The Annual Wireless Checkup
Jay Carnes | May 25, 2016
Unfortunately, service providers benefit when consumers lack a clear understanding about details, terms, and future changes, which can prove costly. Television advertising, fliers in the mail, and pop-up ads in internet browsing only provide snapshots of cell phone plans. Considering the $1,000 average annual expense, consumers should carefully review details and fine print to make informed decisions about which provider and phone plan best suit their needs. Specifically, customers should understand the basic structure of plans, the pricing options within them, and their own pattern of usage.
Today’s BillFixers Breakdown identifies and explains the primary components of contemporary cell phone plans:
Even if it’s only once a year, make sure you know what you’re paying for!
A set amount of data shared among users on the plan
Using a phone on the cell network to access email, browse the internet, navigate with map and GPS software, and utilize other applications requires the user to transmit and receive data via the device. Typically, data usage is measured in Gigabytes, and based on the pattern of usage, customers select the anticipated amount of data to be used each billing cycle. This allotment forms the basis for most contemporary cell phone service agreements. Note: providers charge a penalty fee for exceeding the allotment of data paid for, so it is critical to monitor usage and consider adjustments as usage habits evolve.
Line Access Fee
a fee per device to access the network and data allotment selected
Whether a phone plan is for single or multiple users, a fee is charged for each device that will access the network and data. This fee can vary based on multiple factors. For example, the fee is typically lower for a standard phone that simply makes calls and can send/receive text messages. Using a more advanced smartphone typically results in a higher access fee.
Additionally, providers now vary the fee to incentivize behaviors. For example, with one provider if you choose to buy a subsidized phone, the line access fee is $45/month. Alternatively, customers who pay for a phone via monthly installments have a $20/month line access fee. *This differentiation is but one example how complicated price structure options make it difficult for consumers to easily understand their price options.
Talking and Texting
by paying for data, you can make unlimited calls and send unlimited texts
Prior to development of smartphones that access the internet, phone technology allowed users to make phone calls and send text messages over the cellular network. Consequently, customers paid for a certain number of call-time minutes and allotment of messages to be sent and received. As primary use has shifted from simple voice and message communication to data-centric applications, service providers primarily base plans around data usage and include unlimited calling and messaging within the plan.
monthly payment for a new phone you purchase
Until recently, the predominant model for purchasing a cell phone was structured so that customers paid a subsidized amount for the phone, with the remaining cost of the phone incorporated into the monthly payment for services. Presently, a majority of service providers are shifting away from this model. Instead, upon selecting a device, customers can either pay the full cost up front, or pay the cost divided over a set period of time (typically 18 or 24 months). Additionally, customers who desire to always have the newest device can pay a monthly fee to lease a device, and instead of making payments toward phone ownership, the user continues to pay the fee and is provided with a new device when models are updated.
That is a lot of information to take in. In summary, the most basic decisions involve choosing a device and how to pay for it, and selecting a data allotment to fit the usage need for user(s) on the plan. This structure applies to the majority of plans currently offered from the major providers. There are alternatives, such as pay-as-you-go plans, and some clients remain on old plan structures that are “grandfathered” until you make modifications. It should be noted that some customers benefit from remaining on these old plans, but that is not always the case. (More on that in the next post.)
Before making a decision about the best pricing option for services, customers should review current account details online or call customer service to obtain data usage for the last 12 months. This data summary allows users accurately evaluate which category they fall into:
- OVERPAYMENT – Paying for data and services that are not fully used
- PENALTY – Exceeding the usage allowed in a plan and incurring additional fees
- JUST RIGHT – Utilizing data and services up to the monthly threshold, but not going over
A customer who falls into either the OVERPAYMENT or PENALTY category can take action to mitigate unnecessary costs. Specifically, if there is excess data in the plan, simply reducing the monthly allotment to a more appropriate level can lower monthly costs. Conversely, if usage regularly exceeds the included data, increasing the plan size may reduce penalty charges for overages, thus reducing overall expenses.
Make this review practice an annual priority. While we consider ourselves creatures of habit, service providers modify plans, and needs may actually fluctuate more than assumed. These changing variables can have a significant impact on the cost basis for wireless service. Conduct an “annual checkup” for your service plan to stay updated on information and help prevent unnecessary expenses. Finally, remember these key takeaways:
- Know your usage
- Match a plan to your usage needs
- Evaluate your plan annually
Our next post will discuss how to accurately compare competitors, including how to compare old plan structures to newly released plans within the same provider.
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