Fancy Cell Features First to Go if Economy Worsens

Fancy Cell Features First to Go if Economy Worsens

About two-fifths (40%) of Americans – or 60.3 million consumers – with contract-based cell-phone service say they will likely cut back on their cell-phone expenses to save money if the economy gets worse in the next six months, according to a survey conducted by Opinion Research Corporation (ORC) for the New Millennium Research Council (NMRC).

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The research finds that while the majority of cutbacks will not include complete discontinuation of service, many cell-phone users will seriously consider switching to prepaid plans and/or scaling back on expensive, non-essential features.

Prepaid Poised to Gain Ground

Currently, of the 80% of Americans who own a cell phone, 84% of those have a contract-based plan where they pay a monthly fee, and 17% use prepaid service. If the recession worsens, prepaid plans are poised to gain ground: Some 26% of consumers (40 million Americans) with contract-based cell phone service are more inclined today than six months ago to look for ways to save money on their cell-phone bill, such as switching to a prepaid cell phone service. This group includes 38% of those in households making $35K a year or less, 32% of African Americans and 30% of those ages 18-34, the survey found.

Cell-Phone Extras Will Take Hardest Hit

The report also finds that cell-phone extras – including web access, email and texting – are also likely to take a bigger hit than basic service in the economic downturn. A total of 19 million Americans – or one in five cell phone users with cell-phone extras – have considered cutting back (5 %) or actually have cut back (15%) on their features in the last six months because of job loss, fear of job loss, the recession, or any other related financial concerns.

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Additionally, more than two out of five (41%) cell-phone users with extras on their phones say it is very (19%) or somewhat (21%) likely that they will cut back on cell phone extras if the economy gets worse in the next six months. Fewer than two in five (39%) say it is “not likely at all” that they will make such cuts in the face of a deepening recession.

“The era of cell phone penny pinching is officially here. Thanks to the recession, the US cell phone marketplace is undergoing fundamental changes that will just get bigger as the economic downturn deepens,” said Allen Hepner, scholar, NMRC. “What we see is clear evidence that most consumers will keep a cell phone during this recession, but only after shifting to less expensive cell phone plans, such as prepaid, and also by scaling back on cell phone extras including internet connectivity and texting.”

“It is important to note that these findings do not just point to a potential shift in consumer attitudes and habits about cell phones,” said Graham Hueber, senior researcher, ORC. ‘The change in thinking and purchases is clearly already taking place and has been for months.”

Hueber points to the finding that 8,740,000 Americans, or 19% of consumers without a cell phone, report that they already have discontinued cell-phone service in the last six months because of job loss, fear of job loss, the recession, or related financial concerns. “This strongly suggests that a recession-related shift in attitudes and purchasing habits is already under way,” he said.

Additional survey findings:

  • Nearly one in five Americans who now have prepaid cell phone service (17%) say they switched in the last six months from a contract-based cell phone service because of job or recession-related concerns. This figure includes 23% of 18-34 year olds and 29% of African Americans with prepaid phones.
  • The ranks of all Americans without a cell phone who have discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns includes 29% of 18-34-year-olds and 28% of those living in households earning $35K or less per year.
  • Among those who are likely to cut on back on their cell phones to save money if the economy gets worse in the next six months are 44% of those ages 18-34, 54% of those in households making $35K a year or less, and 55% of African Americans.
  • Two thirds of prepaid cell-phone customers believe they are saving money compared with a landline phone or contract-based cell phones. Less than three in 10 (29%) say they were not saving money.
  • Fewer than half of cell phone users (48%) say that the extras on their phone, such as mobile web access, email and texting, are delivering a great deal (29%) or some (19%) value. About one in five see little value in such services. About a third of cell phone users (34%) have no such extras on their phones.

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  • More than four out five Americans (84%) are concerned about the economic recession and already have cut back their sending “quite a bit” (39%) or “somewhat” (45%). Only about one in 10 (12%) have made no spending changes as a result of the recession. More than half (52%) of those in households earning less than $35K per year already have cut their spending “quite a bit.”
  • Four of five Americans own a cell phone, ranging from 84% of 18-34 year olds to just 68% of those age 65 or older. While 91% of those in households earning $100K+ per year have cell phones, less than two-thirds in households earning $35K a year or less (65%) have such devices. Nearly one in five (17%) report having a prepaid cell phone currently, compared with 84 percent with a contract-based cell phone. (There is some overlap because some individuals own both types of phones.) African Americans, at 22%, are the group most likely to have prepaid cell phones.
  • Among cell-phone users who have both a cell and land-line phone, 35% use their cell phone as their primary phone; 32% use both phones equally; and 32% use their land-line as their primary phone.

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About the study: The data generated for NMRC is based on the findings of ORC’s CARAVAN omnibus telephone survey. The survey was conducted among a sample of 2,005 adults (1,002 men and 1,033 women) ages 18+ living in private households in the Continental US. Interviewing was completed March 5-9, 2009. The survey was weighted by four variables: age, sex, geographic region and race to ensure reliable and accurate representation of the total population.