Should Mobile Networks Introduce Mobile Prepay Packages?

There are currently two ways of paying for your mobile phone contracts; either using relatively cheap Pay as you go or through often more expensive Pay monthly contracts. Now a recent development could soon open the door for a "third" way.

Carphone Warehouse has introduced a new Pay as You go Starter Kit for mobile broadband. Although it is marketed as a PAYG product, its price, £97.86, puts it in a category of its own. In a nutshell, you get a modem loaded with 12GB worth of download credit which you can use within a 12-months expiry date.

At £8.16 per month, that is a discount of £1.84 (or 18.4 percent) on the price you would pay at Three to buy a similar "Broadband Lite package" on a 12 month contract.

Should a mobile phone company like Three come up with a similar scheme, their cheapest monthly plan would cost only £132 for the duration of the contract (18-months), that a mere £7.35.

For that price, you could get a free mobile phone, 1800 minutes or texts, 81000 free Skype minutes, 5400 free minutes on 3 to 3 calls and free voicemail. Should they use up their credits, they have the option of either buying credits or buying a new bundle (and get a new phone).

Why should a mobile phone provider introduce such a scheme? Well, for a couple of reasons. By getting customers to fork out money at the beginning of their contract, the network removes the need to setup direct debits, going after creditors and so on.

Furthermore, it is likely that the customer will pay with cash which will improve the company's cash flow tremendously as well as giving networks a means of differentiating themselves from the competition (either by bringing the price down or by giving out more minutes)

As for prospective customers, getting a 18.4 percent discount, the fact that it is a pay-once-and-forget as well as the opportunity of carrying forward (or using up) your credits as you like are two pretty good reasons to buy a hybrid mobile PAYG/Contract product.

Not all customers will subscribe to such offers but with savers might well want to spend their money now (given that interest rates are so low) and sub £15 per month, 12 month contracts are likely candidates for this novel approach to consuming mobile services.