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The Truth About Cellular Contracts.

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   There are so many questions that come along with contract-based plans. Customer service representatives try to answer thes questions at service providing stores.  However, keep in mind, these representatives are employees of that company, and are trained to answer your questions in a manner that is in the best interest of their employer.  This is an attempt to answer the question that arise most often about what these contract mean, and why they may or may not be a good fit for you.  Contracts are, in a sense, a way of subsidising prices of your wireless charges and phone prices. This is very much like financing for a vehicle or house.  As we all know, financing is a good option when funds are not available, but a credit line can be established.  However, subsidised pricing comes with fees, penalties, and deposits (very similar to finance charges).  A contract plan is the same way!  This would make complete sense if we were expected to pay thousands of dollars per year on a mobile service plan, but we are not!  It would also make sense if we were subsidising the price of a phone that had a cost in the thousands, but they are not priced in the thousands! Let's look at some numbers, prepaid service costs $61 per month on avaerage.  Contract plans cost $122 per month on average.  The typical length of a service contract is 24 months. Over the span of a single two-year contract, a prepaid user saves $1,464 (this is assuming the contract user got a "free" phone with their upgrade).  The average retail cost of a smartphone is $459.  So, where is that extra $1,005 going?  The answer: into the pockets of these contract-based service providers.  As consumers are catching on to thesefacts, more and more people are switching to prepaid services.  Contract-based providers have lost over 52,000 customer in the first half of this year, and it's estimated that over 25% of American cell phone users are on prepaid networks. The major concern has been that these prepaid service providers have offered lower quality devices for use with their service.  This issue is becoming scarce now that many new mobile virtual network operators (MVNO) are launching. These are companies that lease spectrum and towers from major service providers (Sprint, Verizon, AT&T).That being said, most prepaid service users are not noticing a difference in service from major service providers, and phones that were once provisioned for use with only major service providers can now be used with these MVNO networks.  We provide services in our store to set phone up for use with prepaid services.  Our smartphone prices are $300 on average. So, you could save another $159, on average, by purchasing a phone at our store, and having it set up for prepaid use.  This concept may seem foreign, and indeed it is!  Western Europe is about 70 percent prepaid. China, India, and Africa reach 70, 95, and 99 percent, respectively.  These same major service providers offer infrastructure use on these other continents, and this network service has become wildly popular due to better value in the same quality of service. The other big question is data service.  Data now constitutes 85 percent of all mobile traffic in the United States.  This means, more than four out of five times that you touch your phone, you are using the internet in some way. Data charges account for 40% of revenue generated by service providers.  American mobile data providers stand to make $80 billion from your data charges this year!  Knowing this, it's fair to say that service providers are banking on the fact that you use your mobile internet quite a bit.  For this reason, most companies have eliminated 'unlimited data' packages. This has become a level that prepaid services have matched, or provided more data.  So, if prepaid services are offering the same services at a lower price, how are contract-based service providers staying in business?  The answer: they make money by charging fees, deposits, and penalties for these susidised prices. 110% of Americans own a cell phone.  That is to say, there are more cell phones in this country than there are people.  This makes it difficult for service providers to attract new customers.  To compensate for this inability to attract new contracts, these providers just hike up contract fees and prices on existing customers.  Unfortunately, because these customers are under a contract they will have to pay to break the contract and avoid these pricing spikes.  So, is your service provider telling you the truth about what their contractis offering you?  Probably not, but we sure will!

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