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living with prepaid smartphones in the states

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For foreigners or new residents, getting a working cell phone in the United States often means going through some confusing (and sometimes also painful) steps. First, get the phone, i.e. the device itself. Second, get the service plan for the phone.

While GSM is dominating in most parts of the world, US is still using both CDMA and GSM extensively. Verizon and Sprint are big CDMA operators, while AT&T and T-Mobile still stick with GSM. This needs to be taken into account if you already own a slick GSM phone and would like to use it.

Obviously, a service plan is also required. There are two approaches: subscription or prepaid. In the first case, you sign a contract agreement with the operator for a duration of 2 years (sometimes one-year contract is also possible). In the second case, you need to have the necessary credits upfront, before using the service and top it up whenever it is running out.

If you opt to get into the contract, then you are often eligible to buy a discounted new phone as part of the package. Since the service operator knows you’ll going to commit to the service for the duration of the contract, they subsidize the phone and thus can reduce the purchase price. There are also various deals possible, especially with bundled offer and multiple-line/family arrangement. It’s also common to see the price driven to zero, i.e. the phone itself is free.

As an example, at the time of this writing most US carrier offers the much-loved Apple iPhone 4S for the price of $200, provided you’ll be using their service in the next 24 months. This gives the explanatory answer to a very common question (especially from my countrymen):

I heard you can get iPhone for $200 in the US. Can you buy one for me and bring it home? I’ll pay you back.

Of course, the bulk of the carrier profit comes from the service plan. After losing $200 for the phone itself, now you still need to shell out $50 to $85 per month, depending on how much voice/text/data you would need. Along the 2-year duration of your commitment, this is equivalent to losing as much as $2240, i.e. $200 + $85/mo * 24 months.

Another way to reduce the cost is to use the prepaid strategy. Years ago, the prepaid situation in US was disastrous. These days, it is getting better and better. Surprisingly, many are still not aware of this.

Let’s examine the iPhone 4S example above. Buying the unlocked, non-contract version from Apple will set you back $650. After that, get monthly plan from T-Mobile, ranging from the cheapest $30/month for basic service to $50/month for unlimited talk, text, and web. This service is also non-committal, you can stop at any time. In the span of 2 years, the total cost would be at most $1850. That’s like 20% saving vs $2240 for the contract-based.

You’ll save even more if you can live without an iPhone. Surely there is a suitable decent Android-based phone you’ll enjoy for less than $400. Amazon, Ebay, GSM Nation, as well as various deal sites are perfect places to hunt for unlocked smartphone bargains.

In addition, there are also mobile virtual network operators which can resell the service at a discounted price. For example, Simple Mobile piggybacks on T-Mobile network yet it offers only $40/month for the same unlimited plan. Virgin Mobile, which relies on Sprint network, can give you unlimited service for $35/month although you need one of its CDMA-based smartphones.

Since WiFi becomes more ubiquitous, let’s pray that Republic Wireless hits a critical mass and thus reaches the success. I’m sure you’ll agree that $19/month is the best deal!

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