Verizon Eyeing Prepaid Smartphones

Motorola Droid 2

Verizon is reportedly planning to offer prepaid Blackberry, Palm, and Android smartphones soon, in a move aimed at users who don't want to be tied down to a two-year contract, according to industry observers.

The phones include a variety of Blackberrys; the Palm Pre Plus and Pixi Plus; the Motorola Droid, Droid 2, Droid X, and Devour; and the Samsung Fascinate, which has not yet been released, according to Engadget and Softpedia. Pricing information was not made available, but the phones are said to come with an unlimited $30 per month data plan and a minimum $45 per month voice plan, said Engadget, which also showed screenshots of the prepaid phones along with a Verizon prepaid Blackberry Curve box.

The phones may be made available as early as this month. A Verizon spokesperson said they do not comment on rumors. Other carriers with prepaid mobile phone offerings include T-Mobile, Leap, and MetroPCS.

"I expect they'll get a lot more subscribers for prepaid [smartphones] with unlimited data,'' noted Chris Hazelton, research director mobile and wireless, at the 451 Group, since this pricing model helps subscribers maintain a fixed budget with no surprises, no contract, and flexibility. "The key question is, what is the cost on the hardware side for that offering?"

Up until now, he said, consumers interested in prepaid devices only had the choice of "substandard feature phones and some smartphones." If Verizon sees a big uptick in prepaid subscribers, Hazelton said other carriers will have to match this.

The added benefit of a prepaid smartphone is the cache of having a high-end device that provides access to certain social networking apps like Foursquare and the recently launched Facebook Places, he said. The disadvantage will be that, without locking in to a two-year contract, the phone is no longer subsidized by the carrier and consumers will pay a lot more for the device, he said. "The key to making this work is getting a large number of users who are willing to pay more for the phone," Hazelton said, adding that this has historically been difficult to do.

Overall, the prepaid model will be significant, he said. "It threatens to change the carrier subsidy market, which the U.S. government has been investigating... they have a lot of power in the U.S. and this could change the dynamic between smartphone vendors, subscribers, and carriers."