Saturday, August 11, 2007

Mobile phone myths

I've been a mobile phone user since 1999. I started own on Pacbell PCS, which later became Cingular. In 2004 I switched to Verizon.

Over the years I have learned some of the ins and outs of the mobile phone trade. These are all based on my personal experience and from reading the fine print. Here are four myths about mobile phones and their rate plans. I'll debunk each myth with the plain, simple truth.

Myth 1: My carrier requires a 1- or 2-year contract.
Carriers use contracts to help guarantee that you'll remain a customer for at least the length of the contract, not necessarily to extort money out of you. By doing so, they can generally offer lower rates than a pay-as-you-go customer would pay, knowing that they've got you as a customer for at least 12 or 24 months. To get the best of both worlds (lower rates without a contract), simply buy your phone at full retail price and opt for a month-to-month plan. The upfront cost will, obviously, be higher but the rate plan will be the same as the ones for contract. You can cancel at any time. Some dealers will even unlock your phone for you, allowing you to use your phone with other carriers.

Myth 2: My phone was free! (Or nearly free.)
Of course it wasn't. Look at the receipt from your phone purchase. You paid sales tax on the full retail price of the phone. In other words, you bought the phone for full price. But then they gave you an instant rebate. Notice how the rebate amount is approximately the same as the "early termination" fee? If you cancel early, the carrier wants you to pony up the amount that you "saved" by signing a contract. In other words, the early termination fee is the money you would have paid had you bought the phone at full price.

Myth 3: I'm locked into a contract.
No one is ever locked into a contract. Contracts can be broken at any time by either party. All you have to do is pay the "early termination fee." Can't afford the fee? Well, that's your problem, not the carrier's. They're not locking you in; you are. See Myth 1 for a way to avoid contracts in the future. Side note: some carriers wil prorate the termination fee during the last year of the contract. For example, if you cancel your contract after 18 months, you'll need to pay only half of the termination fee.

Myth 4: I can't change my rate plan.
That depends on what state you live in and which carrier you are using. Here in California, Verizon allows me to change my rate plan at any time without penalty. Cingular was the same way. In some other states, I've heard that any change in your plan results in a new contract. I would complain to the dealer or carrier and try to get it waived. By agreeing to a new contract, but not getting a new phone in the process, you're giving the carrier free money. See Myth 2.

And now some real truths about mobile phones.

The user interface sucks and the phone is falling apart.
Yup. You see, the phone manufacturers are in the business of selling phones. They build them to last about 18-24 months under normal use. By the time the thing is on its last legs, it's time to renew your contract and get a new phone. The user interface, too, is designed to irritate you just enough that you'll want to dump your current phone at the earliest opportunity. You've heard of "planned obsolesence," right?

Cell phone rate plans here in the US are more expensive than in ___.
Yes and no. In some countries, such as the UK, rate plans are actually more expensive. It may be why text messaging is so much more popular there; it costs less to fire off a few 100-character text messagse than it is to talk for two or three minutes. That said, in some countries, such as India, rate plans are dirt cheap. However, the consumer generally buys the phone outright. In other words, the phone manufacturers and carriers are not as closely tied togehter as they are in the US. Because the consumer is free to switch plans at any time, the carriers compete ruthlessly for business. Consequently, rate plans are very cheap.

There you have it. Contracts, phones, and plans in the US generally suck. But that's the truth. Any comments?

1 comment:

Breanne said...

There are upsides and downsides to making mobile calls in the UK. For instance, those receiving calls don't pay for that airtime, but on the other hand, it costs essentially the same amount to send a text message as it does to speak for a minute to someone. Therefore, in the amount of time it takes someone to send off a few bulky texts, they could just call someone for a minute and rattle off what they want for less moolah.

For people like me who don't spend much time on on the phone, so-called rollover plans are ideal, yet too expensive. Therefore, pay-as-you-go services look really appealing--but in the US, where we pay for all airtime, these prepaid minutes quickly diminish, unlike in the UK. I suppose that this type of plan is only good if you don't have a bunch of people calling you because you're not calling them. Unfortunately the crappy contracts seem to be relevant everywhere.

Oddly enough, I just read that Montenegro has more mobile users than actual residents. I guess that's just one more sim card I need to add to my collection.