The cell phone industry has shifted in the past several years. Even though the overall cell phone market remains a growth industry, traditional post-paid plans are now diminishing in total current market share. Postpaid programs are rapidly being replaced by less costly prepaid cellular phones.

The two basic varieties of phone service plans are prepay and contract plans. With prepay, you pay for your airtime ahead of time. With contract plans, you pay for your minutes after you've used them. Contract programs require a credit verification because you are essentially using your minutes on credit.

The cell phone marketplace has grown each year since its beginnings, and the overall sector continues to grow. In The United States, over 80% of the public at this point use cell phones. That trend is growing, though substantially less quickly today than in prior years.

Conventional postpaid cell phone plans are actually the largest segment of the cell phone market and that segment grew ever year. Nevertheless, in 2008 growth of new postpaid contracts began to slow. From 2008 to 2009 the net additions of postpaid contracts across all carriers dropped 58 percent. In 2009 postpaid growth essentially reversed and the market share is now shrinking.

Meanwhile, prepay subscriptions are increasing. In 2008 in excess of 50% of new cellular phone users signed up for prepay phone service. The next year, in 2009, in excess of 80% of mobile cellular buyer growth came from prepay service plans.

Historically, prepaid mobile plans had been used by only two variations of individuals: kids and people with negative credit. Due to the fact traditional post-paid programs call for a credit verification, many people were unable to purchase a conventional post-paid cell phone. In times past, those people with negative credit or no credit have composed the bulk of the prepaid market. The only disadvantage of prepaid programs, up until very recently, was that prepaid cell phone service plans had been much more costly as compared with post-paid programs.

A couple of years ago the price of prepay service plans began to come down. Today prepay mobile service plans are significantly cheaper than contract programs. Many prepay carriers are now supplying unlimited minutes service plans which are cheaper than equivalent contract plans that have 500 minutes. The current low cost of prepay plans and the current recession are fueling the explosive growth of the prepay cellular industry.

As expected, the major phone companies are not exactly pleased with this, considering that they earn much even more revenue on postpaid programs as compared to prepaid. There are several factors for this is. The first is that contract plans are more expensive than prepaid programs. Conventional postpaid programs can run upwards of $80 per month even though a prepaid plan with a similar amount of minutes might be as low priced as $40. Second, not only do cellular providers generate much more income on postpaid programs, but they have a secure, repeated revenue stream by locking their users into 2 year contracts. The last reason postpaid programs are so profitable for the phone companies is that they charge exorbitant prices if you go over your minutes, often 25 to 50 cents for each minute. This can add up quickly and many consumers have unexpectedly run up enormous bills of many hundreds of dollars.

With prepaid service plans, you'll never have this situation. Prepaid plans are now less expensive for each minute and they don't require contract agreements. Moreover, if you go over the minutes that you have paid for, it is simple to add more minutes.

Contract plans continue to be preferred by shoppers, though. The most important reason for this is that the cell phone handsets that come with contract plans are inexpensive, at least in the beginning. Many consumers continue to select contract plans because they can't afford to pay $500 for a phone. The cell phone company will subsidize the price tag of the phone when purchasers sign a 2 year contract. Prepay plans, on the other hand, tend to have more expensive handsets since none of the price is subsidized. Buyers have to pay full price prepay phones. What consumers do not seem to recognize is that the contract plans are able to subsidize the cost of the handset since they recognize that over the course of a 2 year contract they'll make up the price tag of the phone - and much, much more.

Prepaid plans continue to increase in popularity, though. They just simply make more sense for users financially. We seem to be stuck in the current recession. The reduced rates of prepaid phone plans will continue to boost their popularity and a great many more consumers will pick prepaid service plans over the classic postpaid programs.