Recession Has Consumers Thinking Of Hanging Up Cell Phones

Sagging economy has users dropping service, choosing prepaid

March 20, 2009
It's hard to imagine anything coming between consumers and their cell phones, but a sagging economy might be the thing that finally does.

As fears about the recession become more widespread, millions of Americans are on the verge of disconnecting expensive cell phone plans, according to a survey by Opinion Research Corporation.

Two out of five Americans with contract-based cell phones — 39 percent or 60.3 million consumers — are likely to cut back on their cell phones to save money if, as is widely expected, the economy gets worse over the next six months, according to the survey of 2,005 Americans conducted by ORC for the New Millennium Research Council.

The survey on cell phones and economic trends also finds that:

A potentially major shift in consumer habits at the expense of contract-based cell phone service is underway as more consumers seek to save money in the face of the recession. No fewer than 40 million Americans — 26 percent of consumers with contract-based cell phone service — are "more inclined today than...six months ago to look at a way to save money on your cell phone bill, such as by switching to a prepaid cell phone service." This group includes 38 percent of those in households making $35,000 a year or less, 32 percent of African Americans and 30 percent of those aged 18-34.

Cell phone extras, such as Internet connectivity, email and texting, are also likely to take a hit in the economic downturn. A total of 19 million Americans — one in five cell phone users with cell-phone extras — have "considered cutting back" (5 percent) or actually "have cut back" (15 percent) on such features "in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns." More than two out of five cell phone users with extras on their phones (41 percent) say it is "very" (19 percent) or "somewhat" (21 percent) 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 percent) 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," said NMRC's Allen Hepner. "Thanks to the recession, the U.S. cell phone marketplace is undergoing fundamental changes that will just get bigger as the economic downturn deepens. What we see in these survey findings 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."

Graham Hueber, senior researcher, Opinion Research Corporation, said consumers are already beyond "just thinking about" changing their habits, but are already making changes.

"For example that, we see that 8,740,000 Americans — that is 19 percent of consumers with a cell phone — report that they already 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," Hueber said. "This strongly suggests that a recession-related shift in attitudes and purchasing habits is already underway."

Nearly one in five Americans who now have prepaid cell phone service say they switched in the last six months from a contract-based cell phone service due to job or recession-related concerns, according to the survey.

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