Why are cell phone plans overpriced?

My wife and I love our iPhones. But the costs! Oh, the costs. We're paying Verizon Wireless nearly $200/mo for two phones. I make maybe one phone call a week. And most of the time wifi is available and I could be using Skype instead. I got rid of unlimited text messaging, bringing the cost down by, oh, maybe $20/mo or so, but it's just not enough, and I just can't find a cheaper plan for us on Verizon Wireless. So, I've started to look around. Our contract is not up for a while, but that's not going to stop me from at least looking.

Before we get started, here are three important things to keep in mind when considering these, or any other, cell phone provider and service plan.
  • Avoid WiMAX-based 4G. Sprint's current 4G technology is WiMAX-based (as opposed to LTE-based) andClear is the provider behind the scenes, coverage is poor and the network has seemingly always had issues. We've tried to use Clear WiMAX ourselves both with home service and mobile service. It's just not ready for prime time, and I'm not sure it ever will be. Right now, true LTE 4G is available only on Verizon and AT&T, and the iPhone 4/4S supports neither WiMAX nor LTE as of June, 2012. The take-away here is: Plan your life around 3G service for now.
  • Most of these services actually utilize Sprint's voice and data (3G) network -- which has been demonstrated to be slower than Verizon or AT&T's 3G network. That's not going to be a problem for most users -- you're not going to be downloading movies over 3G. For typical usage consisting of light to moderate web browsing, email and social networking, you'll be fine. Turn on wi-fi as needed before downloading anything big and beefy.
  • Don't believe the "unlimited data" hype. All of these providers will throttle or cap you at some point. For example, Virgin Mobile says that they will throttle you if you utilize more than 2.5 gigabytes of data in a month. Unless you're streaming Netflix over 3G, you're not likely to be impacted by this. The one thing I'll miss is using Skype over 3G, but that's a small price to pay for...a much smaller price to pay ongoing. Also, most throttle instead of suspend service. Throttling is much friendlier than capping, in that you still have access to the internet, just at a slower speed. Providers who cap you will typically cut you off right there and then when you hit the limit, requiring that you pay an extra fee for additional megabytes.
  • Jump on the Google Voice bandwagon! I ported my old cell phone number to Google Voice for a one time fee of $20. Now my legacy phone number rings through to me at whatever phone I specify. I ignored whatever phone number Verizon provided to me, and I won't have to bother with number portability in the near future. If I switch providers, it'll take me about ten seconds to go into Google Voice and modify settings so that calls reach me on the new provider instead of the old provider. This process is transparent to callers -- they have no idea that you've changed anything. Also, Google's handling of voice mail is fantastic -- I highly recommend it. It can SMS you transcripts of messages. It will email you transcripts as well, and it's very easy to play back messages by clicking on the link in email or in the Google Voice app on iOS or Android. Consider this: I've never even bothered to configure my Verizon Wireless voice mailbox.
Now that I've gotten that out of the way, allow me to share with you the top five cheapest smartphone plans/service options out there as of June, 2012, as identified through my research.

Option #1: Voyager Mobile - http://www.voyagermobile.com/
Service plan costs: For an android smartphone, $39/mo unlimited talk, text and internet, including 4G. For a basic flip phone, $19/mo for unlimited talk/text. The details: You need to buy a phone from them, and if you want a fancy one, expect to pay up to $550. Android only, no iPhones. Shipping times are long, it might take 3-5 weeks for your phone to arrive. The 4G service is Clear Wimax, which sucks. (I would not bother buying a 4G device for this service - I think 3G is good enough.) Voyager uses Sprint's network. This is probably the way I'd go if I wanted an Android phone with unlimited service.

Option #2: Ting Mobile - https://ting.com/getting-started/
This is another Sprint reseller, run by internet company Tucows, based in Toronto. Good guys. Pros: They're hacker friendly, so while you do have to buy a phone from them, they don't care if you clone your ESN onto your personal iPhone, so you can use it on their network (if you know how to do that). They're friendly and responsive when it comes to answering questions on their web forums. Cons: The pricing model, while it can be significantly cheaper if you're a light cell phone user, involves doing your own math. They charge a base $6/mo per phone, then you add on various blocks of megabytes, texts and minutes. You could go data only with 1gig/mo for $30/mo. If you pick a large block of minutes (2000), a thousand text messages, and two gigabytes of data, you're up to $88/mo. Might as well stick with the post-paid plans if you're going to be a heavy user. Ting is another land of Android, no iPhone here. I probably wouldn't recommend Ting, unless you are a hacker or have unique pricing needs that might make the math more favorable. (Here find somebody else's thoughts on Ting Mobile.)

Option #3: Cricket Wireless - http://www.mycricket.com/iphone 
As of June 2012, Cricket Wireless says the iPhone 4S is coming any day now. They have their own network, but they utilize Sprint for 3G coverage. For $499 you can buy an iPhone 4S outright, then pay $55/mo for unlimited talk, text and data. They have a smaller network footprint, from what I can tell, so unless you live in a big city, this is probably not the plan for you. Perhaps not good for you, but maybe it's good for me. I'm intrigued by this. I want an iPhone, and I want inexpensive service. I'd consider this provider, though I don't know anybody utilizing them currently.

Option #4: Straight Talk - http://www.shopstraighttalk.com
This is TracFone Wireless behind the scenes, selling via Wal-Mart and online. No iPhone here, but a number of Android phones are on offer. You can pick up an LG Optimus Black for $329 and then for $45/mo you get unlimited talk and text, data/web access. I'm not sure who the provider is behind the scenes -- Tracfone is a reseller of service from Sprint, Verizon, T-Mobile and AT&T, so it might depend on which phone you get. This is the way I'd go if I wanted an Android phone and wanted the ability to be able to walk into a Wal-Mart to buy it, instead of having to wait to have it shipped to me.

Option #5: Virgin Mobile - http://www.virginmobileusa.com
In the US, Virgin Mobile is owned by Sprint. So this is Sprint's network, and you're actually buying the phone and any service directly from Sprint. They have a variety of Android devices, and the prices seem reasonable. They have announced that the iPhone 4 and 4S will be available as of June 29, 2012. If their current plan pricing covers the iPhone, you can get unlimited data and texting and 300 minutes for $35/mo or unlimited data, texting and minutes for $55/mo. You can save $5/mo discount by signing up for auto billing, meaning you can have an iPhone live and on the air for $30/month with a nice amount of minutes and unlimited data. This might be the winner for me, personally, since it's Just Plain Sprint behind the scenes, and not some third party reselling me somebody else's services. I think this is the way to go if you want an iPhone. When my Verizon Wireless contract is up, this is the provider I'll be looking the hardest at.

Doing the math: Starting from zero, plan out how much you'll pay in phone plans and devices over, say, two years. On Virgin Mobile, you'll pay $649 for an iPhone 4S, plus $30/mo for two years, for a total of $1369 over that period of time. For Verizon Wireless, you can get the same phone (or maybe even with more storage) for $299, but you're going to pay perhaps $90/mo for two years, for a total of $2459.


Pat Cannon said...

My kids both have the $35 Virgin plan for the last year or so and are pretty happy with it. I'm thinking I'll probably do this too if my Nokia 1112 ever dies.

Anonymous said...

Yeah, I don't think that's a bad way to go at all. You could beat it by $6/mo by going with Voyager, but you'd have to wait for them to ship you a phone, versus being able to pick up a phone at one of any number of stores (including Sprint stores, I believe).

Laurel Krahn said...

We switched to monthly 4G plans from T-Mobile not long ago after being on a family plan from Verizon for years. We're on the $30/month for 100 minutes voice / unlimited web & text as we don't do much talking on our phones. We like it quite a bit so far. We're using Android phones, I haven't yet cut the SIM card to try it in my iPad or an iPhone but am sorely tempted as it supposedly works (with the right iPad/iPhone).

I use the phone part of my cell phone so seldom I may just switch to a flat pay as you go plan and use the $15/month plan on my iPad for texting and all that rot when I'm not near a wifi network.

For quite a while I was using the 3G on my Kindle 2 for email and twitter when I didn't have access to WiFi and that worked fine for me and meant no charges whatsoever.

Anonymous said...

I've used an iPhone on T-Mobile. Voice works fine. No 3G, though...the frequency bands are different between T-Mobile 3G and AT&T 3G. So you end up stuck on EDGE data, which blows.

Anonymous said...

This is quite intriguing: http://www.idownloadblog.com/2012/06/07/unlocked-iphone-t-mobile-3g/

Laurel Krahn said...

Cool! It seemed like T-Mobile had to move that way at some point given how many people have been unofficially trying to use iPhones and iPads with their service. Would be foolish not to if they can swing it.