My father-in-law embarked about three years ago on finding the perfect cell phone arrangement. He had one plan with one company and his wife had another plan with another company. This cries out for a “family plan”, but he wouldn’t go forward with that until he could find the right one, which didn’t exist. He just couldn’t stomach the cost.

The first thing he did was go with a prepaid variant of US Sprint. This, despite the fact that Sprint had no coverage in one of the two towns where they live. He thought this was something that you work around. I tried to convince him that it’s not worth it saving 10-20% on a cell phone you can only use half the time. He went forward, but within a few months realized that this was not money well-saved.

The story has a happy ending as he has gone with a prepaid setup that uses Verizon’s network and now he gets coverage on the campground in Genesis. He finally found something that I had actually believed probably didn’t exist: a way to beat the cell phone companies.

The NYT has an article on the superiority of the sort of monthly plans that the in-laws have:

Prepaid phone plans, where you pay the full price for a cellphone and then pay lower monthly rates without a contract, seem to offer what most budget-conscious people want. So why haven’t they really caught on?

Contract-free phone plans account for only 23 percent of the wireless customers in the United States phone market, according to the research firm Ovum. The rest are subscribers locked into contracts and paying higher monthly fees.

That’s despite the fact that prepaid phone plans are generally a better deal for most people, who can save hundreds of dollars over the course of two years compared to a contract plan.

The iPhone with a two-year contract on AT&T, for example, costs $200 for the handset and then upward of $90 a month for the plan; over two years, including the cost of the phone, customers pay at least $2,360. With a prepaid plan on Virgin Mobile, which is owned by Sprint, the iPhone costs $650 for the handset, and then $30 a month, including unlimited data (the type of data plan that people are happier with, according to J.D. Power). Over two years, that would cost about $1,370.

The Verizon-to-Sprint comparison is problematic for many (just as my in-laws discovered), but I suspect you are talking about some real savings despite that unless you are an avid user. Certainly for more than a quarter of the market.

As long-time readers know, I am skeptical of the US’s contract-based/phone-subsidized model in many respects and so articles like this just warm my heart. There is an argument to be made that the contract/subsidy model is actually better for less well-to-do customers insofar as they are the ones most likely to have trouble affording the phone in the first place. I have the sneaking suspicion, though, that the end result has not been making the acquisition of cell phones all that much easier, but rather enticing more and more people onto plans that they cannot afford.

But here’s the thing, though: Like “cutting the cord” for cable and going with all of the free options, can these plans continue to exist as affordably as they do if more and more people switch over to these sorts of plans? I might consider them to be a net bonus – even if I myself am not on one – even at higher rates simply because I like the “model” better. On the other hand, I found myself thinking that people on these plans shouldn’t necessarily be encouraging people not on these plans to get on them.

We will probably stick to our regular Verizon plan. We’re under contract and on the whole as we move from one place to the next it makes more sense to us not to play games with our cell coverage. I may revisit the issue in two years.


Category: Market

About the Author


10 Responses to Prepaid vs Contract

  1. Scarlet Knight says:

    Since we are “good” consumers, we feel the need to get the best deal, and the paradox of choice is an actual thing.

    To use another cliche, the best is the enemy of the good.

    In a way, wasn’t it easier when you just dealt with AT&T? It was more expensive that way, but damn you got a great product.

  2. trumwill says:

    Pre-breakup AT&T was before my time.

    Paradox of Choice is a real thing, but in general it’s the devil I prefer over the other guy, most of the time.

  3. Scarlet Knight says:

    Pre-breakup AT&T was before my time.

    LOL It was before mine too, but you can read up on it, or ask a grown-up. Sometimes monopoly ISN’T a bad thing. The greatest scientists of the second half of the 20th century worked for NASA and AT&T.

    We have a low-budget supermarket chain in NJ, and one of the ways they keep prices down is by limiting choice. It makes shopping easier. Believe it or not, when there were only 36 channels, I was always able to find something to watch.

    O/T: Did Erica DePalo make it to your neck of the woods yet? She is 33, former Essex County NJ Teacher of the Year, and she was just busted for sleeping with a 15 year old. She is single. Here are the demographics of the town she teaches in: 48 percent black, 26 percent white, 16 percent Hispanic.

    Since this isn’t HalfSigma, I will reserve further analysis. BTW, why don’t you comment there anymore? Your comments there led me to this blog.

  4. trumwill says:

    Well, I do know that there is some research behind it all, but it just doesn’t seem to work for me. Possibly because I am rather precise about what I want. I don’t want Turkey something-or-other sausage, I want CHICKEN HARDWOOD SAUSAGE!

    I also go way out of my way for a certain chain’s generic brand soft drinks.

    I may be atypical.

    I saw that about DePalo earlier today. It’ll be quite interesting.

    I stopped commenting on HalfSigma unintentionally. The moderation queue makes conversations difficult. I understand why he does it, but it kills my enjoyment somewhat. I probably do need to start branching out my comments to attract more traffic, though.

    Or, you know, start putting up more content.

    There is, unfortunately, a lot going on right now that is keeping me distracted.

  5. Scarlet Knight says:

    Possibly because I am rather precise about what I want… I may be atypical.

    Au contraire, mon frere. I think that makes you totally typical. The reason why the superdupermarket has taken hold is that people want what they want, and if that means a company has to make 10 varieties, they will do so if they can sell them profitably. I was thinking more of the poor sap who has no real preference. For him, having one or two choices is plenty.

    The moderation queue [on HalfSigma] makes conversations difficult.

    Yes, especially when he makes a factual mistake. I cringe because there will be 10 corrections. Besides moderation, he also employs ReCaptcha. He REALLY doesn’t want spam to get through.

    I probably do need to start branching out my comments to attract more traffic, though.

    Or, you know, start putting up more content.

    I think it is the former. Your posting schedule is fine, but there is no real traffic generator.

    O/T: Will you be watching the game tonight? Go Big Blue. Trivia: The Giants are the ONLY team to win four Super Bowls in the last 27 seasons.

  6. trumwill says:

    I was thinking more of the poor sap who has no real preference. For him, having one or two choices is plenty.

    Fair enough.

    He REALLY doesn’t want spam to get through.

    I don’t think it’s just spam. I think it’s also to filter out “Damn N’ers need to die” comments. Not that he doesn’t let a lot of… provocative… stuff through. But I think he fears a full-on stormfronting.

    I think it is the former. Your posting schedule is fine, but there is no real traffic generator.

    Well, either way, I plan on taking a step back from League/NaPP business, which may leave me more time to focus here and on commenting elsewhere.

    Will you be watching the game tonight?

    No. I had a traumatic experience last Saturday and am avoiding watching much sports this week.

  7. Scarlet Knight says:

    But I think [HalfSigma] fears a full-on stormfronting.

    LOL Good point. His readership, if left unfettered, can get pretty out of control.

    I had a traumatic experience last Saturday and am avoiding watching much sports this week.

    LOL Come on, it was a non-conference game. The Packers can still win the Eastern Metro Conference. The rankings place them in the top half of the conference, and anything can happen.

  8. trumwill says:

    LOL Good point. His readership, if left unfettered, can get pretty out of control.

    When I see the comments that get through, I genuinely wonder about the ones that didn’t.

    LOL Come on, it was a non-conference game.

    Yeah, but a *really* bad one. We’ll have a better idea where things stand tomorrow.

  9. Scarlet Knight says:

    Yeah, but a *really* bad one. We’ll have a better idea where things stand tomorrow.

    LOL Any comments now? Also, this loss was ironic because of the upcoming conference shuffle.

  10. trumwill says:

    The offensive coordinator who was fired after the first game is self-evidently the worst coordinator ever.

    Beyond that, it was close last year, and it was close this year. Things don’t look nearly as bad as they did, though it’s a pretty tough road back to respectability.

Leave a Reply

Your email address will not be published.

If you are interested in subscribing to new post notifications,
please enter your email address on this page.