The pre-paid smartphone world you never hear about is booming

How much of the smartphone market involves pre-paid SIMs and semi-disposable phones? More than you'd think.

When people ask me which smartphone they should buy, the first question I ask is, “What carrier do you want to be on?” But based on some research just out about prepaid, no-contract phones, I’m going to have to figure out a new way to break things down.

Marketing research firm Stevenson Company released its latest TraQline Wireless report, which covers both prepaid/no-contract phones and standard contract/”postpaid” phones. That report, as covered by GigaOM, The Fonecast, and other sites, states that more than 50 percent of all phone purchases, prepaid or contractual, are smartphones. That’s an interesting breaking point, but probably something you already figured. It also depends on how you judge a “smartphone,” but that’s an endless debate.

More interesting in the immediate sense is that 63 percent of no-contract/postpaid phones sold are smartphones in the recent period tracked by TraQline. And with that surge, smartphones have grown from 5 percent of the prepaid market three years ago to about 29 percent at the end of 2011. For reference, 17 percent of all cellphone purchases in the U.S. are prepaid, and Walmart sells the most of those phones, according to TraQline.

The market for prepaid smartphones belongs to Android in a big way. In fact, prepaid Android availability is exactly what hurts the iPhone’s sales abroad, even if that assumes Apple is interested in having any prepaid cellular customers as their own customers. That’s due to Android being, at least on certain levels, free for manufacturers and carriers to modify and distribute. And modify they do. Bluetooth and USB capabilities are hampered to prevent file transfers, the Play Store (formerly the Market) is restricted or stricken from the phone entirely, and every little thing you’d like to add to your phone has to be purchased using your prepaid balance.

Still, that kind of outright nickel-and-dime maneuver is preferable in some customer’s minds to the month-by-month overhead of a hefty voice/sms/data contract, and the device lock-in that creates. Finding the right pre-paid SIM that works with the hot new phone you want can be a nightmare, but you’re free to price out every component of your phone experience as you can afford it. And with services like Google Voice, one can keep a single number while trading phones and accounts like they’re going out of style (or, in the case of Android, when they’ve long since been abandoned on the update circuit).

So, again, I’m going to make a note, and I hope smartphone makers, app coders, and other tech writers do, too: prepaid phones have become a significant part of what we talk about when we talk about “smartphones.”

Top image and thumbnail by marc.flores.

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