Right call? Prepaid plans can save cash
Prepaid calling on cellphones used to be expensive and even a bit embarrassing, because pay-as-you-go service was often aimed at deadbeats and those with little credit. ¶ Now, thanks to companies such as Virgin Mobile and Boost Mobile, prepaid plans have been growing in popularity. Those who can easily afford the conventional monthly contracts are increasingly attracted to the simplicity of paying in advance -- and using all the minutes they paid for. ¶ Prepaid plans can save you money, especially if you don’t use a cellphone much or, if you do, you use it mostly to talk and send text messages. ¶ Your calling habits will determine whether it’s a good buy for you. ¶ “Now, it’s a lifestyle choice,” said Don Girskis, general manager of Boost Mobile, a prepaid Sprint Nextel Corp. subsidiary catering to 4.3 million teens and young adults. ¶ Prepaid calling has caught on among older customers as well. Virgin Mobile, which started out eight years ago targeting the youth market, now finds itself with more than half its 4.6 million customers over the age of 35, said Howard Handler, its chief marketing officer. ¶ What’s the attraction?
To start with, there are no contracts, termination fees, credit checks, bills, age minimums and usually no added taxes or hidden fees -- those costs typically are included in the flat pricing.
And there’s no need to micromanage your minutes because, for most plans, you can’t go over your allotted time. When your prepaid minutes are up, you can’t make any more calls -- except for 911 -- until you buy more minutes. Carriers give you plenty of advance warning so you can enjoy uninterrupted service.
For Bruce Johnson of Dana Point, who had two cellphones from AT&T; Inc.’s mobile unit, switching to a prepaid plan was a simple matter of economics.
“It wasn’t the idea that I couldn’t afford it,” said the lawyer, who has turned in his shingle for stock market trading from his home. “It was the idea that when I sat down at the end of the month, I found I hardly used it.”
The concept of using all the minutes you pay for is a compelling one.
“With postpaid plans, the average customer uses only 60% to 75% of their monthly minutes, and the rest is gone,” said Kirk Parsons, wireless analyst at J.D. Power & Associates, a consumer research firm in Westlake Village.
For a common plan -- say, $40 for 450 minutes -- that means the average customer is paying 12 to 15 cents a minute, compared with the 8.9 cents a minute he would pay if he used all his allotted calling time.
By contrast, many prepaid plans offer rates as low as 10 cents a minute. In Southern California, Boost is testing a month’s worth of unlimited talk time for those who pay $55 in advance.
But prepaid calling does have drawbacks.
For one, prepaid plans can expire. Providers require you to use the prepaid minutes within a certain period of time -- even up to a year for a larger bucket of minutes -- or they disappear. And they may require that you buy a minimum amount of minutes every month or two.
Those are sticking points for Jack Kutcher of Van Nuys, an actor who has avoided cellphones.
As inexpensive as prepaid plans can be for seldom use, he still would like to find one that lets him take however long he wants to use up all the minutes he buys.
“Why do I have to use the minutes or lose them?” he asked. “I only need a cellphone to carry in the car for emergencies.”
There are other problems. Roaming and long-distance charges may apply if you make calls outside of your home region on some plans, like Boost Mobile’s unlimited package. Handset choices are limited at some companies, and you usually pay full price for the devices because wireless providers don’t often subsidize them the way they do when you agree to a typical two-year contract.
Customer service is weak at many prepaid calling firms, though the bigger ones have well-developed procedures. Virgin Mobile, for instance, consistently ranks among the highest in customer satisfaction surveys.
Another downside is that some prepaid plans charge access fees of as much as $1 a day just to use the phone, and that money is deducted from your upfront payment -- essentially taking away minutes from your account.
Finally, most companies don’t offer all the services that would allow full use of smart phones and business devices such as Palm Treos and BlackBerrys.
But then, those aren’t the majority of cellphone users.
“If you manage your plan right with a goal to control costs, prepaid could be a really great option,” said Rosa Esquivel, AT&T;’s marketing director for Southern California. AT&T;’s GoPhone has eight prepaid options.
J.D. Power has found that, overall, customers pay nearly half as much on prepaid plans: an average of $37 a month compared with $65, including taxes, fees and surcharges, for post-paid service.
AT&T; and Verizon Communications Inc., which together control more than half the U.S. mobile market, like those postpaid plans because they help keep customers in the fold, especially when the plans are bundled with Internet access and other services. Customers paying one bill for all communications services usually don’t like unraveling bundles to take all or part of their business elsewhere.
Big carriers developed their strategies at a time when prepaid services were viewed as the dregs of the industry, catering to the credit-challenged. But the success of prepaid start-ups has them courting pay-as-you-go customers more aggressively.
Demand for prepaid service is expected to grow five times faster than demand for post-paid contracts over the next three years, as carriers lower prices and offer more features, according to the Yankee Group research firm.
“Virgin Mobile, Boost and T-Mobile to Go changed the public’s thinking on prepaid,” said Yankee Group analyst Andy Castonguay. “They brought better value to prepaid customers rather than treating them as second-class citizens.”
For instance, Virgin Mobile, a joint venture between Sprint and Richard Branson’s Virgin Group conglomerate, promoted the idea that prepaid plans, with flat pricing and no contracts, are more flexible and easier for customers to control.
“We began to extol the virtues of not having a contract,” said Handler, the Virgin Mobile marketer.
Meantime, 11-year-old TracFone Wireless Inc. in Miami, the first prepaid calling company, has grown into the largest, with 8.1 million customers, by catering to the occasional cellphone needs of seniors. It is owned by American Movil, Latin America’s leading cellphone carrier.
Now, dozens of smaller carriers and companies renting network capacity from major carriers have jumped into the arena. They include Alltel, Liberty, U.S. Cellular, STi Mobile, Movida and Jump. One website, www.prepaidwireless.com, lists 40 companies offering a variety of prepaid and hybrid plans, as well as handsets.
Prepaid companies even pioneered a new category -- known as a hybrid -- that blends elements of prepaid and postpaid services. Customers pay a flat fee upfront for a monthly bundle of minutes, text messaging and photo sharing.”What hybrid does is create a new mechanism to bring in higher-end customers with lower subsidies on handsets and lower costs to acquire customers,” said Castonguay, the analyst.
One way the major carriers fight back is through their family plans, which let everyone in a family share a bucket of minutes and offer low costs for extra lines.
“When you add a son or a daughter for $9.99 a month, that’s a much better value than prepaid,” said Lucy Bridges, Verizon Wireless’ Western region marketing manager.
Still, Verizon’s InPulse pay-as-you-go and EasyPay hybrid plans compete strongly with other prepaid companies. “A lot of parents use it as a financial training tool for their kids,” Bridges said.
With so many prepaid options, making a choice can be paralyzing.
“I’ve been looking at plans for a year and a half, and I still can’t make a decision,” said real estate broker Barbara Solomon of Culver City. “I’ve spent more time on this than any human should choose to do. There comes a point where you just know too much.”
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(BEGIN TEXT OF INFOBOX)
Comparing seven prepaid plans
Prepaid plans let you pay for cellphone service in advance, rather than receive a monthly bill after making calls. Pros: No contracts, termination fees, credit checks, bills or age minimums, and usually no added taxes or hidden fees. No expensive overage charges -- you buy minutes as you need them. Cons: Minutes expire with some prepaid plans. Others require access fees and a minimum purchase every month or two. Roaming and long-distance charges may apply. Handsets can be expensive and their choice limited.
Hybrid plans are similar to conventional plans, except they have no contract and users can cancel at any time. Here’s a sampling of some common prepaid plans:
Pay-as-you-go
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AT&T; GoPhone: 10 cents a minute with access fee; 25 cents a minute without access fee
Boost Mobile: 20 cents a minute nationwide, 10 cents nights, weekends and to other Boost and Nextel customers. Unlimited walkie-talkie time for $1 a day on days used.
STi Mobile: 10 cents a minute plus 10 cents a day access fee or 7.9 cents a minute plus 25 cents a day
T-Mobile ToGo: From $10 for 30 min. (33 cents per minute) to $100 for 1,000 minutes (10 cents per min.). Minutes expire after 90 days or, for 1,000 minutes, after a year
TracFone: From $20 for 60 minutes to $140 for 800 minutes
Verizon Wireless: INpulse plans for 10 cents a minute, unlimited night calls and unlimited calls to Verizon customers
Virgin Mobile: 18 cents a minute all the time; or 10 cents a minute to Virgin Mobile customers and 20 cents a minute to others; or 10 cents a minute for $6.99 a month
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Hybrid
AT&T; GoPhone: Range from $30 a month for 200 minutes to $70 for 650 minutes
Boost Mobile: From $30 a month and 10 cents a minute to $70 a month for 600 minutes*
STi Mobile: $50 a month for 100 minutes and unlimited nights and weekends starting at 7 p.m.
T-Mobile ToGo: None offered, but new FlexPay plan coming soon
TracFone: $9.99 a month for 50 minutes
Verizon Wireless: EasyPay plans range from $50 a month for 350 minutes to $70 a month for 700 minutes
Virgin Mobile: From $15 a month for 100 minutes to $100 a month for 1,000 minutes. Plus overage cost of 25 cents a minute.
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Access fee
AT&T; GoPhone: Some plans charge $1 a day on days you use the phone
Boost Mobile: No
STi Mobile: 10 cents a day on first plan only
T-Mobile ToGo: No
TracFone: No
Verizon Wireless: 99 cents a day with pay-as-you-go plan
Virgin Mobile: No
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Text messaging
AT&T; GoPhone: 5 cents domestic; 20 cents international
Boost Mobile: 10 cents to send, free to receive
STi Mobile: 5 cents to send, free to receive
T-Mobile ToGo: 10 cents to send, 5 cents to receive
TracFone: One-third to half the cost of a voice minute to send; free to half the cost of a voice minute to receive
Verizon Wireless: 10 cents to send or receive
Virgin Mobile: 5 cents each to send or receive. Monthly messaging packs; prices vary
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Multimedia messaging
AT&T; GoPhone: 1 cent per kilobyte
Boost Mobile: 25 cents to send or receive
STi Mobile: 29 cents to send or receive
T-Mobile ToGo: 25 cents to send or receive
TracFone: Varies
Verizon Wireless: 25 cents to send or receive
Virgin Mobile: 25 cents to send or receive. Monthly messaging packs; prices vary
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Roaming/ Long distance charges
AT&T; GoPhone: No
Boost Mobile: No
STi Mobile: No
T-Mobile ToGo: No
TracFone: Varies
Verizon Wireless: 69 to 99 cents a minute
Virgin Mobile: No
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Taxes, fees, surcharges
AT&T; GoPhone: Added for hybrid plan
Boost Mobile: Included
STi Mobile: Included
T-Mobile ToGo: Yes, added
TracFone: Included
Verizon Wireless: Included
Virgin Mobile: Yes, added
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International calling
AT&T; GoPhone: Yes, rates vary
Boost Mobile: Yes, rates vary
STi Mobile: Yes, rates varyYes, rates vary; no added cost to some countries
T-Mobile ToGo: Yes, variable rates plus airtime
TracFone: Yes, rates vary
Verizon Wireless: Yes, rates vary
Virgin Mobile: Yes, rates vary
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* Southern California trial provides unlimited talk for $55 a month or unlimited talk and texting for $60 a month. Roaming and long-distance apply when calling outside seven-county area.
