Are you still on an unlimited data plan with your smart phone? Seems like only yesterday that I was, and it was a great and wonderful feeling. Although I never used more than 2-3GB per month, I enjoyed the comfort of knowing that I would never be charged a ridiculous amount of money for an “overage” when I used my device I already overpaid for every month. Some wireless carriers, such as Sprint and T-Mobile, still offer their users unlimited data, and recently more and more people are taking note of that and making the switch. Just last quarter, T-Mobile enjoyed almost 900,000 new signups, while comparably, AT&T managed to grab only 566,000. Companies that are offering more features for less money, like T-Mobile, are growing at a faster rate than the others (I’m about to switch as well), but Verizon’s CEO doesn’t seem to think this is forever. In fact, he claims that, “eventually, unlimited has to go away.”
Is this true? Are these other carriers who offer to give us services without excessive overage ripoff fees doomed to the same fate as other carriers like Verizon and AT&T, taking features away from their customers while simultaneously raising the already high rates? Will Sprint and T-Mobile be forced to show their greed eventually too? Verizon’s CEO clearly said this in direct response of T-Mobile’s recent aggression, not charging an overage to people, and having lower prices than them. He’s likely trying to say what he can to make people believe T-Mobile’s offerings are a temporary fairy tale…. so let’s get down and analyze this a little bit.
Well, let’s look at short-term facts on this, and then judge for ourselves. While I can’t speak for Sprint (since their “growth rate” doesn’t really exist), T-Mobile is shooting up in the numbers as a result of their attractive offerings and aggressive advertising. But unlike many companies, it isn’t just advertising that’s making them more money now. They actually offer the product to back it up. In a majority of popular markets, including places like Chicago and New York, and places around Southern California, T-Mobile service is quite fair, and they now have the “fastest 4G LTE network,” a title that was turned over to them from AT&T less than a month ago. They don’t charge customers overage fees on data, have lower prices than Sprint, Verizon, and AT&T… Oh, and they don’t lock their customers into a contract with early termination fees.
But Verizon’s CEO seems to think that this form of doing business has to stop, despite its rapid effects on T-Mobile’s growth. Customers respond well to gaining more features for less money, and the ability to get a phone without being locked into a contract is a great deal as well. In fact, this is the very same system that works in most international markets already, especially in Asia. Wireless carriers in, say, Vietnam for example, don’t have lengthy contracts with subsidized phone plans. They have extremely low prices for the money, and offer exceptional performance for that money. You can own an iPhone in Vietnam for about $15USD per month. No contacts necessary. They can afford to do this, because of volume, and a variety of other things. There’s a lot of people in Asia.
Places in Europe operate at similarly high prices, but will allow shorter term contracts (1 year), making their customers feel a little better knowing their commitment isn’t as long-term as the United States. But these carrier rates are also terrible deals when you look at what you get for the money. Long-term contracts don’t work for anyone, except wireless carriers. The idea behind them, of course, is that you get a very expensive phone for a very low price, in exchange for staying with the carrier for a long period of time. They charge you a high-rate so that you eventually pay off your device, which is very similar to giving you a loan and requiring you to pay it off in installments on your bill every month.
But what happens when you pay off your device? Does your rate go down now, since you’re no longer having to pay for the phone’s costs as well? What about when you wish to sign up with a carrier, without getting a new device, and without signing a contact. Will your rates be lower then? In both cases, the answer is no. So if there is no savings by not signing a contract, and customers are locked in when signing one, but gets no additional benefits from doing so, then who benefits from contracts?
Just the carrier. That’s it.
T-Mobile understands this, and that’s why they offer no contract plans, and unlimited data at lower prices than the competition. Much lower in fact. I currently have a bill of about $420/month (after taxes and fees) for my 8 lines in a data share plan. This is pricing after my corporate discount, and it equals just under $50/month for each person on the plan. We all have smart phones, and we all share 10GB of data. When we go over our data limit, an extra $15 is charged for an extra 1GB added to our plan, even if we only go over a couple of megabytes. A terrible deal, of course, but we pay it. We’d love to get out of it, but we’re all locked into contracts for varying periods of time.
If we were at T-mobile, we wouldn’t have that contract problem, and we’d have lower prices too. Let’s look at this family plan, for example, and compare it to the already discounted rate I have with my lines at AT&T.
We’re looking at T-Mobile’s pricing structure, where each smartphone line has its own data limit in the family plan. Those data limits can cost a low amount of money per month, or a high amount per month, depending on if the line wants unlimited data ($70/month), or just 500MB ($50/month). These prices are only for the first line. Prices drop for the second line you have after this:
And then, as if that wasn’t enough savings already, they drop the prices even further for the rest of the lines you add after this:
Now you might look at this and say “that’s not really that expensive!”, and you’d be right. However, we’re not even done yet… let’s dig a little deeper, and we’ll discover why this is an even better deal.
T-Mobile’s “data limits” aren’t hard limits that get overage charges added when going over. They’re also not linked together, so individual line’s can have various amounts of usage, and therefore offer the opportunity to save money for the lines that don’t use a lot of data. For example, I have 2 lines on my account that never use more than 500MB of data, and would place them with 500MB of data for $10/month. Most of my lines use more than that, but not more than 2.5GB. In fact, everyone else would get the 2.5GB plan for $20/month, except the second line, which would be $40/month. So, let’s add it up:
60+40+20+20+20+20+10+10 = $200
HOLY CRAP! I mean… Not only would I get MORE data at 4G speeds and still unlimited everything else, but I’d get it for LESS THAN HALF of what AT&T charges? Adding all this up, plus taxes and fees, and you’ll easily find that everyone owning a smart phone, without a contract, with unlimited data still (even if throttled after your limit) is less than $29/month each. Oh… and that’s BEFORE any corporate discounts are put in place. I haven’t even gotten my discounts yet. Incredible.
So the real question is: Is the Verizon CEO right? Does unlimited have to go away, or does he just hope it goes away so he can continue getting huge bonuses from ripping people off?
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