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Locked or Unlocked? Today, That Is the Money Question


Published: February 24, 2010

Offered two identical phones, one for $400 and the other for $150, which would cost you less?

These T-Mobile myTouch phones may look the same. Their prices, however, could be quite different.

That can be the case when the calling plan for the full-price phone is less than the one for the discounted phone. It could very well be the $400 phone.

The cellphone industry has started to change because of a recent policy switch from T-Mobile. And as it does, a shopper will increasingly have to consider the total price of the wireless service plan as well as the price of the phone itself.

This is especially true if the smartphone under consideration can be perpetually updated with new apps. You might not really need to spend hundreds more on a new phone after a two-year contract expires and then chain yourself to a network for another two years beyond.

And who knows: if enough consumers actually vote with their pocketbooks for this option, the other carriers may come around as well. The United States is one of the only places where consumers buy phones that are subsidized by the mobile carriers. The American carriers lock you into a contract with steep monthly prices so they can recoup the phone’s discount. At least that’s the stated logic. But the logic splinters when it comes to your personal phone bill.

Let’s say that you buy a MyTouch 3G, one of T-Mobile’s most popular smartphones, for $400, and sign up for its unlimited voice, text and data plan for $60 a month. The total cost of the phone over two years would be $1,840.

If, instead, you buy the phone subsidized by T-Mobile for $150, that same unlimited plan will cost $80 monthly — which is still the best deal among the major carriers, by the way — bringing your two-year total to $2,070.

If you reject the subsidy, you’ll actually have $230 to spend two years from now, and $20 every month you keep the phone beyond that. Android phones like the MyTouch 3G have thousands of apps that will let the device evolve with your needs. Another benefit is that you’ll have been free to jump to another carrier at any time without a penalty or having to sell the phone.

The only caveat is that you’ll need to use T-Mobile, because that is the only carrier bold enough to give a $20 monthly break on their unlimited data and voice plans to customers who buy unsubsidized phones. If your stomping grounds have good T-Mobile coverage, you could save hundreds of dollars with this approach.

You’ll save less money if you want Google’s Nexus One, which costs $529 unsubsidized, and $179 with a two-year contract with T-Mobile. So for this phone, the two-year, unsubsidized cost would run $1,969, which is still $130 less than the $2,099 you would spend with the subsidy.

Accounting majors will start running net-present-value calculations to determine the benefit of holding onto more money in the short term, but even here, T-Mobile has an answer. The company accepts installment pricing for the unsubsidized phone, so if your credit is good, you could pay $20 a month until the phone is paid off.

International travelers who choose this approach enjoy another benefit. Since T-Mobile operates on the G.S.M. standard used by most carriers in the world (but not Verizon and Sprint in the United States), you can take your T-Mobile phone abroad, walk into a store and buy a G.S.M. chip for cheap calls.

If you don’t own that phone outright, or if you’ve been under contract with T-Mobile for four months or less, you can’t swap out the phone’s G.S.M. chip. (That’s why it’s known as a “locked” phone.)

Here is the last thing to think about if you are interested in saving money. You might expect carriers to free you from a contract after they’ve recouped their subsidy and immediately begin charging you less each month.

How much less? As much as $30 less, which is what you pay for unlimited talk, text and data for prepaid service on networks like Sprint’s Boost Mobile. Boost charges $50 monthly when you pay ahead of time, instead of carrying a contract.

In other words, about a year after buying that subsidized phone, your financial obligation to the carrier should be finished, and the two of you should continue your relationship for as long as it makes you both happy.

Of course, that doesn’t happen.

Quick Calls
Thespians will appreciate Actor Genie ($10, for iPhones), an app that features casting news for films and TV shows in New York and Los Angeles, as well as a directory of agents and managers. But it’s also fun for entertainment industry voyeurs to see what projects are brewing. … AT&T customers who like Android-based smartphones have been out of luck until now. Motorola says it will introduce its Backflip smartphone on March 7. For $100 (after $100 rebate and with a two-year contract), customers will get an Android device that flips open to reveal a small keyboard. … Following on its success with the Kindle app for iPhones, Amazon will soon introduce a free Kindle app for the BlackBerry, allowing users of popular devices like the Curve 8900 and the Bold to buy and read e-books directly on their phones.

Author: barenose

Have a look at my web site for ideas about the work I've done. I look forward to hearing from you about your next project, the Internet, the environment, or life.

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