Clearing Up Myths About Prepaid Cell Phone Providers

This year’s tight economy can be tough on family budgets, but it is driving tech companies to produce goods and services with affordable appeal. Three hundred dollar netbooks lead the way. Substitute spaghetti at home for a month of family nights out and voilà – you’ve got enough for a new computer. Cell phone providers are also answering the call of the budget conscious with new prepaid cell phone plans.

Prepaid plans are nothing new, but have always carried a bad reputation in this country. Eighty percent of Americans have mobile phones, but only 16% have prepaid plans compared to almost 50% in Europe. Recently, the New Millennium Research Council conducted a survey to uncover the reasons for prepaid plan resistance. True or false:

1. Prepaid service is only good for people who rarely use their phones or can’t get credit.
2. Prepaid service only makes sense as a ‘last resort,’ such as when you lose your job.
3. You can’t get voice mail, text or take photos on a prepaid phone.
4. Two year contract plans with unlimited use are always cheaper than unlimited prepaid plans.

False to all. Researchers found that most Americans believe one or more of these myths, but with this year’s rapid expansion of prepaid phone service, it’s time to let go of the stigma and start saving.
The best prepaid cell phone providers have made remarkable progress in overcoming common consumer objections. The most notable change has been the introduction of all-inclusive monthly pricing plans. Boost Mobile, a Sprint subsidiary, and Cricket debuted plans for $50 a month with unlimited local and domestic long distance, texting including multimedia, push to talk, and wireless web access. Compare to Sprint’s Simply Everything plan at $100 a month. Oh, the irony, but Sprint CEO Dan Hesse insists prepaid is expanding the wireless market rather than cannibalizing it. Either way, you save big with a full menu of features.

Now we come to the catch. Service plans can be half the price of contract or postpaid plans, but cell phone selection is limited. You won’t find an iPhone, a BlackBerry or a G1 on any of the prepaid phone lists today, but do not despair. You will find camera phones, wireless Bluetooth connectivity, media players and web access. Boost Mobile has the Motorola i9 for $300 and Cricket features Motorola’s Hint with a full qwerty keyboard at $230. Both services use Sprint’s 3G network, so you won’t sacrifice speed or coverage.
You may experience sticker shock. Contract based plans subsidize phone prices in exchange for that 2 year service contract. It’s not unusual for smartphones to be subsidized by $300 or more.

Payback for the provider comes with the monthly voice and data fees. Without a contract to offset the subsidy, prepaid cell phone companies must charge full price for the phone. But remember, at a $50 savings each month for unlimited everything, you make up a $300 subsidy in six months, and end up overpaying by $900 over the life of a typical two year contract.

And without a contract, providers have to work harder to keep customers. Could that mean more phones to choose from and lower prices in the future? Bet on it.

Have a question? Email Leslie Meredith at leslie@toptenreviews.com