In recent months, a number of telecom companies have been marketing cell phone service that does not require a contract. So, a good question to consider would be: Is contract-free cell service good for the customer?

On the one hand, with a monthly plan, the customer is not tied to a two-year contract with a severe penalty for early cancellation. On the other hand, that customer does not get subsidized when he or she wants a new phone. Rather than paying a discounted price of $200 or less for a new phone under a two-year contact, the monthly plan requires that the customer pay the full price of the phone — up to $600 or more.

What do you think?

Here are the tradeoffs, as reported by Thomas J. Fitzgerald for the New York Times:

“Say you want a plan with a new iPhone. On T-Mobile, the 16-gigabyte version of the new iPhone 5C is available on T-Mobile for $22 a month for 24 months, with nothing down — a total of $528. AT&T offers the same phone for $100 with a two-year contract. T-Mobile users must then also pay for a monthly talk and data plan. T-Mobile’s monthly plans start at $50 for unlimited talk, unlimited text and 500 megabytes of high-speed data. Meanwhile, AT&T, with its subsidized phone, offers a contract plan for $70 with unlimited talk and text and 300 megabytes of data.”

“In this comparison, the extra $428 spent on the phone at T-Mobile is more than offset by savings of $480 over two years on the plan ($20 a month for 24 months). But you can start to pocket real savings after two years, when the phone is paid off.”

Click the image to read more Fitzgerald.

Image by Minh Uong/New York Times


12 Replies to “Contract-Free Cell Service: A Good Deal for Customers?”

  1. I think that whether a consumer chooses to have a contract or a month-to-month cell phone plan all depends on their personal preferences and habits. For example, my mother can keep any product in brand new condition for as long as she uses it. She got her car 6 years ago and it still smells new. Because she refuses to ever use a smartphone and keeps her phone (as she does her car) in brand new condition, a month-to-month plan would be fine for her. I, however, have a less impressive track record with phones (actually, I probably have the absolute worst track record with phones). I need a plan that offers an update every 2 years, because by the end of two years my phone is hanging on for dear life. The ability to upgrade to something newer is also a plus. I can see how both options have their advantages, but in my case a phone contract is a much more practical option.

  2. It seems like a good idea to have contract free cell- phone service however I think it depends on the person and what they are looking for. With the contract the consumer is saving a great deal of money when getting a phone in that they are not paying the full retail price and if they are pone to damaging the the price they are insured to get a new one. The benefit of a no contract is that the person is not bind to fee when cancelling their contract which would work for people who are unhappy with their phone service, however they pay the full price of the phone they want, so people who tend to take care of their possessions carefully would benefit from this.

  3. I believe a contract-fee cell phone service can benefit many types of people. It can benefit the exchange student who is studying in America for a semester and just needs a U. S. phone for a couple of months. When he’s done with the semester, he can cancel the contract and sell the used phone on eBay. A parent may get this phone for his 6th grader who “wants a phone for emergencies.” If the texting level becomes too high, the parent can cancel the account at any time and not feel bad about it.

  4. I think that the type of cell phone contract that a person chooses really depends on whether the person wants to be in a long term commitment, not just how much they want to spend at the time of purchasing the new phone and contract. I do not think that you can say that a month-to-month plan is necessarily better than a 2 year contract or vice versa because it depends on the person the contract is for. For myself it is better to have the two year contract because I keep my phones for a long time and I like being able when I need to get a new phone at a discounted price. For someone who likes to change their phones more frequently the other plan is better than facing large penalties. But in the end I don’t think one is more right than the other it is all based on personal preference.

  5. I think when it comes to buying a certain plan, it always comes down to what a particular person wants. If someone prefers a contract with less restrictions like the T-Mobile plan then they will most likely buy it. However, there a people who like a plan that offers insurance like the AT&T plan. Personally, I love my 2-year contract plan because my upgrade costs less and I am allowed to replace my phone when it breaks with a low payment. With the T-Mobile plan I wouldn’t be able to to get a discount on my upgrade and since phones are so expensive now, I have no problem waiting 2 years. But then again, buying a short term plan has many benefits as well. It all comes down to the person and their preferences.

  6. I like the idea of contract free cell phone service, but I do not think that the contract system should be done away with. We should implement both options and then consumers can decide which best suits their needs. I am not too fond of my two year plan simply because they try to charge you way more than they should be. We cannot do anything about it because we are locked in automatically for two years. They are able to take advantage of the consumer until the two years are up. Going contract and contract-less both have their pros and cons, but they should both be available to the consumer so that they can decide which best suits their own personal preferences.

    1. I believe this option should be offered by every service. Some people might prefer to pay full price for a phone and not be tied down to a contract if they can afford that. But, on the other hand some people who cannot spend money as loosely might want to have the contract because it severely lessens the amount of money needed to buy the phone. Altogether I believe this should be a choice of the consumer not the supplier.

  7. I actually like the idea of a contract-free cell phone. It sort of breaks the shackles that usually come with cell-phone service contracts. The consumer has more flexibility with the phone without a contract. For instance, without a contract, a consumer holds the ability to decided the longevity of their device or whether or not the cell phone service they chose is the right one. Without a contract, there are more options for the consumer when it comes to cell phone service.

  8. Personally I love the idea of getting a new phone every year because I like to have the newest and coolest phone. However, I feel that this idea is both positive and negative for most consumers. There are people who take excellent care of their cell phones and hardly ever get a scratch on it. Then you have the people who break or lose their phone once a week either because they are generally careless or it just simply gets taken. The “new cell phone every year” plan would be great for people who take excellent care of their phones and also like to have the newest top-of-the-line technology all the time. For the people that constantly lose their phones, the costs outweigh the benefits for them because they would be paying hundreds of extra dollars for a new phone every time it breaks or if they lose it.

  9. In my opinion, I think it is better to have a contract. I am on a family plan with my parents and every time we renew our contract, our cellphone provider always gives us free phones to keep us happy and continuing using their cellphone service. Last time I renewed my cell phone plan my family and I received three iPhone 5s for the price of one just so my family would stay with Sprint. They are always giving good deals for family plans. If your phone breaks on a contract and someone in your family has an upgrade, you can get a new phone for a lot cheaper than what you would have to pay for a new phone if you werent on a contract.

  10. I think this depends on the individual customer, but that both options should definitely be offered. For the upper class who have the luxury of being able to spend money on the latest electronics, they probably would rather go with with a company who doesn’t require a contract so they have the freedom to upgrade and change phones as they please. However, for lower and middle class individuals, contracts may make sense financially if these individuals do not have the money to lay out up front.

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