(Paul Sakuma/AP) A customer tries out the newly released Sprint HTC EVO 4G phone at a Sprint store in San Jose, Calif., last June. Because of steep data costs, it's important to look beyond the sticker price, and calculate the total two-year cost of ownership when buying any smart phone. Fortunately for you, we've done the math.
Avoiding the Smart Phone Data Plan Con
AUGUST 26, 2010Wilson Rothman, MSNBCRight this moment, if new customers buy a Palm Pre from Verizon Wireless, it costs $50, provided they swear to a two-year contract (and accept the penalty for breaking it). Sprint is charging $150 for its Palm Pre. So, which one costs more?
If you said Verizon's, you're right — by nearly $400 dollars. Both Sprint and Verizon charge $40 per month for 450 prime-time talk minutes, and both charge $30 per month for unlimited smart phone data. But Sprint includes text messages in with that, and Verizon charges an extra $20 for unlimited texts, a requirement for all teens and twentysomethings.
Two years from now, that $20 difference costs you $480. Even though Verizon buyers "save" $100 up front, they pay for it, and then some, as the months go by.
"Cheap" phones like Microsoft's teen-targeted Kin have been shot down by customers for incredibly high data plans. Meanwhile, many American parents have no qualms about buying their kids a $199 iPod Touch, that in addition to phones — with unlimited texting plans — that they need for family communication. It's not about the cash-register cost, it's about the monthly bill.
So, how much will your smart phone cost? Forget that number between $0 and $299 that you pay up front. The number you should focus on is the total cost of ownership, which for smart phones is usually around $2,000. (Regular "dumb" phones with unlimited text messages generally cost half that over the same period.)
While it may seem obvious that the true cost of your phone is its sticker price plus service, you may not realize how much you can save by sitting down and calculating it out — or what a mistake you might make by falling for a carrier suddenly dropping the advertised price of a phone.
Fortunately for you, we've done the math. The following are price breakdowns for smart phone data plans for each carrier. What you need to do is add that 2-year grand total to the price of the phone you're shopping for — that's the true cost.
(Note: Though they're all subject to change, these prices should be good for the rest of the summer, through the back-to-school shopping period.)
The iPhone carrier recently killed off its unlimited data plan, creating two less expensive plans to use in its place. This is good news for the extreme majority of AT&T's smart phone customers, though it did make some nerds antsy.
Smart phone data plan: $15/month for up to 200MB of data; $25/month for up to 2GB of data
Unlimited text message plan: $20
Data + text messages after 24 months: $840 for low data plan; $1,080 for higher data plan
2-year grand total (including 450 minutes of voice): $1,800 or $2,040 (see above)
Early termination fee: $325 minus $10 for every month on the plan; no charge after contract is up
Special caveats: If you go over the 200MB on the low data plan, you have to pay double, so it's $30. People afraid of going over may select the 2GB plan. iPhone and Android users can download an AT&T app to precisely track how much data they use. Along with Verizon, AT&T charges higher early termination fees for smart phones, meant to recoup some of the higher subsidy granted to smart phone buyers.
Sprint has been competing aggressively, not only by introducing the Evo, a large-screen phone on an extra-fast 4G wireless network, but by throwing in free unlimited text messages with all smartphone data plans.
Smart phone data plan: $30/month
Unlimited text message plan: $0 (it's included in the smart phone plan)
Data + text messages after 24 months: $720
2-year grand total (including 450 minutes of voice): $1,680
Early termination fee: $200 minus $10 for every month on the plan
Special caveats: Phones that access Sprint's 4G network require $10 extra per month for the increased data speeds.
Traditionally, T-Mobile has priced itself lower than the rest, to appeal to a younger audience. They currently offer a way to buy phones without signing a contract, paying more up front, but with a lower monthly fee and no early termination fee.
Smart phone data plan: $30/month
Unlimited text message plan: $10/month
Data + text messages after 24 months: $960
2-year grand total (including 450 minutes of voice): $1,920 or $1,680 (no contract)
Early termination fee: $200 minus $10 for every month on the plan, unless you opt for a no-contract plan
Special caveats: Although the no-contract option doesn't affect smart phone data prices, it does bring the voice plan part of the bill down, by $20 per month. This could be a good move if you inherit a phone from someone.
T-Mobile also only charges $20 for unlimited text for all phones on a family plan — a great deal if you have
Verizon loves to bank on the quality of the network, and that means as long as its reputation is intact, its monthly rates will remain fairly high. Since its Droid phone line has started to lure former iPhone customers away from AT&T, the carrier may get more aggressive with pricing, but to date, it's pretty unyielding.
Smart phone data plan: $30/month
Unlimited text message plan: $20/month
Data + text messages after 24 months: $1,200
2-year grand total (including 450 minutes of voice): $2,160
Early termination fee: $350 minus $10 for every month on the plan; no charge after contract is up
Special caveats: Like AT&T, Verizon has a higher early termination fee for smart phones. Funny thing: Verizon is the only major U.S. carrier to say "unlimited" and mean "unlimited" when it comes to smart phone data usage. AT&T sells two plans for particular data amounts — if you go over, you pay more. T-Mobile and Sprint reserve the right to discontinue service if you use over 5GB during a month. Verizon may change their policy — I wouldn't be surprised — but for now, it really is unlimited.
Catch up with Wilson on Twitter at @wjrothman. He may be the only person in the world who won't get bored hearing you go on and on about your wireless plan.
© 2010 msnbc.com
Reproduced with permission of MSNBC, from Beware the smart phone data plan con: When it comes to buying smart phones, the true cost can be a mystery by Wilson Rothman, August 26, 2010; permission conveyed through Copyright Clearance Center, Inc.
You can read this story in its original location at: www.msnbc.msn.com/id/38495612