Why do most smartphone plans require us to pay for stuff we don't want or use?
I wondered this after looking at my last three bills and plan usage. So I asked around, and it seems it's a pretty common scenario.
“I pay $190 for two phones with unlimited talk, text and data,” said Morgan S. Without a computer at home, she says, “I basically use my phone as a tiny computer.”
According to Morgan's bill, last month she and her partner used more than six gigabytes and sent more than 5,000 text messages, so her unlimited plan works well for data and messaging. However, she used only 197 of the 1,500 anytime minutes that she paid for.
James S. is in a similar unlimited plan, for which he pays $180 a month for two phones. “Given neither [my partner nor I are] chatty, and we often call other wireless numbers, we barely make a dent in that and have an insane amount of rollover minutes we're required to pay for,” he says. “According to my last statement, we used 58 of our 550 minutes and rolled over the balance.”
So why do customers wind up paying for services they don't use?
If you want voice, data and messaging, you often have to get a comprehensive mobile plan that includes all three, instead of buying individual services.
When I calculated my average usage for minutes, texts and data, I found that I use less of my plan than Morgan and James. For example, when it comes to data usage, my husband and I use less than 200 megabytes combined, yet our family plan was for 1 gigabyte.
Simple enough to solve, just lower the plan! But it turns out that we couldn't.
Fewer minutes, same cost
I called our service provider to see what we could do to lower our bill. But the customer service rep told me that we couldn't switch to a cheaper plan because we were already on the lowest one.
“What if I bought what I needed Ã la carte, instead of paying for a family plan?” I asked the rep.
She ran the numbers, and it turned out that paying Ã la carte was actually going to cost the same as my family plan, but I'd be getting fewer minutes and megabytes!
So the family plan was the better option. This was a little irritating because with a year and a half left on my contract, the company knows I'm not likely to bail.
“Barriers to switching, including contracts with cancellation fees, make the wireless industry less competitive,” says American Customer Satisfaction Index (ACSI) director David VanAmburg in a press release. “ACSI research shows that customer satisfaction is almost always lower when consumers have less choice and more headaches when it comes to switching to another seller.”
But I wasn't ready to give in just yet.
“I just don't think I should have to pay for stuff I'm not using and don't want, you know?” I said.
The rep offered to transfer me to a different department, to someone who could talk to me about other options.
The new rep, Chad, looked at my history of minutes, texts and data usage and offered me a few deals. He lowered my minutes, put 300 megabytes on each phone (the minimum, he said), and gave me a $10-off promotion for the next six months. This effectively lowered my bill by $40 per month.
“That sounds great,” I said, “but what happens after six months?”
“At the end of the promo period, give us a call and we can see what other offers and discounts are available,” he said.
The entire process took about 20 minutes, and will save $240 in the next six months.
Major carriers getting competition
Saving $40 a month was a win, but long-term, I don't know that I'll stick around. Consumers are getting more and more options when it comes to service providers, and some of those options seem like a better fit for someone like me.
For instance, if you don't want to sign away two years of payments or pay a penalty for breaking the contract, smaller carriers like Tracfone, Cricket and Boost won't hold you to a contract. New services like Ting, which launched last year, also allow customers to pay Ã la carte for each minute, message and megabyte used, even crediting your account for whatever you don't use.
Ting sounds like a great option for someone who doesn't use their phone much but still wants the option to talk, text and/or access the Internet.
There are a few drawbacks, however, such as:
You won't get the new iPhone for $99. In other words, no subsidized cell phones. You're on your own to purchase a new device when you want to upgrade.
Speaking of iPhones, they don't work with Ting. Neither do BlackBerrys. The service only works with Sprint-branded devices.
The plan can get very expensive for heavy users. If you use your phone like a computer, this probably isn't the right service for you.
Ting also has a calculator to help you figure out if you'd save money on their service. I input the minutes, messages and megabytes used from my last three bills, plus the amount of the bill. Here are my results:
That's some serious savings! Before I got the promo rate I have now, I was paying $140 for two phones. According to this calculation, if I only had to pay for what I use, at Ting's rates I would pay just $42 per month, a savings of $98 per month. That's $1,176 per year!
Why I'm not switching yet
Needless to say, alternative providers have my attention. But I'm not switching just yet.
As I mentioned, I still have a year and a half on my contract, so I'd have to pay to break that contract. And the longer you have left on the contract, the more you pay. I also would have to buy two phones, since our current phones won't work with Ting. (You can, however, sign up for iPhone/Ting updates, which may mean that Ting is working on including more phones in their service.) In addition to these costs, there's also a $35 activation fee per phone.
So I'll take the wait-and-see approach, and reevaluate my wireless telephone service in six months when my promo offer expires.
Either that, or I'll just chuck my iPhone in the river*, something I fantasize about at least twice a week.
In the meantime, I'd love to hear from you. If you have a smartphone, do you find yourself paying for stuff you don't use? If you use it minimally, how do you also keep your bill minimal?
*I promise that in real life, I would donate my phone and not pollute Texas rivers.
Author: April Dykman
As a freelance writer, editor, and blogger, April Dykman specialized in personal finance, real estate, and entrepreneurship topics. Her work has been featured on MSNBC, Fox Business, Forbes, MoneyBuilder, Yahoo! Finance, Lifehacker, and The Consumerist. Now she does direct response copywriting but, in her free time, April is a wannabe chef, a diehard Italophile, and a recovering yogi.