Thursday, May 24, 2012

Prepaid or on contract cell phone?



Since the last couple of months, I have come across a lot of blogs online which are debating whether it's cheaper and better to go with a prepaid cell phone connection, or stick to the 2 year contracts that are usually advertised. There have always been prepaid options available, but rarely did people consider them seriously.

Recently, people have started using more data and less text and minutes on their cell phones. Because of this, the big 4 companies have started charging more for data connections for smartphones. But prepaid connections give you the freedom to choose packages of less text and minutes and more data, therefore being a much cheaper alternative.

On the other hand, being on-contract for 2 years, you get an expensive phone at a subsidized rate while you have to pay full price for the same phone if you go the prepaid route. Does this subsidization justify paying more monthly charges for 24 months?

Cass, a gdgt.com writer, got really pissed at Verizon, which triggered him to do a comparison between prepaid and on contract deals available by all carriers. His detailed comparison can be found here.

Similar to his table of data, I made my own with my specifications:

On contract deals:

Verizon:

  • Monthly plan:  $80 (450 Mins, 1000 Texts, 2GB Data)
  • Cost of phone: $200 (Samsung Galaxy Nexus; retail at $400)
  • Total: $2120 for 2 years, $89 per month

AT&T:

  • Monthly plan: $90 (450 Mins, Unlimited Texts, 3GB Data)
  • Cost of phone: $200 (HTC One X; retail at $580)
  • Total: $2360 for 2 years, $99 per month

T-Mobile:

  • Monthly plan: $70 (500 Mins, Unlimited Texts, 2GB Data)
  • Cost of phone: $200 (HTC One S; retail at $550)
  • Total: $1880 for 2 years, $79 per month

Sprint (disregarded due to unavailability of 4G)

Prepaid options:

Verizon:

  • Monthly plan: $80 (Unlimited Mins, Unlimited Texts, 1GB Data)
  • Cost of phone: $400 (Samsung Galaxy Nexus, if they let me get my own phone!)
  • Total: $2329 for 2 years, $97 per month

AT&T:

  • Monthly plan: $50 (250 Mins, Unlimited Texts, 1GB Data)
  • Cost of phone:  $400 (Samsung Galaxy Nexus, if they let me get my own phone!)
  • Total: $1600 for 2 years, $67 per month

T-Mobile:

  • Monthly plan: $30 (100 Mins, Unlimited Texts, Unlimited Data)
  • Cost of phone: $400 (Samsung Galaxy Nexus)
  • Total: $1120 for 2 years, $47 per month

Sprint (disregarded due to unavailability of 4G)

Simple Mobile:

  • Monthly plan: $40 (Unlimited Mins, Unlimited Texts, Unlimited Data)
  • Cost of phone: $400 (Samsung Galaxy Nexus)
  • Total: $1360 for 2 years, $57 per month

Straight Talk:

  • Monthly plan: $45 (Unlimited Mins, Unlimited Texts, Unlimited Data)
  • Cost of phone:  $400 (Samsung Galaxy Nexus)
  • Total: $1480 for 2 years, $62 per month

AT&T and Verizon are vague about letting you buy your own phone even on prepaid plans. On their websites, they keep pushing you to buy a phone from them. Don't know how cooperative they will be if I bring my own phone.

None of the above plans include taxes. I think usually prepaid plans have taxes included in the price, but I can't be sure about that. The phones I selected for the on contract deals, I selected the phones which I would get if I would buy if I were to sign up with their service.

If I were to go for a prepaid option, I would get the Galaxy Nexus by Google. Currently, I came across this one which seemed the most reasonably priced Android 4.0 phone. Detailed comparison will follow in another post.

Apparently, T-Mobile's prepaid connection is by far the most cost-effective. Although, I have heard T-Mobile's service and coverage areas are not that great. It might be worth my while to use it for a month in Minneapolis to find out if it's good or not.

Andrew Martonik, on his blog, also lists reasons why he jumped to prepaid service. He lists a couple of caveats of prepaid service: no nights & weekends and no roaming. He also suggested installing Google Voice to be able to use data primarily and save on minutes. It's a very good idea, I already have Google Voice and I agree that it would be great to be able to use it on 4G and save minutes and text on a prepaid connection.

Some users on the XDA Developers' forum have not been happy with the prepaid services. Their complaints about data throttling and unavailable customer service are quite a few. A big reason I would go for a prepaid connection is that so I can also have the flexibility of switching carriers if I am not happy with the service. Since I will be new in the city, I don't know which carrier will have a good service where I will be living. This gives me good reason to get a cheap prepaid connection and switch after a month if I'm not happy with them.