Wednesday, March 27, 2013

Unbundling Cell Phones and Service Makes Sense

Can you even imagine getting a "free" or discounted TV with a 2 year cable TV contract? It's absurd but no more absurd than getting supposedly "free" or discounted cell phones by signing a 2 year cell phone service contract. I've been complaining about it for a long time but this is the year I will do something about it.

There is no free lunch of course and cell phone service providers are merely subsidizing the phones by charging more for service and sewing us up as customers for a long period of time.

It's similar to buying a car. There are three different considerations: Purchase price, trade-in and financing. The dealer wants to bundle all three of those but it's usually in your best interests to negotiate each of those separately. The seemingly high trade-in value you get on your beater is always - always - offset either in a higher interest rate or higher purchase price on the new car. It works the same way with cell phones. The low cell phone price is offset, necessarily, by higher service costs.

I am reminded of it today reading a Consumer Reports blog post reporting that T-Mobile is ending contracts, slashing prices and making more kinds of phones available.

I have an HTC Thunderbolt phone that I got from Verizon in August of 2011. It was state-of-the-art at the time but now, it's about as appealing as a brick. The problem is that my contract isn't up until August. I don't expect to sign a long-term cell phone contract ever again. I'll shop for a service and I'll shop for a phone but I don't plan to mix the two. I'll buy a new phone when I want one, and not when my contract is up because there won't be any.