Hey folks…..we might be able to get rid of two-year wireless contracts for good! (Explained at the bottom)
But first, a diatribe. Why do I hate two-year wireless contracts? Let me count the ways:
If cell service deteriorates in areas in which you need it, then you are stuck with a literally worthless service.
Early Termination Fees (ETF) suck. Many carriers either refuse to prorate them or, when they do, they are prorated at a smaller rate. For example, a $350 ETF is lowered by $29.16 every month on a 12 month contract. On a 24 month contract it only goes down $14.58 per month. After 12 months on a 24 month contract you would still owe a $175 ETF to get out of your contract. Essentially, you are locked in for an extra year’s worth of payments for service. If you try to get out after 12 months you still have 50% of the early termination fee to pay to get out.
Two-year old phones malfunction. Sometimes the OS gets corrupted, sometimes the hardware fails in small ways that limit functionality. Sometime phone gremlins somehow work their way into the phone and you can’t get rid of them. It seems like the longer you own the phone the more likely it is something is going to break. If you’re still on contract you could be stuck paying for a a phone that is only marginally functional and you have little or no leverage to force the manufacturer to support the phone.
The rate of change in phone technology is such that you lose the option of being able to resell your phone after one-year. If you’re able to sell your 12-month phone at a good enough price you won’t need to contribute additional funds to buy the newest phone. You’ll have the newer technology every year without having to invest hundreds of dollars every time. Your cell phone will be worthless at the end of the two-year contract. Not that it won’t work, but it will literally be worth a lot less in terms of value than after 12 months. After 12 months you can still sell your current cell phone for a decent amount and use the money to buy yourself a new cell phone. 24-month old phones are technologically obsolete.
They are expensive. Depending on your usage and the plan you sign up for, contract plans could be more expensive than a prepaid offering. This is more likely if you have an individual cell phone plan with expensive data and texting services. In most cases, prepaid plans with used or new phones are significantly less expensive.
Essentially, he’s calling the bluff of Verizon CEO Lowell McAdam who was quoted as saying that he’d considering eliminating two-year contracts if consumers so indicated. The two-year contract is increasingly falling out of favor as consumers get savvier about wireless plan purchases. The success of carriers such as Virgin Mobile, Cricket and MetroPCS attest to this. T-Mobile figured this out and shook up the wireless industry last month by announcing it would revamp its pricing models to eliminate contracts. Instead, T-Mobile’s new service plans require that customers pay for their smartphones either up front or in monthly payments over two years.
The two steps you can take to crush cell contracts?
When your two-year contract expires, switch to a pre-paid service. If you want a new phone, you can buy it on installment plans that are far more reasonably priced. Preferably, you will shell out some bucks for a decent phone and then, perhaps after a year or two, sell or barter it for a newer version. To learn more about a smarter wireless purchasing strategy, click here.