As if you didn’t already know this: your cell phone carrier is trying to earn as large a profit as possible. The top three carriers in the US are public corporations, meaning they serve their shareholders first and foremost. That means beating last quarter’s earnings. As we’ve seen in the last few years, carriers will rearrange the deck chairs if it means squeezing a little more money from its customers.
Yes, the big carriers offer expensive plans. This is partly because a portion of your monthly bill goes to subsidizing the cost of your handset. You might pay $200 for a new smartphone or get a new feature phone for free, but the carrier pays full price. They make up for it by signing you up for a two-year contract. In theory, you’re paying not only for your monthly service, but also for the subsidy.
If you happen to keep your phone past the two-year term, you’re still paying the same price for service. That might seem a bit unfair, but that’s the pricing that the carrier offers. It would be nice of them to lower pricing after two years, but corporations are not in the business of being nice. They are in the business of making profits. That’s why Rich Brome’s complaint strikes me as odd. He not only bashes carriers for this practice, but uses harsh language such as “scam.”
Trust me: while carrier pricing might be unfair, it is not a scam.
Why is it not a scam? Because once your two-year term expires, you are free to leave. You are no longer under obligation to pay the carrier, which means you don’t have to pay the subsidy any longer. You can choose to take your business to a different carrier, one that charges less because it doesn’t offer subsidized pricing.
This option works out better now than ever before. If you are on Verizon, you can take your phone directly to Page Plus Cellular and they will activate it on one of their plans. Those plans are far less expensive than Verizon’s and provide similar services. You’ll lose the roaming network and LTE, which stinks, but you get full 3G service in Verizon’s coverage area.
If you have Sprint, you can take advantage of Sprint’s new policy of allowing its MVNOs to activate Sprint-branded devices. If you’re out of contract you can take your phone to any number of these MVNOs — and there are many of them — and have them use your Sprint phone directly.
There are other carriers still, such as Straight Talk, that will allow you to place their SIM card in an unlocked GSM phone from AT&T or T-Mobile. Unlocking your phone is tougher now than previously, but if you’re out of your contract term you can almost always get your carrier to authorize it. You’re then free to pay Straight Talk’s $45 per month, rather than AT&T’s $90.
Yes, there are disadvantages to using a prepaid carrier. Customer service is often worse. Roaming is typically not allowed. There are few prepaid carriers offering 4G services, whether LTE or WiMax. Those are some sacrifices, sure, but if you’re disgusted with carrier pricing it’s the only real alternative. Is it worth the savings?
To put it another way: why is it a scam for carriers to imply subsidy pricing, even after the subsidy is paid, but it’s not a scam for them to rearrange deck chairs in the name of profits? Before it introduced Share Everything plans, you could get adequate Verizon smartphone service for $90 per month. It included:
- $40 for the 450-minute plan, which included unlimited nights and weekends plus unlimited calls to Verizon’s 110-plus-million customers.
- $30 for 2GB of data — and that used to be unlimited data.
$20 for unlimited text messaging, though there was an option for $10 per month for 500 texts plus unlimited texts to and from Verizon customers.
Now that same $90 gets you smartphone activation ($40 per month) plus 1GB of data ($50 per month). In order to get the same 2GB of data you have to pay $100 per month. Yes, you get unlimited voice with that, but it’s clear that consumers have devalued voice. The 450 minute plan was perfectly adequate for many, if not most, Verizon subscribers.
So where’s the allegation-flinging on that front? Why isn’t killing unlimited data — and requiring a plan change when upgrading to a 4G LTE smartphone — a scam?
If these practices are scams, then hundreds of millions of Americans get scammed every month. But we do it willfully. We understand the cost of service. Perhaps not everyone understands subsidy pricing, and perhaps they’d act differently if they did. But to call it a scam is just heavy-handed and unnecessary language.
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