The PhoneBoy Blog

I was thinking more about the difference between buying a bundle of minutes–at a fixed monthly cost–versus paying for minutes as you go. I’m trying to figure out why such a thing caught on here in North America, but doesn’t seem to have caught on so much elsewhere.

The only thing I can think of–speaking from my own experience–is that it brings a certain predictability to the monthly cost. I know that my service is going to cost $X a month. It’s much easier to plan my budget when I know how much something is going to cost per month.

If you never go over your allotment of minutes, and never even get close to that limit, consider this: you’re likely paying for minutes you never use. Even if you take into account the “free” night and weekend minutes or mobile to mobile minutes, the overall number of minutes may, in fact, be lower than the bucket you purchased. For my wife, this was most certainly the case. Before we went prepaid, she was on a 300 minute plan and almost never used that many minutes in a month. The one month she did, overage city!

Anyone who has ever gone over their allotment of minutes knows that those overage minutes add up pretty fast. Many years ago, I was on one of AT&T Wireless’ first nationwide no-roaming/long distance plans. They allowed you to change the minute bucket you were on and would backdate it into the current billing cycle–which was very cool and something they no longer do. I had called in to place myself on the largest bucket of minutes possible. Even doing that, I had gone over my minute allotment by several hundred minutes and thus my phone bill was about double thanks to overage charges.

The question is: why are those extra minutes so much more costly than the minutes I got discounted in a bundle? How come if I go over a 450 minute allotment extra minutes cost $0.45? Do they really cost that much to provide an extra few minutes of service?

I will admit that there are some people who likely do quite well under the current regime of minute bundles along with free night/weekend minutes and free mobile-to-mobile. All of those people who are essentially overpaying for service are subsiding those who are making these “free” calls. Does that seem right to you?

The only reasonable approach here to pay for exactly what you use–no more. I know that when I buy my $100 voucher for T-Mobile Pay As You Go, I will get 1000 anytime minutes that are good for a year. If I spend $40 a month on a post paid plan, I get 450 minutes per month. Do I get to keep them if I don’t use them? No. Even AT&T’s “rollover” gimmick doesn’t let you keep all your unused minutes, though it’s much better than the other carriers.

Whether you are a heavy user or not, it pays to shop around. Prepaid plans may be cheaper than you think. It’s the closest thing we’ve got to “pay per use” pricing here in the U.S. The carriers have these plans, but they are for large businesses only. Why is that? Because businesses–particularly multinational ones–know a better way and have demanded it. Why can’t regular consumers do the same thing? Oh yeah, they simply don’t know better.

A reader, whom I’ve been engaged in many private conversations with about how much the mobile operators here in the U.S. rip us off, sent me information about how much mobile phone service costs in Indonesia, along with some basics about how the service works. For the record, Indonesia is the fourth biggest country by population, behind China, India, and the U.S. It is, therefore, a somewhat relevant comparison.

Each outbound minute of calling to a landline costs Rp. 531/minute for the three carriers, calling to a mobile on the same provider costs Rp. 540-813, depending on carrier, and calling a mobile on another operator costs Rp 540-975, depending on carrier. SMS (text messaging) costs Rp. 250-300 within Indonesia, Rp. 500 to locations outside Indonesia. The monthly access fee? Rp. 350, unless you spend a certain amount on your bill.

To put this in American pesos dollars, a minute of calling to a landline costs less than $0.06 a minute, a minute of mobile calling costs less than $0.09, SMS costs $0.03 within Indonesia, $0.05 outside. The access fee is nearly $0.04. And, of course, these costs are for outbound only calls/SMS, incoming calls/SMS are free as they should be.

Let’s compare this with the typical rate plan here in the US, where you pay a certain amount of money (minimum $39.99) for a certain amount of minutes (450 is the minimum, I think), pay a ridiculous amount per minute for overage (up to $0.45, depending on the plan), include made-up fees (”regulatory recovery charge” comes to mind), and of course you pay for incoming and outgoing calls. You might get free mobile-to-mobile or night-and-weekend minutes, but let’s face it–how many people actually use their phones that often during those times?

If you were to actually make 450 outbound minutes worth of calls to a mobile on another carrier in Indonesia–the worst case scenario-it’d work out to almost exactly what you’d pay for a 450 minute rate plan per-month with all the taxes and made-up fees. Of course, if you use less minutes, you don’t actually have to pay for 450 outbound minutes, you pay for–and get charged for– exactly what you use.

And don’t even get me started on SMS charges, which without a package can cost up to $0.20 a pop. International SMS? $0.25 a pop, and you can’t buy packages that include international SMS. How can international SMS only cost $0.05 a message in Indonesia and a quarter in the U.S.?

The CTIA says that other operators worldwide want to become more like the U.S. carriers. No wonder: they’d love to get away with charging for service they don’t provide, and overcharging for the services they do provide, just like U.S. mobile operators! Pity most people in this country haven’t seen how it works elsewhere to know there’s a better way, let alone demanded it.

What irks me even more is that large business demanded a better way, and have gotten it. T-Mobile and AT&T offer to large corporations per minute plans, where you pay a monthly access charge with no minutes included. All inbound/outbound minutes are charged a per-minute charge on the order of what you pay for a minutes of calling in Indonesia. SMS and Data services are add-ons and are charged at the same rates as consumers for similar services.

Why aren’t these plans offered to average consumers? They are, in a sense, in the form of prepaid service. However, all prepaid plans in the U.S. charge far too much per minute. T-Mobile is the only operator approaching a reasonable per-minute rate, but only if you buy 1000 minutes (which costs $100). However, I’d like to see these available as a post-paid plan available to consumers as well. Doubt it will happen.

What do you think? Are we getting ripped off here in the U.S. by the mobile carriers? Leave your thoughts!

(Photo by Wm Jas, used under a Creative Commons license)