Thursday, February 10, 2011

Shopping Cell Phone Plans - Part Deux

Cell phone plans appear to be all over the board, but in reality, the major carriers all follow one another's pricing schemes.  Sounds a lot like collusion, don't it?

Cell phones can be costly, in terms of monthly service.  Many people claim they can't live without a cell phone and spend a hundred dollars or more a month on a plan.  As with any other subscription service, $100 a month adds up over time. If you invested that much per month, at 5% interest, you'd have nearly a quarter-million dollars at retirement.  It is not a trivial amount.

As a helpful reader recently wrote:

A few months ago I actually had a problem with one phone that required me to actually go to a US Cellular store to have it reprogrammed.  I had to wait for an hour while the service technicians repaired it.  It was a complete lesson in financial anthropology.  I quietly sat next to the kiosks listening to customers order their phones and plans.  Not only were they easily swayed to upgrade phones, but their plans for each phone were over $100 EACH.  Just the basic plans, mind you, not the applications or the added charges for the data add-ons.  I have no doubt that many of the families I saw that hour spend over $200 each month for just cellular services.  

I laugh when my neighbors having their homes foreclosed on post emails that have that little “sent from my Blackberry” notation on the bottom of the email. 
The costs of wireless communications can be high - and are very real.

And once we are retired, living on a fixed income dictates that we keep expenses low.  High-end wireless plans can cost a lot of money - money that would pay for a night out every month at a nice restaurant.  So cutting or reducing cell phone expenses is important.

But how to do it?  That is the conundrum and I am interested to hear of any suggestions.

The first step before shopping cell plans is to determine your needs.  Some people need four phones, one for every family member, and a text and data plan, because Junior just has to text his friends or play games online.

Others need less - a lot less.  I just need a phone for emergencies or when I go on vacation.

I was an early adapter in the cell phone business - buying my first "car phone" back in 1989.  Like any 20-something, I thought technology was cool and convinced myself that I "needed" such a luxury.  But in reality, of course, it was just an ego trip to have a car phone back then (You may remember, at the time, people would put fake cell phone antennas on their cars to make people think they had a cell phone, when they didn't!)

Years ago, we used over 1500 minutes a month, but as we have gotten older and matured (in theory) we use less and less minutes.  Last month we used 50 minutes and have over 5,000 "rollover" minutes on our 450 minute plan.  We'd go to a cheaper plan, but 450 minutes is the lowest AT&T will go, and that is a "legacy" plan for two phones (no longer offered!).  We pay about $65 a month with all taxes and fees, for 450 minutes we don't use, for two phones.  We don't text or use data services.

So my goal is to find a cheaper plan, but it doesn't look easy.

Here are some ideas, I have explored:

1.  Cut the land line:  If you have good cell service in your home, you can cut your land line and save money.  A simple land line with unlimited long distance and voice-mail (the latter two being standard features of cell service) can cost $50 to $70 or more a month, depending on your carrier.  That same money will buy a plan with unlimited minutes on AT&T and 450 to 900 minutes on other carriers.

Unfortunately, in many locations, the only high-speed Internet service available is through DSL, which requires you to have at least a "poverty" land line (usually about $19.95 per month).  I did this for many years, but now that I am permanently settled, I went with a "bundled" service for DSL, land line, and long distance (savings, $5 a month, big deal) as my wireless carrier (AT&T) has a weak signal at my house (even with a 4.5 watt booster and an outdoor antenna!).  For conference calls and business, I need a strong signal, and AT&T wasn't cutting it.

2.  Jitterbug:  In the back of Smithsonian and AARP Magazine are lots of ads that target Seniors and often are for very bad deals, if not outright ripoffs.  One that looks attractive on the first glance is the "Jitterbug Phone" which provides 50 or 100 minutes a month for a very reasonable fee ($19.95).

But there are two catches.  First, you have to buy the phone.  How much is the phone?  They don't say, which tells you right there is ain't much of a bargain (no merchant hides bargain prices, but rip-offs are always obscured.  If you have to "Call for Price!" you know it is a rip-off).  Once you buy the phone, and presumably pay a lot for it, you feel obligated to keep the service for a longer period of time.

Second, you pay by-the-minute once you go over your 50 or 100 minutes a month.  How much are extra minutes?  Are there roaming charges?  Well, you'll have to call to find out, as they don't put this information in their ads.

There are number of complaints about the service as well.  And this pre-paid review site notes that the rates are fairly high compared to other pre-paid services.

3.  Traditional Carriers:  As I noted before, the traditional carriers (At&T, Verizon, Sprint/Nextel, etc.) all seem to have the same or similar rates and plans.  I recently called Verizon to shop for a new plan, but their plan was little better than my existing "legacy" AT&T plan, and the only way I'd save money would be to go to fewer minutes and one less phone.

This site compares rate plans from the major carriers and is a handy tool to use.  While they provide a "TruBill Estimate" it does not appear to calculate the various excise and other taxes levied by the Federal, State, and local governments on cell phone plans.

As you can see, all the carriers have the exact same pricing levels - $29.99 (Sprint only) $39.99, $49.99, etc.  The only difference is in the amount of minutes you get, or what other features (nights and weekends, friends and family, rollover minutes, whatever).

Where it gets tricky is when you add a second phone.  For example, with AT&T, I can add a second phone for $9.99 to my plan, whereas Verizon wants more than double that for a "family plan".  So I can save $20 a month by switching to one phone with Verizon, but only $10 a month if I switch to one phone with AT&T.

And of course, there is signal strength and service to consider.  Most of my friends get great service with Verizon, while AT&T seems to drop calls like they are hot potatoes.

There does not appear to be, however, on traditional carrier plan that is substantially cheaper than any other.  Rather, you have to shop these are services and signal strength in your area, versus price.

The one exception is Sprint, which has a 200 minute basic plan for $29.95 per month.  While this may seem like a great savings, bear in mind that excess minutes are $0.45 apiece, so if you go 22 minutes over your limit, you've basically bought the next level plan, which is $39.95 and would have given you 450 minutes.

4.  Disable Texting Features:  It is important that if you don't use texting to disable this feature.  If someone sends you a text message, photo, etc,. and you do not have a texting plan, you may be charged for receiving the message, even if you don't read it.  I called AT&T when I saw some of these charges on my bill and they disabled the feature - resulting in no further charges to my phone, even if someone attempts to text me.

One of the telcos was recently hit with a class-action suit for text-messaging their customers who had no text-messaging plans, and then charging them for receiving the messages!  Text messages, if you are not under a plan, can be staggeringly expensive.  So if you plan on texting, get a plan.  If you don't plan on texting, disable the feature.

Since I do not use texting, shopping that feature is beyond the scope of this article.  I am interested in basic, cheap-as-possible cell service, only because in America today, since pay phones have been removed, you need a cell phone for emergencies or when traveling.

5.  Overseas Calls:  While we are on the subject, when traveling overseas, call your carrier first and see whether you are covered and how much you will have to pay.  And also talk to your carrier about overseas calls made from the USA.

If you call Japan, Sweden, Germany, etc. a lot from the USA, chances are, you will be socked with the highest possible long-distance rates, unless you have a plan in place to begin with.  For a few dollars a month, you can at least get a reasonable per-minute rate for long distance.  Before dialing 011, figure out the cost first, otherwise that might be a $20 phone call you are making.

If you travel to Europe, Mexico, or wherever, it might pay to have a plan that covers those areas.  Otherwise, as is routinely reported in the media, you may end up with a cell phone bill in the tens of thousands of dollars.

For example, when we traveled to England a few years back, I was able to get a European plan added to my phone (make sure your phone is compatible with multiple systems) for only a few dollars - and was able to have the plan removed when I came back.

If in doubt, just buy a "tossable" cellular phone when you get to the airport, along with "minutes" card.  You'll have emergency service while overseas, without the open-ended cost structure.  And if you feel you need to yak or text all the time while overseas, well, you aren't really living.

6.  Disposable Phones and Pay-As-You-Go:  These are an option for people who don't use cell phones a lot.  A friend of mine got socked with a high cell phone bill, an in order to save money, switched to a pay-as-you-go plan.  After a few years, they switched back to an all-inclusive texting plan with smart-phones, as they are addictive personality types and are constantly texting and calling each other.  It is an expensive hobby.

The same comparison site noted above also compares pay-as-you-go plans (as well as family plans).  The only problem with these plans is that you have to read the rules carefully and game the system, to some extent.

For example, some plans charge you a daily fee.  You make one call, and that fee kicks in.  So there is an incentive not to use the phone unless you really have to.

Other plans charge a monthly fee in addition to a per-minute fee.  Others allow you to buy "minutes" on a card (like with AT&T long distance cards) but the minutes expire after 30, 60, or 90 days, if you don't use them (e.g., Tracfone, T Mobil)

Most pay-as-you-go plans don't allow you to rollover your existing number.  And with many, your phone number changes, if you allow the minutes to "expire".  The next time you recharge your phone, your phone number changes.  It is a good system if all you need is emergency phone service only, but sucks if you want people to call you back.

Trying to figure out which plan is the "cheapest" and "best" is hard to do.  If your usage follows a predetermined pattern, or if you only use the phone for emergencies or when visiting a foreign country, then this might not be hard to do.

But if you buy a phone based on low monthly usage, and then use the phone a lot (say, on vacation) then you may end up spending more overall.

AT&T has a 10-cent-a minute plan, which is the same charge, no matter how many minutes you buy.  Sprint has a pay-as-you go plan, but the rate varies by how many minutes you buy - the lowest being 10 cents a minute for 1000 minutes.  Tracfone is the most expensive of the three, charging 15 cents a minute for their 100 minute plan.

With all three services, the minutes expire at the end of 30, 60, 90, or 365 days, the latter being the limit for a 1000 minute plan.  With that in mind, it makes no sense to buy smaller rate cards, as they will expire sooner and the rates (other than AT&T's) are much higher.

For someone who rarely uses their phone (less than 100 minutes a month) the AT&T plan, with a 1000 minute card, might make sense.

AT&T also has a $2 a day plan, that provides unlimited text and talk, but charges $2 only on the days you use the phone - which could be useful if you use your phone only occasionally.  This plan also has unlimited texting - even to Mexico and 100 other countries (according to their rate card) which could be useful if you are traveling overseas.

UPDATE:  I switched to GoPhone from AT&T for 10 cents a minute.

* * * 

So... what is the "best plan" to have?  Well, I hate to say it, but it is again, one of those "it depends" kind of deals.  AT&T has some great plans - but lousy service coverage.

Of the "pay as you go" plans, they have some very competitive deals - 1000 minutes for $100, which don't expire for 365 days.  If  you want a cell phone in your car for emergencies or the occasional phone call, that is one cheap way to go about it.

Their $2 a day plan also looks attractive to someone who might leave their phone in the charger most of the time.

But as for "traditional" plans - ones where you have a fixed phone number and pay $X a month for Y minutes, well, all the telcos seem to have about the same plans and charges, with the only major differences in ancillary features and service signal strength.

Perhaps the only reason I have stayed with AT&T in the past was the rollover minutes.  Since I tend to accumulate rollover minutes during some months of the year, I have excess for those other months when I "go over" the regular plan rate.  As a result, we don't end up paying "overage" charges for "excess minutes".  This also means I can go to a plan with fewer minutes and use the rollover as a buffer and a barrier to excess minutes charges - as opposed to going to a higher minutes plan and paying all the time for minutes we never use.

But today, we find ourselves using 50-100 minutes a month.

So switching from AT&T to Verizon to Sprint to whatever doesn't seem like it would save me much money, in terms of overall costs.  The plans might be slightly different from one another, but there are no dramatic savings, unless we drop a phone or go to 200 minutes on the Sprint plan.  And as I noted, with the Sprint plan, if you go over those 200 minutes, they nail you.

One Approach I am considering is this:  We are migrating our phone usage to the land line, which is becoming my main line for personal and business use and for Voice-Mail.  Over time, we will wean our customers and friends from the cell number and train them to call the house number.

We used a total of 58 minutes on the cell phone last month.  Our bill was about $64 with taxes - which comes to over a dollar a minute (!!) at that level of usage.  We presently spend $768 a year on the cell phones, on average.

A pay-as-you-go plan, with 1000 minutes of airtime, would cost $100 a year (minutes good for 365 days) and provide an average of 83 minutes a month (they "rollover" automatically).

We could use such a plan, or perhaps two (one SIM card for each phone) at a cost of $200 a year, or about $568 less than we are spending now - not an insubstantial amount of money.  And if we needed additional minutes, we could just purchase them.

The SIM cards could be used with our existing phones, too, so there is no start-up cost in purchasing the phones.

Is this a savings?  I will investigate further.  At the present time, we are paying about $64 a month for 450 minutes with two phones.  As you can see, this works out to over 14 cents a minute - far more than the 10 cents a minute on the pay-as-you-go plan.

My next step is to visit the local AT&T store and check this out in detail for the "gotcha" charges.  As I recall, although it is 10 cents a minute, they do charge 2 minutes to initiate each call or something stupid like that.