Are you paying too much for your cell phone bill?

February 3, 2013
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Pretty soon, all our online and real-world purchases could be paid through our carrier bills. Bill shock, anyone?


A recent study by Consumer Intelligence Research Partners (CIRP) indicates that nearly half of all Android users are spending over $100 every month for service with a mobile carrier. When it’s all tallied, 86% of us spend over $50 monthly. With so many attractive prepaid options, isn’t it time we consider a move to prepaid? For a majority of users, a little change will do us good.

The raw data

The chart below details some interesting user statistics. All in all, roughly 90% of users pay over $50/month for their plan. In speaking strictly of Android users, 56% of us spend over $100/month on our plans. These numbers are per person, and not per plan. Please keep in mind that the numbers are rounded, so the totals may be off by a percent.

This study was done over the last quarter in 2012, October to December. This is a prime time for device sales and new activations, as well as those renewing their current plans. This data does not discriminate or discern between carriers or devices.

Monthly_Bill_By_OS

Ending subsidies

T-Mobile has recently decided to end all subsidized plans, instead utilizing a lower cost monthly rate. With this scheme, users are responsible for purchasing the device for the full price, then choosing the plan that works best for them. It’s a very linear approach to mobile service and one T-Mobile clearly believes in.

The trick is getting consumers to understand the ins and outs of this thinking. T-Mobile will rely on staff to communicate to customers just how much they save overall versus the subsidized plans of other carriers. We’re not used to spending quite so much up front, so education will be a paramount concern for T-Mobile moving forward.

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Is prepaid the answer?

Prepaid mobile plans are not new, but they are gaining traction. What has usually been attributed to low-end devices and very minimal service is now a viable consideration for all mobile device users. The Nexus 4 showed us that an unlocked device doesn’t have to cost an arm and a leg, making the idea of unlocked devices and prepaid plans much more approachable for consumers. Many are starting to realize that, even with the higher cost of purchasing a device, the savings really do exist.

Prepaid plans from AT&T as well as T-Mobile have been around for some time, allowing you to take any unlocked device and use it on their networks. The benefit to this is the ability to switch at your leisure, get a lower-cost plan, and choose which device you’d like to use. Verizon has recently began offering pre-paid service, which gives you access to the best network in the country. The downside is that Verizon operates on a CDMA network, and you wouldn’t have the ability to take your device to another carrier.

GoSmart

What plans are out there for me?

The unsubsidized plan model is currently only available on T-Mobile, as other carriers are patiently waiting to see if they should follow suit. While you always had the option to purchase a phone at full price and choose a plan, the price is often higher than a normal unlocked device. As for prepaid plans, we’ll look at your options with the four major carriers. No matter where you live, something is bound to work for you.

T-Mobile

The recently launched Go Smart service is meant to be a very streamlined approach to prepaid service, with plans starting at $30/month. For smartphone users, the $45/month plan is probably the most attractive, with unlimited high speed data. T-Mobile also has its regular prepaid service, but Go Smart represents a huge savings over those already competitive prices.

AT&T

AT&T plans start at around $25/month for basic service, but data service will cost extra. With 1GB of data running $25/month, the cost quickly escalates to a base price of $50/month for smartphone users. This method of piecemeal service may not work for many users, making T-Mobile a much more attractive offer.

Sprint

Sprint recently introduced the “Sprint as you go” prepaid service, with smartphone plans starting at $70/month. The devices are competitively priced, though you have a few restrictions. First, as Sprint operates on a CDMA network, you can’t use any device you like. Purchasing one of its phones is mandatory and the selection is severely limited right now. While $70/month may represent a savings, it does not come without some drawbacks in this scenario.

Verizon

The champion of networks has clearly heard the cries for lower-cost prepaid service, and answered in kind. Its offering, similar to Sprint in both pricing and phone selection, has only the Verizon network to rely on for a tipping point. The best phone available is an HTC Rhyme, and the plans start at $60, though the $70/month plan is a much better alternative for smartphone users. The real difference between Verizon and Sprint? Sprint’s data is unlimited, while Verizon caps you at 2GB/month on the $70 plan.

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Is having Android a problem?

While we think of Android differently, a carrier does not. Accessing data affects them the same, regardless of type of device. Your provider simply charges more for devices that access more. With consumption growing each year, the need for more investments by providers is necessary. Android does, however, have ways to alleviate your dependency on data.

While some of the prepaid plans throttle or limit your data consumption, Android has some stopgaps you can use to relieve some of the data usage on your device. Apps such as DS Battery Saver allow you to better manage how your phone utilizes power and data. Making important files in Drive available offline will also alleviate your data consumption, as will doing the same with your favorite music in Play Music. Save a map of your city to navigate without using data, or simply turn mobile data off when you don’t need it. If you don’t want to fuss with settings, NFC Tags are a great way to manage your power consumption in different environments.

Android money

A case study

These numbers we’re discussing only pertain to individual plans, and not family plans. While subsidized plans may be best for a family, it’s worth taking a hard look at the numbers to discern which is best for you. For this exercise, we’ll use AT&T as our example for subsidized, and T-Mobile as our example for prepaid. The offerings of these respective plans are similar, giving us a better idea of services offered versus cost. We’ll use a Samsung Galaxy Note 2 for this exercise, as it gives us a median in terms of device.

For a subsidized plan, we’ll spend $299.99 for the device. The basic plan of 450 minutes would cost $39.99. The 5GB data plan (which is fair for smartphones) is an additional $50 and unlimited messaging is $20. We’ll factor in $10 for monthly taxes and fees, bringing the monthly bill total to $119.99. Also factoring the cost of the phone and $35 initiation fee, your startup cost for an AT&T subsidized plan is $454.98. Over the course of one year, you will be spending $1774.87.

If we were to purchase the Samsung Galaxy Note 2 unlocked, the device itself will cost $689.99. With T-Mobile, we can get a prepaid plan at $70/month that gives us unlimited access to the network. There is no initiation fee or startup cost and no monthly taxes or fees. Over a 12-month period, we will have spent $1529.99. If we choose to utilize the Go Smart plan at $45/month we discussed previously, our 12-month cost for plan and device is $1229.99.

As you can see, this is a savings of up to $544.88 annually. The average consumer has a mobile device for about two years, meaning that while your subsidized plan may soften the blow up front, a prepaid plan will actually earn you the cost of the device over a 24-month period. The subsidized plan may give you the phone at a lower cost, but the savings with a prepaid plan could save you the cost of a device altogether, which is like getting a free phone.

Apparently, some families like sharing everything, including their tablet computers (Photo credit: Shutterstock)


Families

In terms of subsidized versus prepaid, the family dynamic is very different. The cost of devices is much more approachable with a subsidized plan if you were buying 4 smartphones, and the plans are often a better value. Carriers like U.S. Cellular are offering payment for families to switch, and there may be a good reason for it.

The difference is consumption, as most family plans have a data plan all devices pull from. If your family is full of data hogs, going prepaid and getting everyone their own plan may just be a better bet than overage fees every month. If your family members use a lot of data, as is routine with smartphones, treating each person on the plan as an individual may end up saving you quite a bit.

What do carriers want?

The really easy answer to that is ‘your money’, but it goes much deeper than that. Let’s take the iPhone, for example. Carriers pay Apple a large subsidy to have the iPhone. Sprint won’t make any money from iPhone sales until 2015, as it invested over $15 billion to get the device. Why would the carrier do something like that? It gets subscribers, plain and simple. The device only ties you to the service, which is where the real money is made.

Calling carrier’s relationship with Apple “irrational” may be a stretch, but this recent interest in unsubsidized plans does signal a potential change in how we pay for our service. All manufacturers charge their price, and subsidies are meant to help the carrier make that up over time. Carriers do everything they can to keep us interested, from updating networks to LTE to offering discounts on accessories  They need us much more than we need them.

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Conclusion

The power rests in your hands as a consumer. You are in control and only you can decide what your needs are and how they are best met. I can speak to this issue personally, as switching from Sprint to T-Mobile prepaid saved me $77 each month. Even when I factor in the cost of my Nexus 4, I save $674 over the course of 12 months. I don’t know about you, but I can think of a lot more to do with $674 than stare at my phone wishing I had a signal.

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