The Great Cell Phone Experiment

When I (Ansen) look over the line-items in our budget, the cell-phones category always catches my eye.  And not in a good way.  The amount we spend on our wireless bill is over twice what we spend on television and broadband combined.  It’s one of the most expensive categories in our entire budget, only behind the likes of our mortgage payments and grocery bills.  Dri and I both own smartphones with service from Verizon Wireless.  These phones have served us quite well and we’ve come to be pretty reliant on them.  However, our 2-year contract with Verizon recently expired, giving us the opportunity to evaluate our options.

Here’s a breakdown of our current situation:

• Nationwide Talk Family Plan — $80 (2 Lines, 700 minutes)
• Unlimited Texting –$20 (Shared Between Both Lines)
• Unlimited Data Plan –$30 (Primary Line)
• Unlimited Data Plan — $30 (Secondary Line)
• Verizon Fees, Surcharges, and other Stupidity — $7
• Taxes and Government Fees — $10

If you’re counting along at home, that gives us a total of $177/mo for two smartphones. Ouch. The worst part what we’re (supposedly) paying for voice — the one feature on our phones which, ironically, we use lightly.  Over the last six months, Dri and I have used an average of 60 minutes per month combined.  That’s not many.  Of course, Verizon doesn’t have a family plan for any less than 700 minutes, so we can’t just drop our minutes and pay less.  How inconvenient.

The Major Carriers

The question is…are there any better options out there?  A quick look at the other major US carriers reveals some (very) modest savings opportunities.  We could save $10/mo by switching to AT&T (with 3 GB of data rather than unlimited — although Verizon would also no longer offer unlimited data if we re-committed).  Any savings are good, but that’s not nearly good enough.  Sprint looks like a good option at first glance with lower family plan prices than Verizon and AT&T.  However, Sprint charges an additional $10/mo per smartphone for “Premium Data” (huh?), which puts the final tally at $150/mo + fees.  How about T-Mobile?  They offer a 1000 minute family-plan for $60, with another $20 fee on top of that for unlimited texting.  “Unlimited” (speeds are throttled after 2GB of usage) data packages are $20 per line.  That comes out to a total of $120 + fees.  That’s savings of around $40/mo. We’re getting somewhere now..but there’s still got to be more economical options out there! Right?  Please??  Anyone?!?

The Alternative: Pre-Paid

Pre-paid providers used to be the realm of low-end devices like feature phones (a nice name for “dumbphones”) at worst, or outdated smartphones at best.  There’s a certain stigma associated with them.  As in, “you can’t afford a real phone.”  Fortunately, that is beginning to change.  More people are getting fed up with the major carriers, and more pre-paid services are offering full-featured smartphones.  Some are even dabbling in what used to be an unknown concept domestically: “Bring Your Own Device” (BYOD) plans.

Virgin Mobile (owned/operated by Sprint in the US) made headlines recently by announcing they were going to offer the iPhone 4 and iPhone 4s for use on their network.  The plan price?  An incredibly low $30/mo per phone for 300 minutes, unlimited texting, and 2.5 GB’s of data usage.  Now there’s some savings!  So what’s the catch?  Since there’s no contract, there’s no subsidy on your device purchase. That means a Virgin Mobile iPhone will set you back an eye-popping $650.  So for two lines, we’d save $117/mo, but there’s an upfront cost of $1300.  If we bought iPhones (or something similar) on a major carrier, we’d pay $200 or less.  But think about it.  Once you get over the initial sticker shock and do the math, you’ll see that if you kept the devices and service for the same duration as a typical two year contract, you’d still save a total of $1908 over that time period.  That’s just shy of $80/mo in savings, and that’s pretty major.

The Decision: Monthly4G from T-Mobile

There are many other pre-paid options out there. StraightTalk from TracPhone/Walmart was one we heavily considered, and is a great choice to look into for those who need a larger number of voice minutes. However, in the interest of brevity (too late?) I’ll skip to where we landed.  Surprisingly enough, we’re going full circle — back to one of the four major carriers.  T-Mobile offers pre-paid plans called Monthly4G, and it contends with Virgin for about as cheap of a plan as you can get.  For just $30/mo per device, you get 100 minutes, unlimited texting, and 5GB of data.  That’s twice as much data as Virgin, but only a third of the minutes.  So what’s the draw?  BYOD, of course!

Any unlocked GSM phone (the short version of what GSM means is any phone that would be compatible with AT&T or T-Mobile) can be used on the plan, which gives us more phone options at significantly cheaper prices than we’d get buying through Virgin.  Dri and I each made the decision to purchase a Samsung Galaxy Nexus (Google’s flagship phone) directly from Google for the most-excellent price of $350 each.  That may sound pricey, but remember — this is for a completely unlocked phone with no contract commitments of any kind!  All that is required to get the phones working is a pair of T-Mobile SIM cards, which we purchased online from T-Mobile for $1 apiece.

One additional benefit?  If we decide we don’t like T-Mobile for whatever reason, we can cancel our plan at any time and switch to another BYOD carrier (such as StraightTalk) by just purchasing another SIM card.  No early cancellation fees here.

The Minutes Problem

The one issue with this plan, as I’m sure you noticed, is the tiny number of minutes.  But again, for Dri and I, voice is the least used feature on our cell-phones!  However, for those inevitable longer conversations we sometimes like to have with parents or other family members…there’s a workaround, and it’s one you’ve probably heard of.

It’s called Skype!  After downloading this completely free VoIP (voice over internet) app to our phone (and politely asking our smartphone-wielding family members to do the same), we can easily ask of it’s ok to switch over to a Skype call any time we think we’re in for a long conversation with someone.  Skype runs over a data or Wi-Fi connection rather than using those precious minutes.  If we still really find ourselves to be short on minutes, Skype offers pay-as-you-go or subscription plans that allow you to place or receive calls from cell phone numbers through Skype.  The person you’re calling (or that’s calling you) wouldn’t have to do anything differently than they would for a normal phone call.  These plans are just a couple dollars per month, which means we wouldn’t be cutting into our savings much if we chose to purchase them.

Yet another option?  Additional minutes for T-Mobile pre-paid are just 10¢/min, which really isn’t bad.  That means you could essentially create your own 200 minute per month plan for an additional $10.

The Glorious, Glorious Savings

So speaking of savings, what are we looking at here?  Let’s say we bought the same phones we just bought, but decided to stick with Verizon.  Verizon has moved to new “Share Everything” plans, so we’d be force to change our current set-up slightly:

Verizon Wireless

2 Samsung Galaxy Nexus Phones — $300 (one-time)
Unlimited Voice/Txt for 2 Phones — $80/mo
6 GB of Shared Data — $80/mo
Fees, Taxes, and Other — $17/mo
——————————————–
Total Price over 2 Year Contract:  $4548
Averaged Out Monthly Cost:  $189.50

T-Mobile Monthly 4G

2 Samsung Galaxy Nexus Phones — $700 (one-time)
2 T-Mobile SIM Cards — $2 (one-time)
100 Minutes, 5 GB Data (apiece) for 2 Phones — $60/mo
——————————————–
Total Price over 2 Years:  $2142
Averaged Out Monthly Cost:  $89.25

Conclusions

So what do we lose by switching?  To be fair, there are a few things.  We’ll have significantly less minutes, no 4G LTE data speeds with Verizon (HSPA+ 4G with T-Mobile is an older, stop-gap technology), and we’ll miss out on Verizon’s superb network coverage.  What do we gain?  We’ll have an additional 2 GB of data per device per month.  Oh, and then there’s that little detail of saving more than $2400 over the next two years!  We’ll fully pay off the $700 cost of our phones using our plan savings in just 6 months.  From that point on, we’ve freed up $117/mo in our budget!

For us, that’s absolutely more than worth the minor inconveniences.  Take that, Verizon!