July 11, 2005 10:51 AM PDT

Virgin aims for middle with new payment plan

Virgin Mobile USA has made available a new method of paying for cell phone calls that resembles the plans typically offered by its chief rivals, except for one thing: There's still no contract required.

Under the new Virgin option, for $30 a month subscribers get 300 minutes of inbound and outbound calls. If they go over the allotment, another set of minutes is available for an additional $10 a month, Chief Executive Dan Schulman said during a recent interview.

The new plan is being offered in addition to the carrier's other payment options, which allow customers to prepay for calls on a per-minute basis. The older plans lets subscribers add to their monthly minutes at any time.

On the surface, the new payment option seems to be a step closer to the more traditional plans offered by Sprint, a part-owner of Virgin Mobile USA, and other major carriers, which typically require subscribers to sign long-term contracts and pay penalties if they decide to switch to another operator before the contract term is up. Yet Schulman said Virgin Mobile, which is a joint venture between No. 3 U.S. cell phone operator Sprint and Sir Richard Branson's Virgin empire, will stay true to its roots and remain a prepaid service that doesn't require any long-term commitments to the operator.

Since their debut in 2002, prepaid plans, also called contract-less plans, have proved to be the right mix to attract young adults who lack the solid credit history that carriers typically require of subscribers. Teens, in particular, are now a major focus of cell phone operators, as the number of adults with handsets is nearing saturation levels. Nearly every major U.S. operator offers a contract-less plan, including No. 1 operator Cingular Wireless, whose Go Phone is now the subject of a major marketing effort.

Virgin's two older plans are being promoted as appropriate for light and occasional users. One charges 25 cents a minute for the first 10 minutes of any given day, and 10 cents a minute afterward for that day. The other charges 35 cents a day, then 10 cents a minute for the rest of the day.

Schulman says the new Virgin plan, aimed at heavy cell phone users, is a sign of the maturation of the prepaid market in the United States.

"You are seeing the coming of age of pay-as-you-go," Schulman said.

 

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