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The simple version is: US cell phone contract = service bundled with a small loan for a phone. It isn't that bad. They can't charge you whatever they want, you

by NoPiece 13y ago

The simple version is: US cell phone contract = service bundled with a small loan for a phone. It isn't that bad. They can't charge you whatever they want, your plan is locked in, and if they change it you can leave without penalty. For whatever reason you leave, you can take your number. Pre paid plans are available as options. Nothing forces you to stay with a carrier. The penalty is just recouping some of the unpaid value of the phone. You owe less as time goes because you are paying back the value of the phone through your contract.

67726e 13y ago
Correct me if I'm wrong as I always used a pre-paid phone on an MVNO prior to switching to T-Mobile after they started their reforms, but my understanding was that cell-phone companies would typically have something like: PAYMENT = PRICE_OF_SERVICE + (PRICE_OF_PHONE / CONTRACT_DURATION) I know this is a "naive implementation", but the problem is they would never take off the charge for the phone even after one had paid it off and that they didn't tend to have transparent billing so you wouldn't really know if/when you had.
- er35826 13y ago
  That is essentially correct, though the math was completely hidden. The justification for higher contract rates was because they were using that difference to subsidize new phones whenever you signed a new contract. So, 80 bucks a month for basic service and a few hundred MB of usage. The problem was that after the 2 year contract ended, when they supposedly were able to recoup the cost of the original phone subsidy, your rate never changed. You'd still pay 80 bucks a month, even if you were happy with your current phone. T-Mobile's change, much like the rest of the world, was to break out the math explicitly like you show. Then once you've fulfilled the (PRICE_OF_PHONE / CONTRACT_DURATION) term, it would simply vanish.

by NoPiece 13y ago

67726e 13y ago

Correct me if I'm wrong as I always used a pre-paid phone on an MVNO prior to switching to T-Mobile after they started their reforms, but my understanding was that cell-phone companies would typically have something like: PAYMENT = PRICE_OF_SERVICE + (PRICE_OF_PHONE / CONTRACT_DURATION) I know this is a "naive implementation", but the problem is they would never take off the charge for the phone even after one had paid it off and that they didn't tend to have transparent billing so you wouldn't really know if/when you had.

er35826 13y ago
That is essentially correct, though the math was completely hidden. The justification for higher contract rates was because they were using that difference to subsidize new phones whenever you signed a new contract. So, 80 bucks a month for basic service and a few hundred MB of usage. The problem was that after the 2 year contract ended, when they supposedly were able to recoup the cost of the original phone subsidy, your rate never changed. You'd still pay 80 bucks a month, even if you were happy with your current phone. T-Mobile's change, much like the rest of the world, was to break out the math explicitly like you show. Then once you've fulfilled the (PRICE_OF_PHONE / CONTRACT_DURATION) term, it would simply vanish.