I’ve been doing a little research in the world of cell phones lately, and something I’ve noticed is the power of the cell phone contract here in the US. In Europe, cell phone plans are handled very differently than here in the States.
In America, you basically pick a carrier (be it Verizon, AT&T, Sprint, etc.), select your phone and a plan to match, and then sign a contract that locks you into that phone and carrier for an established period of time (2 or 3 years on average). While the initial price of the phone is relatively cheap here in the US, the real cost of ownership is found in the monthly charges.
Let’s use the Samsung Galaxy Note as an example. On AT&T, the Galaxy Note will cost you $99.99 to start. However, you must sign a 2-year contract and pay $60/month minimum. The phone is locked to AT&T for the duration of your contract as well. In other words, you cannot use the phone on another carrier for 2 years. If you terminate your contract early, you will be forced to pay a $325 deactivation fee (minus $10 for every month of the contract that you fulfill).
Let’s contrast that with Orange, a mobile cervice provider in the UK. The Galaxy Note will cost £399.99 ($644.88) at the start. However, you don’t have to sign a contract, and your monthly access plan starts as low as £10 ($16.12). If you decide you don’t like their service, you can jump to another carrier by simply going to a store and buying a new SIM card to put into your phone after you’ve exhausted your current SIM.
Why is there this difference? Well, it works something like this: a smartphone’s base value is generally around $650. Cellular providers like Verizon subsidize the cost of the phone, offering it to customers at a much lower price (usually somewhere between $100 and $300). The cost of the phone is made up for in the price of the service plan. The carrier locks you into the contract so that you are forced to pay for the remaining value of the phone.
European mobile providers don’t do that because they’re charging you the full cost of the phone up front. The cost of service is negligible to you in the end, and you can get more life out of your phone since switching carriers doesn’t require you to get a new phone (which is a problem with an entirely different set of reasons altogether).
There are two ways around this.
First, there’s T-Mobile. While T-Mobile is often criticized for their small coverage area and comparatively slow data speeds, they are the one American cellular provider (among the big names) that actually attempts to save the consumer all the hassle surrounding contracts, early-termination fees, and locked phones. They recently developed a new product called “Monthly 4G,” which is essentially a no-contract service plan.
T-Mobile is also the only “big-name” provider in the US that will sell unactivated SIM cards. T-Mobile is a GSM provider (unlike Verizon and Sprint), so any unlocked GSM phone will work with a T-Mobile SIM card.
Second, there’s the AT&T GoPhone option. While not quite as versatile as T-Mobile’s services, it provides you the opportunity to purchase a cellphone plan without being locked into a contract. Like T-Mobile, AT&T is a GSM provider, so you can remove the SIM from your GoPhone and use it in any unlocked GSM phone.
Personally, I’m partial to T-Mobile. They appear to offer the consumer a lot of freedom. They also appear to have the most competitive prices of all the major carriers. It’s unfortunate that the company hasn’t been doing so well, and is the smallest of the “Big Four” cellular service providers.
However, I’ve yet to test T-Mobile’s service. My first cellphone was on Cingular which was later bought by AT&T. I remained on AT&T throughout the iPhone’s exclusivity with the provider, but switched to Verizon fairly recently. In my area, service between AT&T and Verizon is quite similar, and they’re both very good. AT&T has better 4G coverage at my apartment, but Verizon has better 4G coverage 30 minutes away at my parents’ house.
According to T-Mobile’s coverage map, my apartment is in some good 4G coverage, so I hope the actual coverage lives up to their claim.
When I receive my HTC One X,
I’ll use a T-Mobile SIM card and activate it with a “Pay-By-The-Day” plan. I’ll also post a video showcasing my discoveries.
Update: Unfortunately, I discovered a little too late that the One X is a quadband phone, not a pentaband. T-Mobile’s HSPA+ protocol is mostly on their 1700/2100 MHz spectrum while the One X receives data on the 1900/2100 MHz spectrum. T-Mobile’s 1900/2100 MHz spectrum is still just GSM/GPRS/EDGE in my area, so the One X was only getting 2G speeds on T-Mobile. Certainly not fast enough for a premium smartphone.