There’s No Such Thing As A Cell Phone Discount

Most people don’t put alot of thought into certain things, and they put alot of thought into other things.  One of the things that most people don’t put alot of thought into  is cell phone discounts.

Every two years, you’re “eligible” for a “full discount” on a new phone in exchange for an agreement to remain a customer of the carrier for another two years.

This “full discount” varies greatly depending on a handset.

A cheap $70 phone will have a $55-60 discount, and a $600 smartphone will have a $200-300 discount.

That should be your first clue that something’s not right…

Where’s the logic in giving someone a $55 discount in exchange for a two year agreement when the next guy can get a $300 discount?

Why isn’t the $55 discount in exchange for a one year contract, or six months?

The reason is because the whole game is to guarantee your business for as long as possible.

Realistically the $70 phone should at the very least be free if the carrier can ‘afford’ to discount the next guy $300 bucks.

The reality is that there are no discounts.

How’s that you ask?  I bought my $600 smartphone for $200 bucks!  How did I not get a discount??

Here’s how… rate plans.

When you sign a 2 year contract to get a discount, you’re signing a deal for a rate plan designed with a $10 a month more fee to recover the carrier’s investment in the phone.

For example, let’s look at the whole picture.  Let’s say that you can buy a high end smartphone at $500 full price, or, $200 with a 2 year contract.

The carrier doesn’t make money off of the handset.  Their only goal is to break even, so looking at our $500 handset, how much did the carrier pay…. around $450 bucks.  Yep, it’s the manufacturer who’s making the money off of the handset sale, and it’s the carrier who’s forking over the $450 bucks for the phone to sell to you on contract for $200.

Right now, day 1, you’re ahead of the game. You’re walking out of the store with a  $500 phone for $200 bucks.  However, because the rate plan has the built in $10 a month hike built in, the carrier is going to recover another $240 over the next two years… simple math… $200 + $240 = $440

About $10 bucks shy of what the carrier paid for the handset.

Still a fair deal, right?  Right, it is…. you bought a $500 phone for $200 bucks and the rest on lay-a-way, and you walked with the phone on day one.  So I’m not saying you’re being ripped off… all I’m saying is that you’re not getting a discount, and you’re not.

Don’t believe me?  Hunt around the carrier’s website or press a store representative for info and you’ll find that there are rate plans available that are $10 bucks cheaper, but, the catch is they’re “non-contract-able” rate plans where you show up with a phone, or buy one full price.

So, at the end of the day, you’re paying (just about) full price, or full price, so what’s the difference?

The difference is the contract.  When you’re bound by a carrier, they own you.  Why?  Because you signed your life away when you signed their contract.  It’s not a contract…. a contract is an agreement between two parties where the terms are clear and neither side can screw the other side over by changing the terms, but read your contract.  The carrier can change just about any part of your contract at any time, but you have to pony up your bill each month regardless of weather or not you agree with the terms the carrier is forcing on you.

So, how do you beat them at their own game?  Easy.  Don’t sign contracts.  Save your pennies & pay for the phone “all at once” instead of  “half now…. half over the next two years”.

It’s really the only difference between contract and no contract, and the carrier doesn’t have you under contract (read:by the balls).

So when they try (and they will try…) to foist some bullshit on you… you can you can say “well… then I’ll just cancel”, and they’ll grant you “special consideration” and grandfather you out of anything you don’t want to be a part of.  In other words… it’s incumbent upon them to provide you good service at a fair price in exchange for your (premium priced) money.

Some things to consider:

It’s still OK to sign a contract if…

  • You’re pretty happy with your carrier/service and don’t plan to opt out.
  • You plan on upgrading in two years.
  • There’s no possibility you’ll move.
  • You’re set in your rate plan/features, and don’t plan to change things there.
  • You’re spending more than $70 bucks on a phone.

Let’s stop there a minute and talk about that…  I saw a simple non-smartphone, an LG flip with a shitty camera, texting ability, and of course, phone for $69.99.  With a 2 year contract, it was $9.99 (plus an $18 upgrade fee), so, instead of $87.99 plus tax, it’s $27.99 plus tax, a difference of $60 bucks.  Believe me, it’s more than worth 3 Andrew Jacksons to opt out of a 2 year contract with a carrier, so if you’re in that shrinking group of people who use a phone “just as a phone”, then you have the best choice.  Phones are cheap, and it’s easy to waltz in, buy a phone full price, and walk out, or better yet, if you don’t need alot of bells & whistles, a prepaid solution may fit even better.

People earn different amounts of money, so what price point you sign a contract for may differ, but don’t bother unless you’re getting at least $240 off the retail price of the phone, or you’re actually paying more.  Remember, the carrier’s charging you $10 more per month for two years, so there’s really no point in signing a contract for a $60 savings… Pony up the $70 bucks and go home richer.

If you’re fairly happy with your carrier, and it is possible, then chances are things will likely stay that way over the next two years.

If your job, or desire to relocate or whatever could possibly put you somewhere else, then don’t sign a contract.  If you find out you’ve been transferred to B.F.E. 3 months from now, you may wind up somewhere where the carrier doesn’t offer service, or, if they do offer service through a partner network, they’ll cancel you for extreme roaming, and you have to buy your way out of the contract by paying the early termination fee.

Also, if you’re under a contract-able rate plan, then you’re always paying that extra $10 a month, so it’s in your best interest to upgrade as soon as your eligible for the full discount again or you’re just dumping money into their pockets.  Either that, or switch to a no contract rate plan after the agreement is up so you’re not paying that extra fee (that the carrier will neglect to inform you about).

Whenever possible, buy the phone outright.  If you can afford it, you’ll get the best deal and the best service you can get from the carrier.  They’ll keep trying to hook you, but be the smart fish with the smart phone and you get to set the terms of the business relationship, not the carrier.

Another thing to consider is buying your phone from a different channel. Carriers really don’t care if you buy a phone from them or not in the end because they only sell phones more or less at their cost.  There’s hundreds of different places to buy phones.  From dealers to Ebay or Craig’s list or some online wholesalers of unbranded phones, you can buy phones all day and night and never step foot inside a carrier’s store.

The only caveat being that if you’re buying an unbranded phone, or a phone branded to one carrier that you plan to use on another, then you need to be fairly savvy when it comes to programming the phone to function fully.

For example, an unbranded GSM phone will work to make phone calls or send/receive text messages, but if you’re planning on sending/receiving MMS messages or using the data services of the carrier, you need to program access point names and other settings into the phone.

Sometimes this is easy, the carrier can often shoot a text message to the phone that will automatically configure the phone, other times the carrier (or info found on the net via articles & videos) can help you configure the phones too, but in the end, not all off the functionality may be there.

For example, an AT&T iPhone will not work on T-Mobile’s 3G/4G network (although it will connect EDGE/GPRS), and features like FaceTime (despite being wifi only) and iPhone visual voice mail just flat out will not work on T-Mobile’s network.  Blackberries are a service book nightmare when trying to cross carrier lines when configuring them to a network it wasn’t branded for, and again, full functionality may not be there.

Comments welcome.

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