Tech Talk Money: Are Your Actually Saving Money By Getting A Prepaid iPhone??

Prepaid does not mean you can talk with the best devices. It was recently reported that the popular iPhone will be available on prepaid. But does the no contract equate to saving dollars? Check it out after the jump.

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Though the straight numbers say that the new prepaid iPhone offerings from Cricket Wireless and Sprint Virgin Mobile are the way to go, it got us wondering what kind of hidden costs come with the too-good-to-be-true cheap option. Call us pessimists, but when someone comes along and tells us we can free ourselves from the shackles of our phone plans, for which we pay too much one way or another, for a some magic cheap phone, we get skeptical. The whisperings say that these prepaid options might cost more upfront, but save money over time. Consumers could save up to $600, one analyst told The New York Times’s Brian X. Chen. But, it doesn’t really shake out quite like that.

The idea behind prepaid is that the phone costs a lot but the plan does not. On Cricket Wireless, customers will spend $500 for an iPhone 4S and then $55 per month for unlimited texting and data, though at about 3GB data will feel very slow. Virgin Mobile will charge $650 for the 4S and $40 per month for 1,200 minutes and unlimited data and texting. Neither has roll-over minutes. But all of this comes without signing your soul away into a full two year contract.

How does that compare with the other guys, though? Looking around the Internets, we found two different price comparison breakdowns, leading to different conclusions, leading us to believe the overall cheapness of prepaid phones is not yet fact. One, we get from Cult of Mac’s John Brownlee, who said he went for realistic phone plans versus the very cheapest option. The other, we got from PC World, which went for the cheapest possible route. As you can see in our meta-chart below, no matter what, Virgin Mobile got ranked cheapest by both guys, but that’s where the similarities end.

Cult of Mac Chart has the Cricket and Virgin Mobile phones coming in with a two-year cost of $1,819.99 and $1,609.99, cheaper than Sprint, Verizon and AT&T, which all ring up $2,000-plus for two years. As for PC World, Virgin Mobile still comes out cheapest, at $1,369, but Cricket costs more than AT&T and only about $60 less (over two years!) than the other two carriers. Neither of these come out to $600 savings, by the way.

The Cult of Mac numbers come out higher than PC World’s overall, because Brownlee thinks most people don’t go for the cheapest option.

In the above chart, we decided to not nickel-and-dime the big carriers. You can get cheaper plans with Verizon and at AT&T, but these are outlier cases when it comes to usability. We decided that 450 minutes, unlimited texting and at least 2GB of data was the bare minimum service most people expect when it comes to their carrier.
Looking at our own phone bill, which happens to be a family plan, this billing cycle we only used 200 voice minutes and .5 GB of data, which matches a Nielsen study from last year that found most Android average .6 GB per month. And Verizon said earlier this year that more than 95 percent of its users use less than 2GB of data. Brownlee is being a bit generous. Nonetheless, PCWorld’s breakdown goes the lowest-cost-possible route, and we do see a cheaper option in the long run, definitely for Virgin and maybe for Cricket.

That deal, however, does have some hidden costs. First, neither Cricket nor Virgin Mobile have the most reliable voice coverage, though both piggy back of of Sprint’s network, as you can see from the maps below, respectively.

Here we have Cricket’s coverage map, where the darker the green the better the coverage.

And now Virgin, which has a disconcerting amount of white space.

This CNET user review forum for Cricket confirms the unreliability, which also extends to the company’s customer service. “HORRIBLE SERVICE, PHONES AND SO CALLED “CUSTOMER CARE”” begins one review from March of this year. Virgin gets similarly bad reviews, with one angry customer saying “you don’t even get what you pay for.” Verizon, AT&T and Sprint all have various reliability when it comes to service, to be certain, but they all at least claim to have national coverage.

The other big cost of these phones, is the phone itself. Some people might prefer spreading their payments out over time, rather than paying a big uncomfortable sum upfront. That idea, however, might also prevent some from even trying the prepaid option, when it might be the right choice overall.

AW