Understanding Cost and Personal Needs Can Ensure Smooth Celling
Think you might want a wireless phone to keep in your car or pocket or just to travel freely around the house and garden with? If so, you’re in good company.
A walloping 38.2 million Americans have gone wireless over the last decade--a threefold increase over 1992--making mobile phones the fastest-growing segment of the burgeoning telecommunications industry.
However, phone companies are increasingly pushing new--and more expensive--options, such as digital wireless and mobile personal communications services, or PCS. Phone pricing plans have multiplied.
And over the next several months, new competitors will be starting up shop in nearly every major city in the country, driving down prices and making the choices even more complex, says Jeffrey A. Kagan, a Marietta, Ga.-based industry consultant.
That’s left many consumers confused. Do you buy now or wait, hoping that increased competition will drive down prices? Do you go with traditional cellular service or one of the newer options that are supposed to make connections clearer and conversations more secure? Do you buy your own phone or do you get one for free in exchange for signing a long-term deal with a cellular company?
The answers pivot on why and how you use your phone. However, the first thing you need to realize is that there are three distinct costs involved in wireless phone service: the cost of hardware (that’s the phone); the cost of access (a monthly service fee); and the cost of calling time (billed in minutes of use). And there are huge disparities in the price of each item. What’s the difference?
Phones
Traditional cellular phones are the least expensive. You can buy a new one for as little as $99, and used phones can be purchased for far less. Check the classifieds. Moreover, if you are willing to sign a long-term contract--promising to stay with your cellular provider for a year or more--the company is likely to give you a phone for free.
But some industry experts say the free-phone deals are not a good idea for big-city consumers because the price of service is likely to decline with increasing competition. (If you’re in a small town, competition may come more slowly.) In other words, that free phone could cost you in higher monthly fees for the duration of your contract. The downside to cellular: Reception isn’t always crystal-clear, range is limited and security is poor. You can easily pick up a cell phone conversation on a scanner, Kagan says.
Digital phones, on the other hand, usually cost about $300 or more. But the service is supposed to be clearer and conversations are encrypted--eavesdroppers hear gibberish rather than you. Mobile personal communications services are another version of digital. While few companies offer PCS, they promise international access--someday. When these services become mature, you could take your phone to Europe and still use it, says Terrence Valeski, vice president of business development at Pacific Bell Mobile Services in Los Angeles. But the range is currently limited. So, if you travel out of the phone company’s service “footprint,” you cannot make or receive calls, Kagan says.
Both digital and PCS phones can be purchased with automatic paging systems, call waiting and other extras that might make them attractive to serious business users who are frequently on the road. The downside: cost. Phones may cost $300 to $500, and the really fancy ones--light models with lots of features--can set you back $1,000.
Access fees
Monthly access fees vary--ranging between $15 and about $300 a month--based on the calling plan and the number of minutes of air time that are included for free. Generally speaking, the bigger the monthly access fee, the more “free” minutes you get and the cheaper your per-minute rate when you exceed your free calling time allowance.
Per-minute charges
Both incoming and outgoing rates range from 20 cents to more than $1 a minute, depending on the calling plan, time of day and provider. One long cellular call at peak rates could cost as much as a car payment. However, some of the newer calling plans allow for free incoming calls.
So how do you choose? Consider why you’re getting the phone, suggests Melissa May, spokeswoman for AirTouch Cellular in Los Angeles.
Nearly half of wireless users say the phone is for emergencies only. If that’s the case, an inexpensive phone and a bare-bones calling plan are best. But if you start chatting it up on the road just because you can, you’ll spend a fortune.
Serious business users, on the other hand, may find it is more cost-effective to buy an expensive monthly service plan that includes plenty of air time. If you use the phone a lot, paying upfront is cheaper.
Those in industries in which privacy is paramount may prefer digital.
What about those long-term contracts that come with free--or subsidized--phones and cheaper monthly rates? If you’re tempted to take one, ask whether the company will switch you to a lower-cost plan if market rates drop, Kagan says. Some will. And nearly everybody is predicting that prices will start falling in major cities soon.
“There is no question that phone prices are going to decline,” says John H. “Hank” Bonde, president of L.A. Cellular. “I think you will see the cellular industry will become very price-competitive. We are just not going to lose customers because we’re being priced out of the market.”
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Cell Multiplication
Cellular phones have proliferated over the past decade. Nearly 40 million Americans now use them. Here’s how the numbers stack up.
Wireless subscribers in millions: 1996: 38.2
Average monthly bill for local service: 1996 $48.84
Source: Cellular Telecommunications Industry Assn., Washington, D.C.
Kathy M. Kristof welcomes your comments and suggestions. Write to her in care of Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail kathy.kristof@latimes.com
