A few days ago I mentioned that I had opted to pay full price for my mobile phone and to use the “pay-as-you-go” calling plan. I chose this option because I don’t actually use the phone very much and I didn’t want to pay $25 a month (which inflates to $40 after taxes and the various access charges) for the sake of a handful of calls and text messages.
Based on experience with my previous phone, I estimated my actual usage would cost less than $10 a month. Unfortunately, $10 a month is the minimum with the pay-as-you-go plan, but still, $10 is a lot better than $40.
A bought a fancy new Motorola v710 from Telus. At the time, the price was $400, plus tax and a $75 start-up fee, for a grand total of about $535. If I had taken a three year contract on the $25/month plan, I could have gotten the phone for the subsidized price of $149 plus tax and no start-up fee. However, based on my minimal real usage (about $10 a month), here’s how the numbers crunched:
Three Year Contract, Subsidized Phone
Phone cost = $149.00 plus tax ($171) and calling plan of $25 a month (which totals $40 when you add taxes and various fees).
First year: $171 (phone) + ($40 x 12 = $480) = $651.
Year 2: $40 x 12 = $480
Year 3: $40 x 12 = $480
Total: $1611 for three years of use.
No Contract, Full-price Phone, Three Years of Use
Phone cost $400 + tax and setup ($535), plus $10 a month.
First year: $535 (phone) + ($10 x 12 = $120) = $655.
Year 2: $10 x 12 = $120
Year 3: $10 x 12 = $120
Total: $895 for three years of use.
Note that even if I used $20 a month in talk time, the total at the end of three years would only come to $1255, which is still $356 less than if I had taken the discount and used the cheapest talk plan.
Mobile service providers love to talk about ARPU (Average Revenue Per User), and they love to get people off of pay-as-you-go plans and onto fixed-rate plans because those plans bring in, on average, higher ARPU rates. The reason is simple: most people on fixed-rate plans don’t use up their full allotment of minutes, so they are paying for minutes they don’t even use. Better still, if they go over their allotment, they pay sky-high “overage” charges.
Forget that. I only want to pay for what I use, which isn’t much. So I paid more to save more.
Update: It’s now March 2010, and I’m still using that phone on the $10/month plan. While the iPhone crowd teases me unmercifully, I get the last laugh on price. The phone has cost me an average of $253 a year for those four years, or about $21 a month (factoring in the price of the phone). Since I have an iPod Touch, and will likely soon have an iPad, I don’t really need an iPhone. On the other hand, this Motorola is just so 2006! It’s embarassing!
11 thoughts on “Pay-As-You Go versus Subsidized Calling Plans”
Hey, talk about seeing it on a rational basis. But the real question is… do you actually have an average of 10$ per month? If you are, what is the typical use of your phone? I would be interested in having a cell phone, but I too found the 40$+ per month too much. I am really interested by your approach!
Simon
Simon, I make maybe six or seven short calls a week, plus the occasional text message and the occasional photo message (sending a photo attached to a text message). It’s way under $10 a month — even if I doubled my usage it would be less than $10.
Keep in mind I don’t use the phone for long chatting sessions — most calls are under a minute.
There are drawbacks — when I was in the US a few weeks ago I couldn’t send text messages and I had to go through some credit card service to make a call. I haven’t complained to Telus about that yet. (Soon.)
blork
Coming from Europe I never could bring myself to buy a mobile phone here. In the Netherlands (as an example, I’m sure the situation in other countries is more or less the same) there is a lot of competition between mobile phone carriers. They all use GSM, you can keep your phone number when you change carriers (although you pay a fee for that) and because of that the competition is fierce.
And the prices you pay are much less. You can now buy 1800 minute prepaid cards for 3 euro ($5 CAD), and those prepaid cards are valid for 6 months or a full year. That makes using a mobile phone much cheaper than using a land line (you pay for local call on a land line in Europe) and I know many people who don’t even have a land line anymore. And the number of public phones is so low (they were almost all removed by the main land line provider, probably in order to push their mobile phone service) that you’re almost required to have one if you want to call ‘on the go’.
I know the investments in aerials and fibre might be a bit lower in a country as small as the Netherlands, but since there is a penetration of over 90% (some people have and use more than one phone) they need more aerials because there is a limit on how many phones can be connected in one “cell”.
Anyway, since all operators in Canada use a different system (Fido and Rogers both use GSM but now that Rogers bought Fido there is no real competition), and since number portability is not expected (and required by law) before 2007 there is not much movement and thus not much competition. If you have signed up with one provider, you’re not going to switch another one, because you have to buy a new phone and tell all your contacts you’ve got a new number. And so they can ask those high fees and those ludicrous “network access fees”.
I’m not going to pay 300 dollar per year for the “joy” of being able to talk and being reached anywhere and anytime. If the prices are going down I might be considering buying one, though.
mare
I did go for a pay as you go for pretty much the same reason ie I don’t use the phone enough to justify the contract charges (it’s a bit different in the UK because I don’t have a minimum charge and my top ups do not have a use by date). I also have the cheapest phone I can find (unless it can make a cup of tea all i want it to do is calls and texts) so that should I get mugged for it the small amount I have on it + the relatively low cost will disuade me from being too stupid in fighting for it and reduces the worry over how high a bill will have been ran up by the time i get to report it stolen.
stroppycow
I use a pay-as-you-go plan and have been very happy with it. I usually put $50 into my account every 90 days (my time period), with a little more from time to time. It’s a much better deal than paying 30-40/month on a multi-year contract.
John (Uneasy Rhetoric)
Stick with the $10 cards that cost 30 cents a minute cuz the $15 cards are cheaper per minute but only last 15 days.
You can also make it cheaper by bumming someone’s old cell. I have a couple sitting around my place that were given to me. People are always giving away their old one. It only costs $25 to activate one of these beefsteaks and you’re off to the races.
blorknot
Hi all,
What is the best pay as you go plan available here in Qc? We were given a cell phone, we buy card, it’s 15 or 20$ for x minutes (no idea???) 60 or 120 maybe? maybe less. It’s valid for 2 months once the card has been activated. I think for 25$ you have more minutes worth 3 months.
is that the best we can get?
another analysis, in French:
http://www.yvonet.com/La-telephonie-mobile-au-Canada.html
the guy went with Virgin, with quite the same needs as you .
C'est Raoul
Sorry: and that’s with Bell mobility.
C'est Raoul
I don’t know what the best plans are, really. With Telus, you can buy $10, $20, or $50 cards, with the first two lasting (I think) 30 days and the $50 lasting three months. (Don’t quote me on this — see their web site to be sure.) The per-minute rate is best with the $50 one, but once you’ve bought one of those you can keep that rate (and rollover minutes) if you top-up before the time expires.
I’ve set mine to automatically top up by $10 every 30 days, and since I started with a $50 card (part of the startup process) it means I keep the $50 rate but it costs only $10 a month.
I almost went with Virgin — I like their no-nonsense pay plan. Unfortunately, I hated their phones (they have only three to choose from).
blork
Interesting. I’ll check with bell mobility, maybe the 10$ top up could be a good way to go if it’s possible.
So it’s 50$ the first month, use it for less than 10$, add 10$ the next month and so on.
and if you use it for 20$ one month, top it up by 20$ the next time. I tent(?) (past of tend?) to think of it as ‘units by card’ but after your comment, I think it works more in a ‘account with always at least 50$ on it’ scheme.
C`Est Raoul
I bought a Nokia phone for $69, took the Virgin pay-as-you-go plan (I got a $10 to start and added $20 right away. All money deposited sits for 4 months at a time, at which point unused $$ is carried over if there is any), and am sitting a lot prettier than you! My $25 Telus plan was costing me $46 a month with all the “fees” – and I am GLAD to be rid of it and in a position I can control more easily!
France
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