AT&T unveiled a new $65 GoPhone smartphone plan on Monday, Oct. 1, ramping up competition with prepaid carriers such as MetroPCS Communications Inc.

The new GoPhone smartphone plan is set to take effect on Oct. 7, and it will save $10 per month compared to previous pay-as-you-go offers with similar features. The new plan is called Monthly Unlimited Plan with Data, and it will give subscribers 1GB of data, as well as unlimited talking and texting. AT&T said it will still offer the $50 plan with unlimited talk and text, and the $25 plan with 250 talk time and data options.

AT&T, the second-largest wireless-service provider in the U.S., is also introducing a new Android smartphone to help kick off the new rate plan. Called the Fusion 2, the smartphone will sport a 3.5-inch display, and 800MHz dual-core processor, 512MB of RAM, and micro SD expansion. The Fusion 2 will run on Android 2.3 Gingerbread and will be available for $99, serving as an entry-level handset for first-time smartphone users who want a no-contract Android experience.

"As more of our prepaid customers choose smartphones, we wanted to offer them a rate that meets their needs while still being an excellent value," said Judy Cavalieri, Vice President of Voice and Prepaid Products at AT&T, according to the press release.

"We're excited to offer this new option to our growing base of smartphone customers to give them a better smartphone experience while keeping their budget in check."

As it becomes more difficult to add more contract customers in a saturated U.S. wireless industry, carriers are increasingly shifting towards the prepaid market to tap new resources. Prepaid plans typically appeal to young users, bargain hunters, and consumers on a tight budget. AT&T's new plan aims to step up competition and lure more customers in a tight prepaid market.

On the other hand, AT&T's new offering will be more expensive than rival services, even with the price cut. T-Mobile USA, for instance, has a $60 per month plan that offers 2GB of data. Meanwhile, MetroPCS and Sprint Nextel's Virgin Mobile unit both have $55 unlimited programs for smartphones.

For more information on AT&T's new GoPhone prepaid smartphone plan and the Huawei-branded Fusion 2 Android smartphone visit the company's Web site.