08 July 2012

We are all paying too much for cell phones.


A Benjamin a month or more can be quite a motivating factor to learn more about cellular options, and there are millions of potential students looking to discover a smarter way to carry their phone. Looking ahead to the cellular wavelength future, it seems entirely possible that some Americans may learn how expensive subsidized phones can be, and companies like Virgin Mobile are our professors attempting to educate us. The question is whether we are paying attention or fell asleep through their course.

Virgin Mobile just entered the American market in force with zero contract service for a handful of phones including the beloved iPhone 4S. The geek world is aflutter with affection for any option that can easily cut 25% off your total cellular cost over two years, even when you factor in the cost of the phone. Sure, you pay $650 up front, but you then pay only $35 a month for service and can quit at any time. Unless you are a Verizon shareholder, it would be lunacy not to consider switching to their service when your contact expires. Concerned about coverage in your area? Their piggyback on the Sprint network has a 30 day money back guarantee to backup if things go awry. Apple gets their money and you save yours, so we cannot lose!

In a way, we still are. The brilliant people in Cupertino do not want you to open your calculator app to find you could save 50% off your bill over two years (a thousand bucks) if you pick up a different smart phone. An HTC One V is a $200 smart phone running Android's latest Ice Cream Sandwich interface and having comparable specs in nearly every way. Maybe you need a device that is iPhone 5 with 4G LTE service? That device is only $300.  Less than half the price for a device that will do the same cartwheels of an iPhone that has not even been announced. Even better - these great Android devices come out every month and since you are outside a contract, you can buy a new $100 to $300 device whenever you like.

Do not misunderstand me - this is not a Virgin Mobile commercial. That is the scary part. There are other players in the space, like Cricket, and even some cheaper options that rely on cellular only when WiFi is unavailable that bring the bill down to $20 a month. The reason I focus on Virgin is because they are pushing this concept mainstream and, when you add this to the already suffocating cost of subsidizing Apple's equipment, it is easy to envision how someday we might see AT&T or Verizon consider abandoning contracts themselves.

This presents a significant paradox for the children of Jobs. As many of us move away from cellular contracts and the curtains are pulled back from the subsidy cloak we will finally see how Apple prints their cash: They charge a bloody fortune for their phone. No doubt, there will always be those that worship at their altar, and rightfully so since their products are near technological perfection. Those true believers can still purchase their favorite device and save $500 during a typical contract, or save only $250 and have the option to buy a the latest iPhone annually. But the reason more people carry Android is a feature set on par or better. When customers start to see the actual cost of the phone this divide could get much worse. Unless you are going to mass at the Church of Apple every Sunday, it is impossible to ignore saving hundreds of dollars.

We will see how this shift to contract-less cellular service works out, or if Yanks even buy into the concept. It certainly is popular in Europe and maybe that fact alone will keep us from following those silly snail-eating, toothbrush-hating liberals. Maybe we are so affectionate of our cell carriers that paying a hundred bucks a month for Siri services that we cannot be blinded by the light of lower prices. But if we do see the light .. If some preach the iPhone as a false idol .. Well .. Let's just say that Apple may need to change the cost of entry to their cathedral or the mass might move elsewhere.