RIM - Beware of Pre-Paid

Implications: Looking to expand into foreign market, RIM and Alcatel-Lucent have come up with a pre-paid Blackberry solution.  Pricing is key to this initiative, which if not priced correctly, will backfire.

Analysis: Traditionally RIM’s Blackberry solution and pre-paid have never be uttered in the same sentence.  RIM’s subscribers were typically corporate customers who had robust budgets for RIM’s devices and services.  In the past several years, however, RIM has expanded its focus to include the consumer / pro-sumer markets and seen its customer base approach 14 million subscribers.  Even with the diversification into consumer markets, Blackberry users typically spend well above the average ($50 per month in the US) for mobile services. 

This new pre-paid initiative with Alcatel-Lucent is aimed at further expanding RIM’s reach, especially into foreign markets where RIM does not have a presence outside of wealthy corporations or individuals.  RIM’s solutions outside North America have been cost prohibitive for most consumers, pro-sumers, and even many businesses.

While pre-paid services sound appealing, the concept of metered email traffic is foreign to most consumers who have never had to think: How large is that email?  How much data have I transferred this month?  If RIM and its operator partners are able to price the service so that an overwhelming majority of pre-paid users don’t exceed their data quota, then the offering could succeed.  (It is worth noting that RIM does an excellent job optimizing its traffic and claims that the average user consumes less than two MB of data per month.)  If however, users have to start counting e-mails and MBs transferred then there will be a significant backlash, and RIM have to revert back to unlimited usage pricing.  Finally, RIM’s positioning, which has been at the high end of the smartphone spectrum since the company’s inception, has never been challenged.  Any move into pre-paid, and certainly an unsuccessful one, has the potential to hurt RIM in the all-important branding arena.