Once upon a time, like just one year ago, all cell phone plans and wireless service companies were basically doing the same thing, offering the same pricing, and saying that they had the best service. This quad-opoly of the big 4 cell phone companies was broken by the desperation of T-Mobile, after the government refused to allow AT&T to buy the smaller company. With new pricing and plans, T-Mobile nudged, ever so slightly, the cell phone market. Now, things are a bit different at the different wireless carriers. Which cell phone company has the best deal might now depend on what it is exactly that you do with your mobile phone, which is why I’m looking into each company’s new offerings now.
Keep in mind that cell phone costs are busting many people’s budgets these days, so it’s important to focus on both monthly cost, and overall cost.
AT&T Cell Phone Plans and Service
I’m starting with AT&T because every time I complain about Sprint on Twitter, the AT&T customer care accounts show up asking that I take a look at AT&T. Okay, I will. (Actually, earlier this year I looked at T-Mobile free switch offering, but things have changed even in the last six months. See, competition is good.)
So, part of the disruption T-Mobile caused was breaking from the model where your cell phone company basically gave you a free phone in exchange for locking you into a 2-year contract. This way, your cell phone company could give you terrible service, and there was basically nothing you could do about it, because it was too expensive to switch carriers. This, is why I’m still on Sprint despite knowing that at least 2 of the other carriers in Denver would offer me much better coverage and much higher speeds.
AT&T has followed suit by offering something called AT&T Next. One of the things that didn’t make sense for me about T-Mobile’s offer was that the carrier’s incentive in locking you into a contract was that it would make more profit on you over those years to make up for giving you a free phone. Well, T-Mobile took away the free phone, but didn’t give you a lower rate. AT&T Next seems to at least give you some of the benefit of buying your own phone in the form of a lower bill.
The AT&T Next plans come in different flavors. So, for example, if you wanted to get the Nexus 6, there is an AT&T 24 plan, an AT&T 18 plan, and an AT&T 12 plan, all corresponding to how long you will be making payments on your new device. The numbers, however, do not correspond to how long you make payments. Rather, that is when you can trade-in your phone and upgrade. So, for example, the Next 6 phone seems to have 20 months of payments for the AT&T Next 12 plan. After the 12 months, you can trade-in your device, and the remaining 8 payments would be waived. However, your device must be in good physical and fully functional condition to trade it in, so no more upgrading for free to get rid of that broken screen.
Of course, the longer the term, the lower the monthly payment. Unlike normal loans, like a mortgage, there is no interest charged, which means you do not pay any more or less overall no matter which term you choose. The difference is that you could upgrade, or leave the carrier faster by paying it offer more quickly.
In this example, the 24 plan has a price of $22.77 per month, while the 12 plan has a payment of $34.15 per month. Basically, this is just the price of the phone divided by the number of months, because there is no interest being charged.
AT&T Next Service Discount
In exchange for paying for your own cell phone with monthly payments, AT&T Next offers you a discount on your service. Of course, wireless companies love the fine print, so you’ll have to dig and read carefully to find out what your exact discount is. Keep in mind that the bold number on the front page says UP TO $25 per month.
My read, as of this writing, is that you get a $25 discount only if you have a data plan of 10 GB or higher. You get a $15 discount on plans with less than 10 GB. (If you had a pre-existing contract with AT&T, there are different rules.)
Now, here is where it gets weird. Depending upon sales, specials, and rebates, and so on, the best deal can be pretty murky.
So, here with a 2-year contract, you could get the Nexus for $249.99 with the instant savings for the contract. If you do the Next plan, you don’t get that instant savings, you pay $22.77 * 30 = $683.
The math then, is a $25 discount * 30 months = $750, but you pay $683 for the phone instead of $249.99, or $433.01 more.
If you only got a $15 discount for 30 months = $450.
But, if there were a special where they offered the Nexus 6 for say $99, then you would not be coming out ahead for making the payments.
What Does AT&T Cost?
OK, enough hypothetical math. Let’s figure out what AT&T costs for someone like me who might want to switch. I haven’t researched cell phone heavily, so I’m just going to use the Galaxy S5 as the example, because I currently have a Galaxy S4, and that’s the next one up.
Before we begin, let’s just get something straight. Yes, I know cell phone companies are bald-faced liars when it comes to their cell phone plans and they will add dozens of dollars worth of phony fees and taxes to the final bill. In an effort to be a slimy as possible, there is virtually no way for someone to figure out what those phony fees will be until you sign up. So, for the comparison below, we just have to make the assumption that all the garbage charges on the cell phone bills will be relatively equivalent.
So, a Samsung Galaxy S5 from AT&T, on 12/17/2014, is $199.99 with a 2-year contract. Plus, you have to pay a $40 activation charge for a 2-year contract, so it’s $239.99 all in. The monthly payment would be $140 per month for a 10 GB plan, and $80 for a 3 GB plan.
With the AT&T Next 24 plan, it costs $21.67 for the phone. If I kept the phone for 24 months, that’s a total of $520.08. If I kept it for 30 months, that’s $650.10.
The plan cost is $115 per month for the 10GB plan, but when add back in the $21.67 for the phone, that makes the monthly payment $136.67. So in other words, on this particular phone, I would come out ahead by $3.43 per month.
If you got something like a 3 GB plan, then the cost is $65 per month (only $15 discount.) If I kept the phone for 24 months, my plan savings is $360. If I kept it for all 30 months, the savings is $450. However, the monthly bill is actually higher, at $86.67 per month, versus $80 per month with the two year contract.
Here is how the totals look:
*includes phone purchase price and $40 activation fee
| The Deal | Phone Purchase* | Monthly Phone Payment | Total Monthly Bill | Total for 24 months* | Total for 30 months* |
|---|---|---|---|---|---|
| 2-year Contract 10 GB | $239.99 | $0 | $140.00 | $3,599.99 | $4,439.99 |
| AT&T Next 24 10 GB | $0 | $21.67 | $136.67 | $3,280.08 | $4,100.10 |
| 2-year Contract 3 GB | $239.99 | $0 | $80.00 | $2,159.99 | $2,639.99 |
| AT&T Next 24 3 GB | $0 | $21.67 | $86.67 | $2,080.08 | $2,600.10 |
So, what does it all add up to?
Basically, the difference between a 2-year contract and an AT&T Next plan isn’t much. What you really need to do is determine what the right amount of data is for you. Check your current wireless bill and see if there is a number on there. Then, check a few different months to make sure you know what you usually use. Then, buy the smallest data plan you can. Don’t get sucked into 10 GB just because you get a bigger monthly discount, because while there isn’t too much difference between the 2-year contract and the AT& Next options, there is a very big difference in overall costs between a 10 GB plan and a 3 GB plan. Paying for 10 GB to get a “bigger discount” when you never actually use more than 3 GB will be a costly financial mistake.
How does this compare to other cell phone companies? That will have to wait for later.
But, for now, I won’t be switching anytime soon. I’ve got a grandfathered plan with Sprint that cost me about the same amount as the 10 GB plan on AT&T, except it’s for unlimited data, and it’s for two lines.