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Cell Phone Cost Goes Down Over Time? Don't Be Silly.

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Don't you just love those statistics and pretty charts that reveal how cheap our cell phone service today really is? Never mind that you are probably paying more than $100 for your smartphone service with a relatively crappy broadband connection and a voice service that isn't half as good as TV commercials suggest. In the end, you have to be grateful for the cheap service you get today and that you pay less every time you get a new phone.

A few days ago, it happened that Lisa and I had to replace one of our two smartphones. Luckily it wasn't a BlackBerry and the device actually made it almost through its two-year contract cycle in one piece, so we qualified for the full discount on a pretty T-Mobile G2X.

I don't quite understand why the whole phone buying experience has turned into something that is about as painful as buying a car at a low-end dealership. We spent nearly two hours in our local T-Mobile store until a sales person had copied (almost) all data from the old phone to the new phone, and until he upgraded a SIM card, printed the bill, finished the small talk (with his colleagues). It also remains a mystery why I still tend to believe that the number printed on the price tag is actually the price I will pay before I walk out the door. Instead of the advertised $199.99 + tax, we forked over $360 after being explained that there was an activation fee, mail-in-rebates, etc. It's a lesson you keep learning every time you buy a phone.

I can still remember AT&T (NYSE: T  ) telling us in a fancy presentation that the acquisition of T-Mobile is about the best thing that could ever happen to U.S. consumers. There is enough competition (even if AT&T snaps up the only remaining GSM provider in the U.S.) here and service prices are going down over time as well. After our latest cell phone purchase, I feel like someone slapped me with a two-by-four and promptly posted a LOL Facebook status message with my picture on it. Here's why.

We previously subscribed two what we believed was a reasonable service package. Unlimited calling for $80 per month and two "unlimited" data packages (5 GB, unlimited SMS) for $35 each. The bottom line was $150 per month for the service on two phones. If you replace a phone, you cannot keep your old plan at T-Mobile (which makes me wonder what AT&T exactly meant when it said that T-Mobile users can keep their old plans, even if they upgrade to new phones?). Interestingly enough, the salesperson told me that we could still subscribe to an unlimited voice-unlimited data plan (which was 5 GB and not the original "unlimited" when we first subscribed to it), but it would now cost $175: $90 for voice, $25 for a family texting plan and 2 x $30 for Internet (this is a promotional plan, by the way).

That translates to a 17% price increase in two years, if my math is correct. Plus, that unlimited data plan went from 5 GB suddenly to 2 GB (at full speed -- when you hit 2 GB, the bandwidth is throttled to a degree where it is faster to walk across town to find a hotspot and load a webpage using Wi-Fi there.) Oh, and I forgot: The new data plans also no longer include tethering. Needless to say: If this is a first taste of AT&T and AT&T's idea of wireless pricing, then we are in for a real treat.

T-Mobile always had an advantage over its rivals with its pricing plans that were easy to understand -- as "data" (SMS) and "Internet" was always bundled into one package, which is now apparently discontinued.

The clear trend is toward tiered pricing and creating an environment where people subscribe to cheaper plans with less service but are likely to run into overages. An option for us was a plan with 3000 voice minutes per month (which may be quite a bit, but it is not unlimited anymore) for $90 per month, unlimited family messaging for $20 (a promotional rate comes with the 3000 minute plan) as well as 2 x $20 for unlimited (2 GB) Internet (also a promotional rate that comes with the 3000 minute plan). The bottom line is that we may pay the same for substantially less service than we had before, while we have substantially more capable smartphones in our hands. Of course, those $150 do not remain $150, but turn into close to $200 after all taxes and fees in the area we live in.

The unlimited voice/data plan had a clear value to it. With restrictions, it is not such a good deal anymore. Of course, I asked T-Mobile why there is a price increase when we are told that service prices are actually going down. The answer. 4G is really expensive and someone has to pay for it. Seriously? Can we please stop calling T-Mobile's 3G service a "4G" service? It is simply not 4G technology.

The good news here is, of course, that AT&T would be even more expensive. AT&T would be charging an astonishing $210 per month for a similar service, however, with the courtesy to extend the 2 GB per month for $15 per extra GB on top of that. How nice. If you were to take the 4 GB plan to actually use your smartphone as an Internet device, you'd be running into $250 of basic contract cost and more than $300 with taxes and fees. AT&T may argue that this is a bargain as $300 doesn't even pay the rent for a monthly parking spot in San Francisco.

Seriously, AT&T, here is the question again: Cell phone service cost is going down? Sure. Whatever you say.


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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 29, 2011, at 1:31 PM, prginww wrote:

    This author is writing for the right news place as he is surely a Fool. He's not even comparing apples to apples. He talks about having a voice package at $80 but now the price has gone up because he has texting and unlimited internet. Well, he just added two new choices,so of course the price will rise BUT if you compare the voice he use to have at $80 to voice he now has, the price has not risen. Everyone always cries and compains about mergers killing creativeness but this FOOL is saying he doesn't want any (text, internet, video, etc). This article was a waste of my time.

  • Report this Comment On April 29, 2011, at 7:58 PM, prginww wrote:

    My way of dealing with it is buying a phone retail instead of getting it 'subsidized' through the carrier.

    I wanted a smartphone without the internet and texting plan (I know many would not understand) but no provider does that. That is another handicap to users who buy their phones through the phone companies because people like me want an excellent organizer, good camera and few apps without paying extra for a plan not wanted/needed.

  • Report this Comment On April 30, 2011, at 1:53 AM, prginww wrote:

    @pstolmenov - I, too, wanted a smartphone for use with a prepaid voice+text plan. Palm Pixi Plus models are available for well under $100 and with WiFi, I don't need the service provider's data network. But no, the large CDMA service provider said I would not be able to activate that phone under my plan. I would have to sign up for a data plan.


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