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.