Can Prepaid Plan Users Save Money?
iPhone Moves Into Virgin Mobile Territory With New Prepaid Plans
Virgin Mobile USA has entered the prepaid iPhone world just a few days after Cricket announced a similar arrangement with Apple. Virgin's plan is different from Cricket's in two ways. The phones cost more, but the monthly prepaid rates are lower.
With Virgin Mobile, which is a subsidiary of Sprint and uses Sprint's CDMA network, the 16GB iPhone 4S costs $649, which is the same as a contract-free, unlocked GSM phone purchased from Apple. The two major GSM carriers in the United States are AT&T and T-Mobile. Virgin is also offering an 8GB iPhone 4 for $549. Apple sells an unlocked GSM iPhone 4 for the same price. Apple will also sell you an unlocked iPhone 3GS for $375.
Virgin's edge in the prepaid phone space is that its monthly rates are lower than Cricket's. All of Virgin's plans include unlimited data, although that data will be throttled after 3.5GB. Virgin Mobile's least expensive plan gives you 300 voice minutes for $30 per month. An unlimited voice and data plan costs $50 per month. Cricket sells its unlimited voice and data plan for $55 per month.
As enticing as these plans may sound, they're not as new as they seem. Apple customers have been able to buy the unlocked GSM phones online or at Apple stores for quite a while, and they've been able to get similar rates from T-Mobile, which has been pushing prepaid phones and plans recently, and from AT&T, which has had prepaid plans for years. For example, T-Mobile will give you unlimited voice and data also for $50 per month, although the data will be throttled after 100MB to less than 4G speeds. Since the iPhone doesn't do 4G, that may not matter.
AT&T also has a $50 unlimited voice and data plan. But for smartphones, there's a surcharge for data ranging from $5 to $25 depending on the amount of data. AT&T also has a $25 limited voice and data plan, and it offers plans by the day or by the minute.
What this really means is that the CDMA world, except for Verizon Wireless, has now joined the GSM world in the ability to have a prepaid iPhone. The biggest difference is that you can use the GSM iPhone anywhere in the world simply by buying a local SIM from a phone store. CDMA doesn't work everywhere.
Can Prepaid Plan Users Save Money?
But it also means that smartphone users can save a lot of money if they're willing to forgo the subsidy the carriers put on their phones, and just pay the full price upfront. For example, by buying the Virgin iPhone 4S, a customer can easily save about $60 per month over a Sprint unlimited plan. If you buy the iPhone 4S from Sprint, it'll cost you $199.99 and the unlimited plan will cost you $99.99 per month. Sprint says that there's also a $10 Premium Data charge. So in reality, your iPhone 4S service is costing you $109.99 per month.
The savings in a year is $720. In other words, by buying the Virgin phone and using it on Sprint's network, you'll more than make up the difference between the subsidized phone and the unsubsidized phone in about a year. The next year is basically gravy.
Of course, there are some potential gotchas. Depending on the details, you may not be able to roam in some areas with the Virgin phones. The Cricket phone released last week can be used almost everywhere because that company has roaming agreements with almost every CDMA carrier. The other potential problem is that you may not be able to use either the Virgin or Cricket phones outside the United States, even in places that have CDMA service. You'll need to check this if you plan international travel.
So in reality, Apple has been in the prepaid phone business, although quietly, since it started selling the iPhone as an unlocked device, back in the days when the iPhone 4 was new. The difference was that Apple was doing the selling, and you had to set up the phone service and buy a SIM through your favorite GSM carrier, most likely T-Mobile or AT&T. Those two carriers weren't selling unlocked iPhones at the time, although you can get AT&T to provide the unlock code for an out-of-contract iPhone now. T-Mobile, of course, has never sold iPhones, although the company is happy to sell you a compatible SIM and a plan to go with it if you show up with one.
For Apple, the release of the CDMA iPhones through prepaid carriers gives the company some experience with the prepaid market before it enters into the much bigger prepaid markets in Europe and Asia, where subsidized phones with contracts are rare or nonexistent and most phones are sold through independent retailers. Gaining this experience is what Apple needs to do if the company plans to grow globally, which is what it clearly plans to do.