To the extent that too-aggressive approaches to prepaid pricing might create pricing pressure across the entire installed base of users, and if you have a large installed base, the impact of even-small pricing changes can create quite a ripple effect. 

The analogy is fixed-line VoIP services. The bigger issue is not "lost market share," which is what happens when competitors offer lower-priced VoIP and incumbents do not, or do not differentiate the offers based on price. Losing some customers entirely to VoIP providers is preferable to dropping prices across the entire customer base by matching those prices. 

On the other hand, prepaid is where the growth is in the mobile subscriber market. The fourth quarter of 2009 marked the first time that the number of new prepaid wireless customers in the U.S. market outnumbered new contract-based cell phone providers, according to industry data from both Ovum (News - Alert)/Datamonitor and IDG.   

New prepaid cell phone subscribers accounted for nearly two thirds (65 percent) of the 4.2 million net subscribers added by U.S. phone carriers in the fourth quarter of 2009.

Nor is Verizon Wireless unaware of prepaid growth and prospects. According to Current Analysis (News - Alert), Verizon added 896,000 wholesale customers during the second quarter of 2010, and around 460,000 of those came from TracFone's unlimited prepaid Straight Talk service, which uses the Verizon network. 

So what might Verizon do? Leverage the perceived value of handsets in a bigger way. Historically, one drawback to prepaid services is the inability to use the latest handsets. That is unlikely to change, but Verizon Wireless might be looking at a significant expansion of the later-model devices as a way of attracting more prepaid customers without cannibalizing prices. See http://www.engadget.com/2010/08/31/prepaid-droid-blackberry-and-palm-phones-coming-to-verizon/.

Verizon apparently is preparing to market a whole new lineup of prepaid phones, including the BlackBerry (News - Alert), the Palm Pre and Pixi Plus, and just about every Android-based phone Verizon offers, including all of the Droids. That would be a potential game changer, as never before have so many top models been made available for prepaid users. 

While there's no indication of prepaid pricing for the phones themselves, they would apparently be available with an unlimited $30 a month data plan, which would have to be tacked on top of a minimum $45 a month voice plan, ranging up to perhaps $75 for heavier users.

Were Verizon Wireless to make such devices available on a prepaid basis, for the first time, it could be quite interesting. If a user can buy a top of the line device, with reasonable recurring pricing and without a contract, we will get an interesting test of demand. 

Historically, prepaid users have had to pay close to full retail for their devices. If they buy such devices, on plans without a contract, we'll see the clearest test yet of end user demand for "unlocked" devices, which this approach most closely resembles.