By Asif Khan
Sometimes inspiration comes from the strangest places. I took the family to Thailand on holiday in December. I noticed one of our tour guides had a 7 inch Android tablet and a Nokia feature phone. I asked him why he didn’t have a smartphone. He said he has the tablet, which is better. Then I noticed that there were smartphone ads everywhere but smartphone users were few and far between in Thailand. But I saw lots of tourists with a tablet-plus-feature-phone combo like our tour guide had. It turns out you can get really nice Nokia feature phones for $50 or less throughout Asia and buy SIM cards in every country for next to nothing.
This got me thinking that this combination was so much smarter than having an expensive smartphone, as we tend to have in the US. Here’s why.
The Problem With Smartphone Contracts
In the US, when we purchase a high end smartphone (iPhone5, Galaxy SIII), we make a down payment of $199 or $299 (depending on model) and then lock ourselves into a two year contract paying $80-100 per month for voice, text and data. Say we just purchased a 32GB iPhone5 for $299 with a two year contract (which retails for around $800 without contract). We pay $299 upfront and presumably pay the remaining cost of the phone over the next 24 months, or $20.88 per month (rounding up to $21 per month). So if we pay $90 per month for our AT&T or Verizon contract, $21 of that is supposed to go towards paying for the phone itself.
But if you should damage or lose your phone prior to contract end, you will pay substantial penalties and/or pay full price for a replacement phone (unless you buy insurance at additional monthly cost AND your damage/loss is covered by the policy…read the fine print!). Oh, and if you want to continue your current plan month-to-month after your two year contract ends or if you purchased your own phone, you still get to pay the $21 per month phone subsidy you had been paying all along. And if you want to use your phone outside the US, well, let’s not even go there. This is extortion by the phone companies, plain and simple.
Prepaid providers have a much simpler alternative. You pay for your phone upfront and just pay for the monthly network access. So the prepaid providers should be charging around $69 per month ($90 minus $21 for the phone on a traditional two year contract as described above), right? Wrong.
My wife has a prepaid Virgin Mobile account and we pay $35/mo for 2GB data, unlimited text and 300 min voice (we can cancel anytime without penalty). She has an LG Optimus V for which we paid $90. But if she bought a 32GB iPhone5 at full cost, that brings her total to just $68 per month over two years INCLUDING the cost of the iphone5. Put it another way, over the course of two years, the two year Verizon contract with iPhone5 described above will cost a total of $2,459 (not including taxes and fees). The Virgin contract with same iPhone5 would cost only $1640 (Virgin does not charge monthly fees; you have to pay tax on the phone itself).
With the money we save on Virgin PrePaid, we can get a spare iPhone5 or a PAIR of iPad 4s or Surface RTs. This is clearly a much better deal than a traditional 2 year Verizon or AT&T contract (OK, Virgin Mobile still uses Sprint’s CDMA 3G network which is not as fast as Verizon’s LTE 4G but will transition to LTE soon). But we can do even better.
NEXT PAGE: The Problem With Smartphones
ALSO READ MY FOLLOW-UP TO THIS ARTICLE: T-Mobile Just Launched a Smartphone Revolution. Did You Notice?