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Prepaid Wireless (Costs & Providers)

Discussion in 'GENERAL Wireless Discussion' started by KevinJames, Nov 23, 2001.

  1. KevinJames

    KevinJames WA's 1st retired mod
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    Setting aside the cost of the phone (which is usually higher for the prepaid offer than it is for the contract plan), lets consider the cost of PrePaid.

    Depending on where you are calling from (home area or outside the home area), AND where you are calling to (local call or long distance) AND the time of day you are calling AND the restrictions put on you by the company you choose you could pay: 60 cents per minute for air time, 25 cents to a dollar for a long distance call and 50 to 80 cents for roaming charges. When you add that up, you are close to two dollars for a call.

    Now just because you prepaid for the minutes doesn't mean you can keep those minutes forever. One of the restrictions is that the prepaid term expires. If you still have time left on the card, too bad. That restriction alone adds to the total per-minute cost. What I mean is, if you only used 75 percent of the value of the card before it expires, you can add the lost value to the total cost of the calls you made while that prepaid term was active. If you had a 25-dollar card and only used 75 percent of it, that means you just lost $6.25. If you made a total of 10 calls in that prepaid term, then $25 divided by 10 calls means that prepaid term cost you $2.50 per call.

    How about the service itself? If you plan on traveling using a prepaid phone service, don't expect to be able to receive calls. ATT openly states that they do not support incoming calls on roaming prepaid phones. Oh, and if you are roaming, they won't permit you to place outgoing calls unless you have provided them your credit card number.

    What about Verizon? There website indicates their prepaid plan (named: FreeUp) has limited city coverage. Though the cost structure seems a bit simpler, it still is not cheap. All FreeUp terms expire in 60 days. From 6AM to 9PM it is 35 cents per minute but this includes long distance. If you are off their network (again, you need to see which limited cities they cover for FreeUp), then it is 99 cents per minute and I assume, though it is not stated, that long distance is not included in this scenario. (Off-peak is only 10 cents per minute.)

    Finally, there are a couple upstarts that may bring some competition the market of prepaid wireless service. HopOn.com is one such company that will offer disposable cell phones. ZDNet wrote an article on this back in August but as of it, it has not hit the market. See article:

    http://www.zdnet.com/zdnn/stories/news/0,4586,5094944,00.html
     
  2. JustinConnors

    JustinConnors New Member

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    I want to preface this by stating that I am not a prepaid fanatic. But I do believe that there are some people (even people without credit issues) that would benefit from prepaid plans.

    Kevin brings up a lot of valid points on how costly some aspects of prepaid can be, but I would like to discuss the other side for a moment.

    I have had a at&t free2go plan for over a year now. I don't use it for much of anything. As a hobby, I try to keep one phone from each carrier around for comparison purposes, and this fits the bill nicely for at&t. I have real plans which I use day to day on my verizon and sprint phones, but just have the at&t prepaid as a novelty. Here are my experiences set against the points that kevin makes. For reference, my phone is in the Pittsburgh ATTWS market.

    I do want to state up front that I think AT&T's change from 90 day prepay minute expiration to 45 day prepay minute expiration is terrible, and ruins a lot of the prepay argument. But I still wish to comment that it might be right for some people.

    1. Cost of the phone.
    Indeed, the phones are not subsidized to the levels that the post-paid plans are. However, I will assume that a pre-paid user only needs an "average" phone, and I was able to walk away with a 5160 as a gift last christmas for a total (all taxes and fees included) or 139.09. Included in the box was 1 90 day $25 card, a rebate for another 1 90 day $25 card, and the phone. Therefore, I will remove the $50 in free airtime from the cost of the phone, and instead include it in the airtime discussion below. So the phone cost $89.09. Assuming a lifetime of 2 years for the phone, this is about $3.75 per month for the phone.

    2. Cost of calling
    The "local" at&t prepaid plans charge you $.35/min for airtime AND US long distance while in your home area and $.85/min for airtime AND US long distance while outside your home area. I have one of these local plans, and have never seen ANY other fee. I want to stress that no matter where in the country I have used it I have never seen more than an $.85/min fee. No other restrictions or fees. For the sake of argument, lets assume that 20% of your calls are roaming. So 80% of your calls are .35, and 20% are .85. Net average cost: $0.45/min.

    So, even considering AT&T's new 45 day pre-paid expiration that would give you the following price structure and available minutes. (Going for the absolute lowest price point). $25 every 45 days. That's $16.90 per month in service for an average available airtime of 37 minutes per month (@.45/min). Remember, I'm not taking a deduction for the initial free airtime, I did that in the price of the phone. So, total cost of the plan is $16.90 for airtime and $3.75 for the physical phone. That gives us $20.65/month, assuming it is held for 2 years.

    So now to compare, we have a net total of $20.65 for this plan. Assume that we compare against AT&T's lowest post-paid plan, $19.99 for 60 peak minutes. With nominal 10% taxes, and assuming a $0.50 Universal service fee per month, your bill would be about $22.48/month. Add in a conservative 5 minutes a month roaming and you have another $3.00 tacked on. (My hypothetical prepaid user had 7 minutes a month roaming) So I'm going to use $25.00 as my average monthly bill for a very basic user of the $19.99/month plan. (And I even assumed that this post-paid user got a free phone.)

    So the idea that prepaid CAN cost less is not at issue, I think everyone can agree that it can. The questions remaining are carry over and roaming. Now it's time to adress those.

    3. Roaming
    In the last year, I have never, I repeat never, found a place where I could not originate or receive calls on my AT&T prepaid phone. And no, I don't just hang out in AT&T areas. I've used it on networks owned by AT&T, Dobson, Cingular, Verizon, Rogers(canada), and several two-bit cellular one operators in the hills of west virginia and inland california. I would go so far as to say it the most reliable roaming phone that I have. I have never found a place with cellular service that I could not use this prepaid phone to originate or receive calls. It as at least as roaming friendly as my post-paid Verizon phone. And no credit cards, or anything like that. The most annoying thing when roaming with AT&T prepaid is that they will ask you to manually enter your phone number your pin and your destination number after originating a call on a roaming network (the original call just get intercepted into this system, regardless of dialed number)

    4. Rollover.
    One word, always. This is one of the most beautiful parts of prepaid. And I know it works in the AT&T prepaid system. The phone I gave as a gift last christmas has has $25 cards loaded onto it four times (once every three months). Every time, they only use a few minutes a month, and everything rolls over. Their current balance is around $75 or so. So now they have about 150 saved up minutes of usage for whenever they need it (vacations, etc). As long as the account is kept active, the minutes keep rolling over. So at least with AT&T, the argument about losing 25% of the value of a card because you don't use it is not the case. As long as you renew before the last day, you will never forfeit unused time. This can definitely never be said about post-paid plans. Note that AT&T puts a rollover limit of $1,000 on their plans. You can never have more than $1,000 worth of airtime. I guess that puts a theoretical limit on rollover.


    These are just my views on one particular prepaid plan, AT&T's. I restate the fact that I despise the fact that AT&T just dropped the expiration time from 90 days to 45 days on these plans. They did it without notice to anyone, and still selling plans with the 90 day promise right up to the wire. I think that is just plain shady business.

    But, I still hold to my argument that if you need a cell phone for less than 30 or so minutes a month, you can save money if you use prepaid wisely. And one other thing you don't have to worry about is getting a messed up bill and having to spend all day on the phone with AT&T trying to straighten it out. Also, I am a firm believer that AT&T has a very solid roaming network behind their prepaid plans. Just as good as any other post paid plan.

    I am sure their are other perpaid plans that have all of the bad things that Kevin noted, but I don't believe that all prepaid carriers do. And I definitely don't want this to sound like a flame of any sort. I dislike a lot of what goes on in the alt.cellular hierarchy because they mostly just flame at each other with very little intelligent discussion being done. I respect Kevin's views and think that he raises several valid points. These are just my opinions.

    -justin
     
  3. KevinJames

    KevinJames WA's 1st retired mod
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    Ditto on the mutual respect. I very much appreciate a trooper like yourself who has actually experienced this program. I based my article just on what I could gather from the published info on each website. Your clarifications are great. Glad to have you with us here.

    Kevin
     
  4. CellguyNY

    CellguyNY Junior Member
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    Prepaid of course does have its advantages in the market, but it does help if you don't make calls alot and just need it for emergency and ATT had that going well with the 71 minutes for 90 days, but when you split that in half you end up realizing that these companys don't want this system around and it kills there revenues and profit margins. Overall they want everyone to use the phone not to keep it in the glove. So now ATT has made the 75 dollar card amount with 100 minutes and I want to see how long this 45 days thing lasts through out the year they will probably lower the days even more. The thing is these companys could care less about there prepaid systems as i discussed in Kevins other post on the prepaid subject everyone is eventually going to under contract or under someone else's plan. For instance Voicstreams prepaid service Easyspeak has the minimum 10 dollar card amount this amount us dealers make about 50 cents on after taxes and all that other junk. Alot of the dealers want this system done away with becuase it is too costly and very tiresome with the customers who come in and have a gripe because they can't go to Florida with there preoaid phone without calling CS and getting a pin to use that phone and roam freely. As a matter a fact voicestream cards which are now $10=40 cents a minute $25=25 cents a minute and the $50/$100=20 cents a minute which days run from 15 days to the maximum 2 months are being changed possibly next year and will be cut in half as well with the dissmisal of the 10 dollar card and this is a issue that is trying to force customers to go contract and use there phone.

    CellguyNY
     
  5. KevinJames

    KevinJames WA's 1st retired mod
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  6. erub

    erub Junior Member
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    is that product for real?? the thing i used to hang most about my old analog startac was that it couldn't store names, only numbers - and i could never remember whose was whose. There are a bunch of people in my phone that I call maybe once a week or so, or even less - I wouldn't want to waste my braincells memorizing their phone #s, but yet I like to have them easily available for me. On two different occasions, two different friends of mine were saying that the greatest thing about cell phones is the ability to store other people's numbers in them for easy retrivial/use. I definitely agree with them. I probably have 70 #s or so in my phone - maybe 6 or 7 I could give to you if you put a gun to my head :)
     
  7. KevinJames

    KevinJames WA's 1st retired mod
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    Erub: Yes, I agree about the benefits of having memory on a phone. But the market for these things is different. As the article states, there is a large contingency of potential users out there that just don't qualify or want on-going cell service. I know that to people like me and you, that seems unfathomable, but it nonetheless real. My mother has never owned one and considers it foolishness. I have friends that act like I am some sort of geek because I have one. (That I AM a geek is beside the point. Don't go there. :)
     
  8. Google

    Google New Member

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    "...but when you split that in half you end up realizing that these companys don't want this system around and it kills there revenues and profit margins"

    This is true - prepay does not bolster profit margins but it's all about SAC (ie Subscriber Acquisition Costs). Prepay is levelled at the youth market, and like the banking industry, the operators are prepared to get the youngsters on board at a potentially lower ARPU in order to convert future contract sales. Prepay accounts for nearly 90% of all under 25 year old subscriptions currently in the UK and Italy. The boom has yet to happen in the USA. Mark my words, prepay is coming big time - and with that competition and far better prepay packages for the user.

    More information about prepay at http://www.mobileyouth.org/ - (Mobiles + Youth + Marketing)
     
  9. Tommyboy

    Tommyboy Member
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    Google,

    That's an interesting viewpoint but as far as the part about prepaid coming bigtime in the US I don't agree. Albeit there might be a slight rise but as cell phones become more of a commodity you will continue to see prices drop on both the handset and service. To further stimulate growth the carriers will drop the requirements on the credit check to make it easier to sign up. The carriers realize the long term potential of the youth but they would rather have them on board for a long term contract not some month to month prepaid deal. Since the prices will drop, their exposure to loss will be less as well. I also believe you could see the carriers get a little more creative in the level of access they give the youth who generally are more of a credit risk. They could give them local only service and restrict roaming and LD which in turn would minimize the bill and in turn minimize the potential lost to the carrier. After some period of time young subscriber would earn the right to have roaming and LD. This is not too different than a co-signer but the difference is the young subscriber would be building credibility on his own.

    For the record, I don't know of any marketing programs like this in the works but it would be the direction I can most likely see them going.

    Tom
     

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