Tag Archives: AT&T

Unlocked phones are the way to go

iphone5s

My wife and I got new iPhone 5s(es) this month, an upgrade from the iPhone 4S models we got two years ago. Our contract was up and we certainly could have bled another year out of them, but two things were working to make sure we upgraded. First, we needed more storage thanks to the explosion of baby photos we’ve been taking. Second, the more research I did on carrier practices the more I saw it’s a terrible deal to not upgrade.

This post is about what I found in my research and where the savings are. The tl;dr version is that carrier contracts almost guarantee you’ll upgrade every time you’re eligible if you have any sense, because otherwise you’re just giving these companies free money.

Most of us roughly know what our monthly costs are for cell service, and we’re also used to getting either a free phone at upgrade (if you get an older model) or one with a down payment if it’s a nicer phone. What’s hidden in a contract cell phone bill, though, is the monthly subsidy that’s built into our phone plan price. The subsidy is used to pay the carrier back for the full cost of the phone. What happens when your two-year contract is up and your phone is paid off? One of two things:

  1. You upgrade, starting over the process of down payment and subsidized cell phone plan rates. The only extra cost here is an extra down payment per phone every two years, which seems like something you’d like to avoid until you consider Option 2.
  2. You don’t upgrade, helping you avoid the down payment of $100-$200 but your monthly plan rate doesn’t change. That’s right, you keep paying the phone subsidy even when the phone is paid for. As a matter of perspective, for my wife and I this meant paying $50 more per month than we should have. Eight months of doing this, and you’ve paid the equivalent of a down payment on new phones.

As an example: My wife and I had AT&T. We got two 16 GB iPhone 4S models two years ago at a cost of $199 per phone. Over the next 24 months on our contract, we paid about $130 for the two lines with their cheapest calling and data family plan. By the time we were done it broke down to $40 a month or 1 GB of shared data, plus $45 per phone. Now, notice there is no charge for the phone subsidy. It’s built right in. So when our contract expired, I tried both the AT&T Store and calling customer service to ask if they had a cheaper plan for off-contract phones, which is what they were at that point. I was told no.

As I did my research, I realized how crazy this was for AT&T to hold this position. I found a non-contract price for two unlocked iPhones on T-Mobile for $80 a month. We ended up two 1 GB of data split between two phones (500 MB each rather than sharing 1 GB). That’s a difference of $50 a month, and that’s where you’re seeing the true cost of the subsidy built into phone plan prices. If you go with option 2 above and don’t upgrade, yeah you’re saving around $400 in down payments but the downside is much worse. First, you’re going to upgrade eventually, meaning you’re going to pay that down payment eventually. It’s something of a sunk cost and your only real control is when you pay it. Second, every month you stay on an expired contract without upgrading it’s costing you around $40-$50 in money you’re just handing to your carrier for nothing in return.

So we did something I’ve never done. We bought GSM unlocked phones that are usable on any GSM carrier (more on that in a bit). Right now when you get an iPhone from a carrier they are locked so that they’re only usable on that carrier (many carriers will unlock it for you after your contract is up, but the rules vary widely). Instead of a down payment and then subsidy in our bill, we pay for the full cost of the phone. In turn, we are able to shop for a plan without a subsidy and benefit from the price. The chart below is a look at the true cost of an unlocked phone vs. locked phone over two years. That time frame is a good comparison because contracts last two years and you’re locked in on price, so it was useful to compare an unlocked phone cost over that timeframe.

Unlocked vs. Locked iPhone pricing comparison over 24 months

2 Unlocked Phones
2 Carrier Locked Phones
Phone down payment to carrier (32 GB iPhone 5s) $0 $598
Monthly plan $1920 (a) $3,120 (b)
Unlocked phone purchase $1498 (c) $0
Sales taxes at point of purchase $120 (d) $32 (e)
Carrier, local taxes on monthly bill $288 (f) $480 (g)
TOTAL $3826 $4230
Monthly savings for every month past 24 months $50 $0 (h)
(a) Based on T-Mobile Simple Choice price of $50 for the first line and $30 for the second line for a total of $80 a month. At that tier, each line gets 500 MB of data and then the speed is slowed for any overages (but you will not be charged more). The plan includes unlimited talk/text.
(b) Based on AT&T Family Share price of $40 for 1 GB of shared data per month plus unlimited talk/text, plus a cost of $45 per month for each smartphone on the plan. Total monthly cost is $130 for two phones, and price in the above column is based on 24 months (2-year contract). Data overages incur a $15 one-time fee for each instance.
(c) Based on the cost of two iPhone 5s models at $798 each. In our situation, we are paying off that cost in 24 installments over two years thanks to Apple financing, which got us the phones at 0% as long as they’re paid off within 24 months.
(d) Computed from purchase of two unlocked phones at full price.
(e) Computed from the down payment purchase
(f) Based on the average 15% sales tax on the carrier plan of $80/month, multiplied by 24 months
(g) Based on the average 15% sales tax on the carrier plan of $130/month, multiplied by 24 months
(h) One caveat: When your contract is up, it’s possible to get your carrier to unlock your phone and then shop around to a carrier that has Bring Your Own Phone pricing (or switch to a plan with your own carrier that has no subsidy built in). This usually is not automatic.

So you can see a few things here. First, over two years you save $404. Big deal, huh? Yeah, it’s a big deal. With an unlocked phone, every month past two years that I keep my phone I’m saving $50 a month. Going even 7 months past 2 years would yield me enough savings to be able to pay for one upgraded phone in cash. With a carrier locked phone, you do have the option to unlock it and go to another carrier, but you’ll always be playing behind. If you leave it locked and simply upgrade, you pretty much have to do it when your contract expires or you’re losing even more money than you already are. In addition, on our old AT&T plan we were paying for data overages 3-4 months a year, so that’s extra cost right there, whereas with T-Mobile they’ll just slow your data speed.

One of the benefits of unlocked phone other than the obvious financial benefits is you have freedom to choose when you upgrade. This is a big deal to me. Smartphones are getting better each generation, but the pace of improvement is more around the internal hardware these days. With the first iPhones, upgrading after 2 years was something of a no-brainer due to the camera and chip improvements, not to mention upgrades such as 3G to LTE. Now, though, I can see it being useful to go 3-4 years if possible between upgrades. The pace just isn’t quick enough anymore to justify a new phone every two years.

By the way, this doesn’t just apply to iPhones 5s models. The iPhone 5c also has an unlocked model for a cheaper price, and many Android phones are available as unlocked. My favorite affordable Android phone is the Nexus 4; I got one of those for my Multimedia course for about $350 and it was unlocked for any GSM carrier. Using the chart above, we would have paid off two Nexus 4 phones in just over a year. (UPDATE: Google just announced the Nexus 5. An unlocked version is available for $349 for a 16 GB model and $399 for a 32 GB model – usable on Sprint, T-Mobile and AT&T, so you have some carrier choice if you go with a big carrier that has a Bring Your Own price (without subsidy) or go with a Wal-Mart Straight Talk option).

Your leverage is that the savings are a sliding scale, and it works along two factors: (1) upfront cost for the phone, and (2) number of devices on your plan.

  1. Go with a cheaper model like the iPhone 5c or a Nexus 4, and you pay it off faster, giving your more months in that 24-month period by which to accrue savings via the cheaper plan.
  2. The more handsets you have on your plan, generally the greater the savings. If I was on an individual plan going from AT&T to T-Mobile, I’d save $20 a month; with two people, we’re saving about $50 a month.

So is the switch useful for you to think about? Here are some of the major things you’re going to want to research.

1. Price it out

You can use the table above as a guide. I priced it out for two people. Do the math for however many handsets you have. From my own looking around, the more handsets you have the more stark the savings can be. Consider starting out by carrier unlocking your phones and switching to a cheaper plan to give yourself some savings cash to pay for those phones up front.

Consider the sunk cost of paying for phones up front, but ask about financing options. T-Mobile will let you break the payments up over 24 months if you buy the unlocked phone from them. We got ours direct from Apple, which offered 0% financing over 24 months. We essentially are paying a subsidy for two years, but that’s a financed cost that goes away when it’s paid off.

2. Know your protocols

In the United States, phones work on two different wireless protocols: GSM and CDMA. AT&T and T-Mobile use GSM (as do most countries around the globe, making it a very attractive phone for people who travel) whereas Sprint and Verizon use CDMA. What you should know is that Apple right now is not selling an unlocked CDMA phone, but Verizon in particularly is good about letting you unlock a phone when the contract is up. Once a CDMA phone is unlocked, the past two iPhone models have been usable on either CDMA or GSM networks because it is a true world phone (I don’t know of any Android phone that does this), but you can’t buy a true universal unlocked phone as of yet. An unlocked GSM phone, which is all you can buy from Apple, will not work on CDMA at all.

Short version: Verizon is great once it’s unlocked, but you have to go through the contract first. If you want the bigger savings, you’ll need to switch to a GSM carrier so you can buy an unlocked phone upfront.

3. Look beyond the Big 4

All four carriers rent network space to smaller carriers. You may have heard of Wal-Mart’s Straight Talk plan, or Cricket Wireless, or AIO (and this is just scratching the surface). None of these companies built their own network. They’re renting space. But a lot of them will welcome your unlocked phone and all you need to do is buy a SIM card. The upshot is you get the benefits of a big carrier’s coverage map but you don’t pay subsidy prices. The downside to these are that they don’t have storefronts, and so when something goes wrong the customer service isn’t great. Most of the problems seem to be around porting your phone number to the new carrier. When a Big 4 carrier loses it, they can work with you. When one of the smaller carriers loses it, the complaints I read mostly centered around the difficulty in even reaching someone to help solve the issue. Additionally, while they might advertise LTE speeds for data it’s not guaranteed. Look for “up to LTE” verbiage as your tipoff.

Still, the smaller carriers have good pricing. Straight Talk was a flat $45 per phone rate for unlimited everything, and you can use them on Sprint, Verizon, and AT&T. AIO was about $40 a month, and they just got bought by AT&T so hopefully that means the carrier is planning a non-subsidy option somewhere. The things to research with smaller carriers are the price (obviously), talk/text prices, data cost (unlimited with throttling or do they charge for overages) and whether you are able to port your phone number. But even bigger, look at their coverage map and what network they’re on. If they’re a CDMA network you’re going to need the right phone.

The key to making this cost-effective for you is to reduce that monthly plan cost as much as possible. That’s the beauty of unlocked phones, so leverage it to the degree you’re comfortable. The major downside differences, as I said before, compared to the Big 4 are customer service and data speeds.

OK, so you’re ready to go. Here’s what I’d do:

  1. When your contract is up, call your carrier and ask if they’ll unlock your current phone. Even if they charge a small fee, it’s worth it. From there, you can shop around to a cheaper unsubsidized plan and keep your phone (and then you’re saving right away), or you can still do an upgrade as outlined below and still have a backup phone in case you lose your new one. We did this with our 4S models so we have some peace of mind. But if your contract is up, it’s a no-brainer to get them unlocked and keep the phone if you’re happy with it, because you can shop for non-subsidy pricing and save right away, allowing you to bank money for an unlocked phone down the road. (Side note: Right now, T-Mobile is really attractive to switch to with either an unlocked phone fresh of contract or a new unlocked phone because they’re making the pricing no-nonsense and they just offered free text/data in 100 overseas countries. The one thing you’ll want to check is coverage maps because they aren’t great in rural areas. But the plans with the most savings as of this writing are either in non-Big-4 carriers or on T-Mobile.)
  2. Pick your unlocked phone model. Make sure to note whether it’s GSM or CDMA so you know your switching options.
  3. Price it out on your network as well as others that are allowed by that phone model. Look at smaller carriers. Ask your current carrier if they have a “bring your own phone” price that is cheaper than plans where you get a phone from the carrier. Double check their price against online prices that get you a subsidized phone and do the math over the life of the contract – you’d be surprised how often they’ll mislead you. But if they do have a cheaper option (as of this writing, only T-Mobile does) then you can save a bundle without having to go through the pain of switching.
  4. Check with your carrier to make sure they will support your chosen phone. Even if it’s got the right protocol, the phone might not connect. The 4S, for example, doesn’t work on T-Mobile – only the 5, 5c, and 5s.
  5. Pick your network. Find out what kind of SIM card is needed for the protocol (GSM/CDMA) it uses and be absolutely certain your chosen phone will work on that protocol.
  6. Buy your phone.
  7. Buy your SIM card and activate it. Tell them you want to move your current phone number on to the new plan you’re setting up. Do not call your carrier and cancel your plan before this is all set up, as you could lose your number.
  8. Once your phone is working on the new network, find out if you have to call and cancel on your old carrier. With AT&T it was automatic once the number was ported, but be sure to check within a few days to be sure. But either way, be sure to be certain everything is working well with the new carrier.
  9. I recommend doing what we’re doing: bank the savings into an unlocked phone fund. Sit on it until upgrade time. Wash, rinse, repeat and you’ll never have to borrow money for a phone again.

That’s it, lots of info there. I may update this as we go along. I can tell you we just switched from AT&T to T-Mobile and it’s been flawless. We unlocked our 4S models before switching, and they are usable on something like Straight Talk if we need a backup. Moreover, if T-Mobile’s service ends up being bad we aren’t bound to them by a contract.

Our current plan is to keep these phones three years. That would be $1000 in savings by the end of the third year, which is about two-thirds the cost of new iPhones. If we did another 3-year cycle, the cash savings would then pay for both phones. After that, we’re not paying for phones and we’re saving extra money every month that can be spent on other things.

Some of you might be wondering about the early-upgrade plans carriers are offering. Those are an even worse deal than contracts, for the most part. Unless you’re a Sprint customer, forget about it.

Episode 39: Do you really want to be polling a bunch of weirdos?

Fring update push notification

We discuss the value, or lack there of, of push notifications.

Are push notifications making us more and less productive? Do we need better ways to manage push notifications?

We also discuss political polling and the difference between polling landline and cell phone users.

I apologize for Jeremy’s audio quality. I blame his Internet connection (although it could be mine, but don’t tell him).

Listen to this week’s show:

 

Download the MP3

Show notes:

Verizon CEO: Shared data plans coming next year

Engadget is reporting that Verizon will begin offering shared data plans in 2012, allowing families and devices to share one pool of data.

There are two big use cases that people want shared data for. First, families have been sharing minutes for years, so why not data? By allowing familes to share data, more people will get smartphones. A lot of people are reluctant to dabble in using data for $30 a month (Verizon’s monthly charge for 2 GB of 3G data and the only data plan they offer on smartphones). 2 GB of 3G data is more than the vast majority of people need on their smartphones, especially first-time smartphone owners. AT&T says that 65 percent of their smartphone customers use less than 200 MB of data a month.

The second use case is for sharing data between multiple devices. Instead of purchasing a data plan for each device — say a smartphone, tablet and mobile wifi device — users could purchase one pool of data and use it across all of their devices. I used to have a data plan on my iPad, but I got tired of managing two different data accounts — one for my iPad and another for my iPhone. It was getting really expensive, and I would often use up the data on my iPad and have plenty of data remaining on my iPhone. Now the iPhone offers the ability to tether data from the iPhone to the iPad, and I do use that from time to time, but it’s a great way to drain your phone’s battery and not as good of solution as sharing a pool of data between my iPhone and iPad.

If I could buy a giant pool of wireless data and use it across a bunch of devices, I would. Instead, I have cut down on my data usage because it was getting too expensive and too difficult to manage several different accounts with the same company, all while I was having too much data on one device and not enough on another.

ISPs form new Copyright Alert System that will alert users of copyright infringement

This is a step in the right direction. Instead of just randomly suing people when a music label or movie studio suspects copyright infringement, ISPs will notify people that a copyright holder believes a copyright infringement has occurred:

The entity announced today that AT&T, Verizon, Comcast, Time Warner Cable and Cablevision have teamed up with the RIAA and MPAA in order to agree upon a six-stage notification system that’ll electronically alert internet users whenever their account is used for wrongful downloading.

Under no circumstances will this system result in your Internet being cut off. The UN considers Internet access a human right, and it shouldn’t be shutoff just because a company believes copyright infringement may have occurred. This new system is a lot more user friendly, and hopefully it will lead to less litigation and more education and awareness of what is and isn’t legal.