Prepaid Cellphones Are Cheaper. Why Aren't They Popular?
bits.blogs.nytimes.com
bits.blogs.nytimes.com
In Australia, I was with Telstra, which has by far the best coverage. I was on cotnract. The reason? For $50 a month I basically got (for me) unlimited voice, text and Internet (2-3GB/month). but the 32GB iPhone 4 only cost me $300 with $100 rebate. The handset outright cost $950 IIRC so for $1400 I got the handset and 2 years of service. I don't think I could've gotten two years of service for $450.
In the US I originally went with AT&T as they were the only GSM network that supported the iPhone (T-Mobile could support it on Edge; Verizon and other models came later). Coverage kinda sucks in NYC, really sucks in the Bay Area but in most of the rest of the country is fine.
This was originally month-to-month but ultimately I figured I may as well get the 4S on contract (the discounted price plus the ETF worked out to be no more than the outright price anyway if I cancelled early).
But prepaid? That tends to relegate you to "inferior" networks in the US. T-Mobile and Sprint can give good deals but have really patchy coverage. MetroPCS, as far as I can tell, exists solely for drug dealers and pimps.
One difference is that in most of the rest of the world you don't pay to receive calls. This makes having a phone and not using it much (to make calls) much more viable. Also texting rates in the US are essentially extortionate.
Other countries (Australia and IIRC the UK at least) seem to more heavily discount handsets. It seems like people most often buy the phone that is $0 upfront on whatever plan they want (or they bump their plan up to where it is $0 upfront). The iPhone changed this dynamic somewhat whereas most people seemed to view phones as interchangeable previously.
This article is right about one thing: people do seem to put too much importance on the upfront cost. I see things like the latest gen iPhone is $99 upfront and the previous generation is $49. For $50 you get older hardware that will be obsolete a year earlier... for something that'll probably cost you up to $2000 (or more) over 2 years anyway.
I think your conclusion is valid but that particular anecdote is pointless. If a customer is willing to pay $50 less up front for a cell phone, then chances are any hardware obsolescence isn't going to be particularly noticable.
Both AT&T and Verizon have competitive prepaid plans, roaming included.
I think it's more of a cash flow thing than anything else. People buy the best thing they can afford based on the cash they have available at that very moment.
Would love an iPhone, but the only 2 options I have are a 24month contract at around $50/month or lay down around $900AUD for the phone.
Instead I picked up an ex AT&T WP7 phone for $US160 :)
This is similar to my situation. I pay $79/month and pay $4 per month (or thereabouts) for a 32GB iPhone 4S. $0 upfront. I'm a relatively heavy user, and therefore the $1992 over 24 months that I pay seems the better deal (for me) than buying it outright for $999 and then only having $40/month to spend on pre-paid credit, which would not be enough for my usage.
I also get (slightly) cheaper call and text rates, AFAIK.
I am using Boost (Sprint network) and it doesn't seem to roam. Using only Sprint towers, I get one or two bars in most places and drop off of 3G along one segment of my commute. Well worth it though for how little I use it outside of areas with Wifi.
This ostensibly communist country is way more free market than the U.S. in many ways.
I am £15 prepaid with 3 here in the UK, i get 2,000 texts, 600 minutes and UNLIMITED data. I think this is the best deal I have ever heard of.
You may have to go into an actual shop to get this set up. The people selling sims on the side of the road aren't very tech savvy in my experience.
Then you can text the name the plan you want, I pay 5 dollars for one month's worth of data (384 megabytes). You can also get one gigabyte for U$S 5, but expires after 5 days.
http://www.antel.com.uy/antel/personas-y-hogares/internet/pl...
there's also a fixed contract 3 gb data plan for U$ 15.
Vietnam I found pretty awesome. I got a sim for my phone, tons of data (which I couldn't use up) and plenty of calls for about £5 (150k VND) which lasted the whole month I was there. And the data speeds seemed pretty good (although I was only on 2G). Think I was with Tomato plan on Viettel?
2. Net10 in the States normally runs on AT&T infrastructure.
It was really hard to get this set up. I had to literally fight with AT&T, cut my own SIM, manually enter APN settings. When I have to purchase a new AT&T SIM after traveling they tell me it's not possible, that I can't do it. I explain that it is and I can, tell them how to set it up on their end. Ridiculous.
They tell me the iPhone can't do prepaid (it can), that it isn't unlocked (it is), that it won't work if it's jailbroken (it's not) and that all of my data will magically disappear (it will if you don't configure up the APN settings). They will say anything to steer you from prepaid.
Overseas in Southeast Asia you just walk in to a corner store, pay $2 for a SIM, give him a few dollars to load it up and send a text to buy a data plan. Vietnam was the cheapest, a couple bucks for gigs and gigs of mobile broadband.
I will never buy a phone on contract. AT&T is a nightmare and the fact that we're no longer married helps me rest easy.
Use the wiki to look up your GSM carrier's APN settings.
Using APNChanger's manual entry option, enter the correct settings and install the APN. You may now turn on cellular data. If it says you're not subscribed to a plan when you try to load a website, turn off data, uninstall the APN and repeat, paying careful attention to the APN settings - you typed them in wrong.
At the end of the month, set your data plan to auto renew and make sure you have enough money in your prepaid account so that it does. You'll be charged a few cents for texts and calls if you make them.
You also may have to cut the SIM down to fit in your iPhone.
It's not just AT&T that is the problem there is an unspoken wink and a nod between the carriers to maintain an, essentially, monopolistic cartel on the market. More so on land, but also in the air.
As much of our economy, choice in mobile and land data is nothing but a facade.
I downloaded and compiled 1 year of usage into a spreadsheet. One year later and the results are in.
* My monthly usage never went over 300MB. Most of the traffic was offloaded to local wi-fi between my office and home. * Average of 125 text messages per month * Average of 900 minutes (TOTAL) used per month
I was a little shocked to see the hard data. As it turns out, and I only speak for myself, internet in my pocket did not mean very much. I could save a lot more money by switching away from a smart phone and back into a trusty Nokia 3310.
Even after breaking the contract ($200 fee) I will be saving $70 per month which offsets the penalty in 3 months.
I now have my Nokia 3310 with 1500 minutes and text for $35/month. Other benefits include:
* charging the phone once a week * better reception * [sarcasm]texting and driving is way safer now (love t9)[/sarcasm]
edit: added sarcasm tags
$25 a month for 300 voice minutes and unlimited data (after a few gigabytes this usage is throttled, but still remains relatively fast for a phone data connection when you aren't constantly watching streaming netflix or whatever, which I never do with my phone anyway).
As a full-on Google Voice/VOIP user, the fact that I have "only" 300 minutes is pretty much meaningless, I consume almost entirely "data". As an Android fanboy/Cynaogenmod user my phone is running Ice Cream Sandwich even though the Optimus V is old enough to ship with Froyo standard. I use the tethering features available in CM/Android daily.
Granted, I'm not saying my setup would work for everyone, you have to be fairly technical to take advantage of unofficial ROM upgrades and I'm probably bending if not breaking terms of usage with my tethering usage (even though I only use it for basic web browsing and stuff, I'm not running torrents or anything goofy like that), but my current deal is the best I've ever seen for a smartphone.
The phone cost $150 no-contract and I've been paying $25 a month for the past year and a half or so. The phone's hardware pales in comparison to the latest iPhone or high-end Android phone, but it does everything I need including the full Google Nav GPS experience, pocket browser, pocket tethering modem, etc.
Sadly they upped the monthly rate to $35 (still a great deal!) but as long as I stay on my Optimus I'm "grandfathered" in at the old rate, which is pretty cool considering I'm not on any contract to start with.
If I were a new user, I'd go with T-Mobile instead of Virgin Mobile. T-Mobile uses GSM so switching to a new phone won't require calling up VM for activation -- just pop in the SIMM card. Right now there's no way to use a newer CDMA phone without losing my grandfathered $25/mon plan.
Of course, you might still find that the utility is low :).
I feel like so many of these use cases are romanticized.
Mapping on the phone is painful, especially if you have no signal. I tried it in LA and found myself waiting on tiles to load. I just decided to buy a small map and use my boyscout map skills -- which was better.
Amazon is great, but by the time I find myself in Best Buy, the decision to purchase has been made. Brick and mortar has the benefit of immediacy.
Same goes with tethering and immediate access to information. Coffee shops, office lobbies, and client offices offer all the connectivity my laptop could want. Secondly, I am not the kind of person to settle a dispute by whipping out wikipedia entry at dinner.
In terms of utility, I say it is definitely marginal. The times when it was convenient did not outweigh the expense.
Even if you're planning to buy brick and mortar, I find it valuable to be able to look at Amazon et al and confirm that I'm not getting ripped off (since, once in a while, I am).
Unfortunately this plan is "web exclusive" and limited to new activations only, so you have to order a new SIM online and activate it with a new number to switch to it. (You can port the number afterwards; I just route everything through Google Voice).
I've been on that t-mobile plan for a few months using GrooveIP for GVoice-VOIP, but keep thinking there is a better way.
I've also been texting more on my smartphone than I did on the dumbphone, especially since installing TouchPal.
I switched to Straight Talk on an iPhone 4 (AT&T GSM) right after my contract expired, with basically no problems. I'm a light data user (web/twitter/email/maps, no streaming music/video), so $45/month is a decent bargain for "unlimited" everything.
Now, if there was only a decent prepaid data-only plan for tethering. What I want is to buy a few gigs of transfer that doesn't expire (for at least a few months) and is tied to a USB stick. Nobody appears to sell this.
Googling for things like "iPhone ATT prepaid" didn't yield good results. The power of a human recommendation is infinitely useful. And backed up by an Ars technica article is double win.
Thanks Zdw...
Also, I do tether it for my daily train commute, but please don't tell them that.
This is how they luck us in, even though we'd truly prefer to be somewhere else.
The first place I walked into in Paddington station 2 years ago was Vodafone. For a £10 top-up I get 500MB of data that's good for 30 days, and the credit is generally enough to last me for that period as well (it's less than 100 mins I think, but I tend to use Skype for long conversations). My wife pays slightly more for unlimited data and 300 mins/3000 texts since she talks more. It's a very minor hassle to top up every month, but it's crazy to think how much more we were paying in the states. Saving well over a $1000 a year.
I didn't realize prepaid plans were available in the states. I thought it was basically just the prepaid feature phones they sell in gas stations. I'll definitely be looking for a better deal when I get back.
Ultimately they're deliberately not designed for people who get a lot of use out of their phones, because the point is not to sell them to those people.
The cell phone carriers have an iron grip on the sales channel for cell phones, and that sales channel is the oxygen supply for handset manufacturers. Realistically that means that Samsung needs to sell to Verizon, not Verizon's customers.
Interested in why the HTC One X hasn't sold very well? In spite of equivalent electronics compared to Samsung and far superior build quality? It's because Verizon and AT&T got pissed off at HTC a year ago when HTC announced that they were going to be unlocking their boot loaders.
HTC forgot that they don't sell to cell phone users - they sell to the telephone company.
Problems the One X has had that have had nothing to do with US carriers and bootloaders:
1. No microSD card slot and no removable battery, making it a trickier sale to existing HTC customers.
2. US customs holdup from the Apple lawsuit that delayed the EVO 4G LTE launch on Sprint and limited supply in the pre-SGS3 period on AT&T.
3. Disappointing European sales (probably due to #1).
HTC has had their problems and made their mistakes, but unlocking bootloaders has not been one of them. Remember, with the recent exception of the Verizon SGS3 (and they've already had to partially backtrack with a "developer edition"), Samsung has had wide-open bootloaders the whole time (and employs Cyanogen, to boot).
I've not bought a handset in the US. And never will, from a carrier (irrespective of the cost) because -
a). I want an unlocked handset
b). I don't want carrier branding or crapware on my phone
c). I don't trust carriers (ref. eg. CarrierIQ).
You can buy on Amazon, but even there you're still buying it through a carrier, with a plan.
[1] http://www.bestbuy.com/site/Mobile-Cell-Phones/Unlocked-Mobi...
- Every cell carrier in the US has its own frequencies, so you generally have to buy a handset specific to a particular carrier. (The GSM carriers, T-mobile and AT&T, share the voice and 2G data frequencies, but they have different 3G data frequencies. The CDMA carriers share nothing.)
- With most carriers, when you start service you are paying a baked-in surcharge designed to pay for the discount on the handset you got from them. You pay this whether you bought the handset, or brought your own. So if you buy a handset and then set up a plan, you're throwing money away if you don't buy it from the carrier. (There are some carriers for which this isn't true.)
Not really. The good-quality handsets are just more expensive.
Virgin Mobile offers iphone4 and t-mobile you can put almost any quality android phone on their prepaid.
On the other hand, I'm in Sweden now. My phone bill for the whole year has been below $100 (I don't phone much, but I use internet a lot). So, "pre-paid" can mean a lot of different things.
And for those who don't really have a need for cell phones beyond the basics, they have an offer at 2 euros a month for 1 hour of voice time and 60 SMS. Even better, it's free as in beer (0 euros) if you have chosen Free as your ISP. http://www.free.fr/adsl/index.html
You'd really have to be bad at math to chose an expensive contract nowadays over paying in full for your own phone and getting that kind of plan.
Either way it doesn't make sense to charge $0 for a phone to consume resources by having a constant connection to cell phone towers and reserving a number. $7 is pretty cheap so I hope it's a fair price compared to actual costs.
That said, I can't imagine the carriers being too happy about having clients like me, who only charge the phone with $10 every three months ;)
There are typically two phone-minute charging models: "Calling party pays" (Eurozone, others) and "Both sides pay" (US, Australia(?)).
In a "both sides pay" scenario, each customer pays for their own side of a call. I call your mobile from my mobile, we're each charged a minute per minute.
In a "calling party pays" scenario, the person who calls pays for both sides of the call. You can tell when this is happening by whether there are different rates for calling landlines vs. mobile phones.
The important thing here is what this means for pre-paid services.
In a "calling party pays" situation, a mobile subscriber can continue to make money for the telco _just by leaving their phone turned on_, regardless of whether they can make outbound calls. The inbound caller will still be giving money to the pre-paid caller's telco.
With "both sides pay", the telco of the pre-paid customer receives all revenue up-front; there's no subsequent money to be made because all charges come out of the credit balance of the pre-paid customer. Between that, and revenue recognition rules, it makes sense to expire that credit every 1-2 months because there's no other way to get a revenue stream off that customer.
Once, for instance, I lost a phone with 3000 minutes on it, and I was able to buy a new phone at Target and transfer the minutes in about ten minutes. Contrast this to the hours that people spent on the phone talking to AT&T people that just screw up your account.
I can't imagine the panic operators are feeling over declining SMS revenue.
I've spent less than 200 pounds in two years in the service, and another 200 in terminals (I use 2, a Blackberry Curve 3G and a Xperia Arc S upgraded to ICS). I won't get another terminal in a year or two, so my average expense per month is less than 15 quid, and when I'm abroad I spend even less.
Cost, a new Iphone 4S is ~£400, with a contract you effectively get it for £40 up front. Sure, over the life of the 2 year contract it might work out cheaper to buy it up front but not everybody has £400 up front and they really have their heart set on the iphone. It's basically another form of "buy now , pay later".
Convenience , a monthly paid phone will always work as long as you remember to pay the bill. My days on prepaid phones were a hassle as I remember needing to make calls and having no credit, or being cut off in the middle of a call due to running out of credit. Having to wrestle with the automated payment line in order to make an important call is a real pain.
Culture, There is a perception (in the UK at least) that prepaid phones are for children and drug dealers while serious grown ups will have a monthly contract. I know a few women who would consider a guy who uses a prepaid phone as a "bad sign" if out on a date for example.
For topping up prepaid, I just set up automatic monthly payments for some amount larger than I'd regularly use. Sure, the balance would grow, so occasionally I would just hold a payment. The key is that I had to actively act to NOT pay.
At least for me, that's why.
Admittedly, the instant I move from Massachusetts to Haifa this September I'll be heading off to a mall to find a new phone plan. The entire bleeding country over there basically runs on no-contract SIM plans, so the competition has dragged prices way down. Their equivalent of my current T-Mobile plan costs about $22/month (including VAT, as far as I know) and includes unlimited international calling (to either North America alone or North America+Europe et al depending on when you want your data throttled).
The same comment can be said for many other expensive monthly subscriptions and pseudo-subscriptions, including cable TV and car loan/lease payments. I'd include mortgages as well, but in my state the paperwork is actually very clear about monthly costs and total costs (principal + interest + fees) over the lifetime of the loan.
I've been using prepaid plans for as long as I have owned mobile phones (10+ years). First was AT&T GoPhone on cheapo handsets (paid about $100/year from 2001 until 2011), now it's a T-Mobile Monthly4G plan on a midrange Android device (Samsung Exhibit II which cost $200, the plan costs $30/month).
The savings add up. Back-of-the-envelope, I estimate I've saved more than $3000 since 2001, compared to if I had started on contracts.
That's because the loan industry is regulated to disclose these numbers. If some US government agency attempted to enforce this kind of upfront openness on wireless companies, there'd be a veritable shit storm of lobbying effort to stop it. Funny thing is, if the monthly payment fits within consumers' budgets, they don't particularly care about the overall cost. And if the actual bill is within, oh say, 25% over the stated amount, they'll pay the extra without question.
- they don't want to pay $500-$600 upfront, so they rather go with a contract, even though in the end they pay more.
- they can't be bothered to buy a phone separate and do the research to find the right plan for them.
- they just want to go in a store and leave with a nice phone, without thinking and paying too much.
Since consumer credit is much more heavily regulated, if they win, people will be more likely to consider prepaid plans and non-subsidized phones.
1) Get the "standard" 20% corporate/education discount that most phone companies offer
2) Get a family plan which can be much cheaper
3) Get data for cheap (t-mobile offers 200mb data for $10/month)
4) Get free nighttime and weekend minutes
5) Get free calling within the phone network
Most people on prepaid could get a better deal without prepaid if they shopped around a bit.
I would love it if people stopped the misconception that "prepaid is cheaper" and instead realized that different plans are better for different phone usage habits.
Update: formatting, changed one instance of the word "on contract" to "without prepaid"
That's pretty expensive. Here in the UK on Tesco mobile (uses O2's (Telefonica) network) prepaid/pay as you go, £5 gets me 500mb for a month.
I guess data must be more pricey in the states.
The absolute cheapest postpaid plan any carrier offers is $40 a month plus bullshit fees and taxes - even if you knock 20% (which is an abnormally high discount - and its especially disingenuous to suggest a 20% discount in a startup forum where people almost certainly aren't affiliated with a company of sufficient size to receive such a discount) off of that, that's $32 + 'fees' and taxes plus the cost of an SMS and/or data plan. Your 'free' features start looking a lot less competitive at that point.
Like I said, it depends how you shop around and your usage habits.
ps: I don't think "disingenuous" is the word you're looking for here
I'm not sure there is a "misconception" -- the majority of users consume less than 2GB of data a month, so prepaid is cheaper option and can offer the exact same coverage (Straight Talk AT&T SIM).
Just from this thread, for the same U$ 10/month you say is "cheap" from T-mobile to get 200 mb:
Vietnam - 2.5 GB (500 mb for U$ 2)
China - 300 mb data PLUS 90 mins phone
UK - "unlimited" data and text (Giffgaff), 1 gb (Tesco) or 500 mb (Vodafone)
Uruguay - 384 mb (Antel)
Australia - 600 mb (Soul/TPG)
The cost of texting is pretty overblown, the people that are sending the most texts almost certainly have a bundle that is essentially unlimited, for others, $2 a month for 20 texts is cheaper than $5 or $10 for 20 texts (Sure, $24 a year can still be made to look expensive).
Virgin Media uses the Sprint network. Verizon and Sprint have roaming agreements, but only for contract phones. If you're outside Sprint coverage on a contract you can roam to Verizon, but with Virgin Media you don't roam.
Also, last time I checked, Verizon, which has waaay better coverage than everyone else, does not actually make it any cheaper to go off contract.
I'm being very lazy and not providing any citations for any of my claims, I hope I'm proven wrong by more recent news or newer options.
The one thing is that the phone is not subsidized, so I bought a $300 LG Android phone. But at $50/month for unlimited talk/text/3G versus $90/month on Verizon for limited on talk and text, that payback is well short of the 2 year contract I would have been locked into.
I tell everyone I know how happy I am that my wife and I switched, but most people just stare blankly at me, like there must be some catch and some valid reason to stick with paying twice as much to a major player in the wireless oligopoly with hostile customer service.
Most people and surveys find that Verizon works better for them but that's not always the case.
Once 2.5GB (3.5 if paying for "mobile hotspot") of data is consumed during the monthly cycle, data speeds may be reduced to 256 kbps or below for the rest of that monthly plan cycle.
It was only 200MB last time I looked (although that may not have been with Virgin) which is why I went for a contract plan. Also, outside the iPhone, the selection is really poor.
1) http://www.virginmobileusa.com/cell-phone-plans/beyond-talk-...
People with money aren't going to buy a cellphone from a Family Dollar or Exxon.
Neither of the major players here, Telstra or Optus, seem to do prepaid data, although they're in the same ballpark for postpaid: https://www.optusbusiness.com.au/shop/mobilephones/packs/mob...
The only reason is with prepaid cards, they can control the balance, losing fear of unexpected high bill.