As we just discovered, the lifetime cost of smartphones is enough to make you question the meaning of life.
But why are prices so high and seemingly on the rise when the cost of data transfer should be declining? For starters, there is a lack of competition to keep prices down.
In fact, there are only four legitimate mobile national network operators left in the U.S.:
- Verizon (137.5 million subscribers)
- AT&T wireless (126.4 million subscribers)
- T-Mobile (owned by the German Deutsche Telekom) (59 million subscribers)
- Sprint/Nextel (58 million subscribers)
These four own a majority of the wireless spectrum from which almost all mobile/data plans in the U.S. run. There are a few other smaller network operators such as Leap (Cricket) and U.S. Cellular (each with about 5 million subscribers) – but it’s probably only a matter of time before they are bought up by the big 4.
Remember Alltel, which operated in 34 states? Bought up by Verizon, and reduced to operation in 6 states. Consolidation is the trend, because consolidation = lack of price competition and more wireless spectrum gained by the buyer.
Except, when it comes to MVNO’s.
What is an MVNO?
MVNO = mobile virtual network operators.
MVNO’s do not own wireless spectrum, like the big 4 do. They buy up network access from the big 4 at low rates. And then charge customers whatever they like.
Most MVNO’s know they can’t compete with the big 4 directly:
a. they don’t have their own network, so what is their selling point?
b. they don’t have huge ad budgets
So who do MVNO’s compete with? Each other. And what do they compete on? Price (almost all MVNO plans are prepaid plans), and therefore, they run on extremely low margins. As a cost conscious consumer, you win. You aren’t paying for a brand name, huge ad campaigns and associated acquisition costs, subsidized expensive smartphones, deadbeat customers who don’t pay (most MVNO’s are prepaid), retail stores with staff, the cost of building new towers, servers, and a huge network, or any of that stuff.
You pay slightly above the wholesale rates at which network access is bought by the MVNO.
In fact, customers of the big carriers pay about 3.4X the amount of customers of MVNO’s. And if you’re smart about choosing an MVNO plan, that difference is more like 10X.
And here’s the beautiful thing. You’re using the same damn networks!
- Republic Wireless, Virgin Mobile (owned by Sprint), and Boost (also owned by Sprint) – all run off of Sprint’s network. Republic also runs off of T-Mobile.
- Airvoice? AT&T.
- PagePlus? Verizon.
- Tracfone, Net10, and Straight Talk (all owned by America Movil)? They run off of Verizon, AT&T, Sprint, and T-Mobile, depending on phone and location.
So that “reliability” that the big 4 touts in their ad campaigns is really just an MVNO away.
MVNO’s Fulfill Most Needs & Most Wants (Very Cheaply)
In my opinion, the true value of a smartphone plan is limited.
Here’s what I want in a mobile phone plan:
- decent amount of talk/text minutes, so I don’t run out
- a full QWERTY keyboard for texting or emailing
- memory enhancement capabilities (memory card upgrade), so I can turn the phone in to an mp3 player with a huge library
- wifi capabilities so I can stop at a free wifi hotspot and jump on the web, if needed
Whether it’s a dumbphone or a smartphone, it doesn’t really matter, as long as it can do these things. Navigation on a phone is nice, but I can get that with an old school GPS for $75. Everything else can wait until I have a much more convenient full keyboard and large screen in front of me.
Lets put it in the perspective I mentioned in the last article. Up until the mid 90’s, in the entire history of the human race, very few people had a phone at all. And when they did, it didn’t have mp3, full keyboard, or wifi capabilities. Just numbers and a call and power button. And for this phone that was no more advanced than a home phone, they paid $50+ per month for service.
20 years later, all of those wants I listed (above and beyond mid 90’s cell phone capabilities) can now be had for notably less than $10 per month!
Paying $115 per month for a smartphone plan seems absurd, when you look at it with that perspective.
A List of the Best MVNO’s
I decided to put together a list of the MVNO’s to get you started. This list blends the largest companies with the best reputations and most affordable plans.
These plans (outside of Republic Wireless) are really designed for those who don’t want to use mobile data, in order to keep costs low. And now you can bring your own phone to Republic Wireless. There are cheaper mobile plans out there than the ones the big 4 offer.
|MVNO||Network(s) Used||Owned By||Cheapest Prepaid Plan||Notes|
|Tracfone||AT&T, Verizon, T-Mobile, Sprint||America Movil||$6.66/mo. min., pricing plans vary.||Get a "triple minutes for life" phone to cut cost of minutes.|
|Republic Wireless||Wifi, then Sprint or T-Mobile||Bandwidth||$15/mo. unlimited talk/text/wifi data. (+$5/1 GB cell data, etc.)||Uses wifi, then switches to Sprint or T-Mobile. Can now bring your own phone.|
|FreedomPop||Wifi, then Sprint||Private (FreedomPop)||$19.99/month, including unlimited talk, text, and 1GB data||Uses wifi, then switches to Sprint.|
|PagePlus||Verizon||Recently sold to America Movil||$2.50/mo. min. $0.04-$0.10/min., $0.05/SMS, $0.10/MB||With America Movil purchase, changes are likely ahead on pricing.|
|Airvoice||AT&T||Airvoice||$3.33/mo. min. $0.10/voice, $0.10/SMS, $0.066/MB. Pay as you go plan also available.||You can actually run an iPhone with Airvoice.|
- Which MVNO or prepaid wireless plan do you use, and how much are you paying?
- Do you refuse to use an MVNO? Why?