Prepaid Smartphones: Not For Everyone
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Leap Wireless announced this week that its Cricket prepaid cellular service provider would offer the Apple iPhone 4 and iPhone 4S starting June 22. The devices will cost $399 and $499, respectively, and can be matched to a voice and data plan that costs only $55 per month. No contract is required, and you can cancel the service any time you want. Sounds like quite a bargain compared to the $70 to $100 monthly plans that some smartphone owners are chained to for 24 months at a time.
Before you hop on the prepaid bandwagon, however, you ought to know a few things. Prepaid plans aren’t for everyone and sometimes don’t make sense at all. Here are some pros and cons that business users should consider before taking aim at a contract-free life.
No Contracts = Freedom: One of the worst aspects of any cellular phone is the contract that accompanies it. Wireless network operators typically want customers to sign a two-year service agreement in order to get special pricing on devices. Prepaid providers, such as Cricket Wireless, Boost Mobile, Virgin Mobile USA, MetroPCS, U.S. Cellular, and others, don’t require contracts, which means you can drop the service at any time, for any reason.
Low-Cost Monthly Service: Prepaid services generally cost less than those offered by post-paid providers. For example, I pay ATT about $100 per month for 450 voice minutes, unlimited messages, and 4GB of data. By way of comparison, Cricket’s plan includes unlimited voice, unlimited messaging, and 2.3GB of data. I’ll spend $2,400 during two years with ATT. Staying with Cricket for two years, however, will cost just $1,320.
No Early Termination Fees: Because you’re not signing a contract, you’re not subject to an early termination fee, or ETF. These are fees levied by wireless network operators to discourage you from leaving a contract early. No contract means no ETF.
No Credit Checks: People looking for prepaid wireless service generally aren’t subject to credit checks. That means if you’re sporting a credit score of 500, you will still be able to get wireless service. National wireless providers require credit checks for anyone signing a contract. Poor credit can necessitate a significant upfront deposit that’s held by the carrier.
Limited Device Selection: Some prepaid providers offer top-of-the-line devices, but most do not. That means you might be stuck with an out-dated or basic device that’s not as capable (and, let’s face it, not as sexy) as what’s offered by the big boys. Right now, Cricket is the only prepaid provider offering the iPhone. All the others stick to Android devices. A few prepaid providers offer BlackBerries. Even fewer offer Windows Phones.
High(er) Device Cost: The nature of contract-free service means you’re going to pay a higher price for the device when you initiate service. Cricket is charging $499 for the 16GB iPhone 4S, when ATT, Sprint, and Verizon Wireless charge $199 for the same device. Why? The post-paid service providers are subsidizing the device cost and recouping the money during the life of the service contract. Since prepaid providers can’t count on you to stick around for two years, you have to pay the full (or nearly full) retail price of the hardware.
Limited Service Availability: The Cricket Wireless network does not cover the entire U.S. region. In fact, it’s not nearly as expansive as the networks offered by the national carriers. Cricket does, however, have a roaming agreement with Sprint, so that Cricket customers can use Sprint’s network when Cricket’s own network isn’t available. Many of the prepaid regional players have similar arrangements. Regional operators, in particular, can have very limited service footprints.
Aging Network Tech: While some prepaid providers, such as MetroPCS, are updating their networks to faster 4G technologies, many are still stuck using 3G. That means slower mobile broadband speeds. The four major wireless network operators have clear 4G LTE plans and are well under way with their build-outs. None of the prepaid providers is even close.
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