Monday, January 07, 2013

Save $1,000 a year by buying a Nexus 4 and moving to Straight Talk? Step 1.

Having been a customer of AT&T mobile services for the better part of a decade, voice and 3G service has been "good enough" for me for a while.  I know some phone geeks rave about the transfer rates on Verizon, or T-Mobile, and for some reason most just seem to hate AT&T... but despite living and breathing IT for most of my life, I just can't get juiced about mobile bandwidth.  WiFi at home, WiFi at the offices, and more bandwidth than I really need most of the time... it works.  So, what I have is really good enough.

But good enough, is also expensive.  Too expensive.

My objective is to reduce the total cost of my my plan by some noteworthy amount... say $1,000.  And to do it in such a manner that I don't have to think about my minutes, my texts, or my data - because I won't.  I also don't want to have to be ever in search of hot-spots, or anything like that... because that's irritating.  Oh, and I don't want a contract, because who in their right mind would want one?  I also don't mind paying more for a phone either, if it can be cost justified.

The history...

So flash back a couple of years to when I last renewed my contract... I was really looking for a pre-paid monthly option, and did a bit of market analysis and considered Simple Mobile, which at that point was an independent MVNO that ran on T-Mobile's network.  However, for a number of reasons... not the least of which was perceived complexity and a need to replace a phone quickly, I failed to pull the trigger and ultimately re-upped with AT&T.

What's an MVNO, you ask? 

Good question... an MVNO is a mobile virtual network operator.  To make a somewhat long, and unnecessarily convoluted story shorter... and MVNO buys capacity on someone else's network (e.g. AT&T, T-Mobile, etc.).  They negotiate to get wholesale rates, and then they chop it up and resell it to to consumers.  So they're a middle man... they don't own a network, and they don't build service.  They just repackage the capacity.  Virgin Mobile UK (1999) was the first to successfully make inroads in the UK MVNO space.  And if you know anything about Virgin, they're an interesting company that takes risk.  Helm'd by Sir Richard Branson, they tend to get involved in markets that abuse, neglect, and gouge their the mobile phone market, or the Airline business, and then they do it better/faster/cheaper... or at least cheaper (or they go out of Business, Like Virgin Brides).

Why do carriers resell to MVNOs?

An even better question.  One which I've found more difficult to answer.  There's some evidence to suggest that at one time, MVNOs let carriers service a market that they previously were unable to reach.  For example, having a cell phone contract requires some type of credit score (and a cursory skim of the Internet suggests it's south of 500).  But the reality today is that if your breathing, and you don't owe a major carrier money... you can probably get a contract.  That still leaves swaths of the market under-served.  So an MVNO steps in and can enable the carrier to reach a market that they have historically identified as too high-risk, and at the same time put phones in the hands of people that otherwise might be unable to get them.  Or, that once was the argument.  So win-win, right?  Well, I think it's a bit more complicated than that.  The reality today is that there are so many MVNOs out there on each major carrier, that the carriers are being forced by the market to enable MVNO's to compete, and what might have started out as a means to reach more subscribers could be more disruptive than the carrier's originally anticipated.  Although at the end of the day, the carriers are the carriers... they own the infrastructure and that counts for something.

Where's the market going?

 MVNOs seem to be here to stay, and while there are scores of them, Straight Talk appears to be the leader right now, reselling AT&T and T-Mobile in a one-size-fits-all $45 of month plan that includes unlimited voice, text, and data (officially throttled after 2gb).  That fact, combined with what Google is doing via their carrier unlocked Nexus branded phones, and the carrier market is under a bit of pressure in the US.  For instance, With a Nexus 4 you get the fastest, most up-to-date Android-based phone on the market, with a LG-manufactured "zerogap" LCD Display.  Put another way, the phone doesn't suck, and and is a viable competitor with the iPhone 5, and costs $299 with no contract.   In terms of network performance, on AT&T the phone can do HSPA+ in markets where it exists (HSPA+ is a 4G-ish service, based on 3G and is faster than traditional 3G, but slower than 4G LTE).

The market:

  • As of 1/2013, AT&T is paying an annual dividend of over 5%, and the performance of their stock suggests that the future is bright.  Indeed, if BT is the canary in the coal mine, then the prospects for AT&T remain strong if they're able to jettison legacy costs
  • The percentage of the US population that has cell phones is 103%.
  • From 2006 - 2011, AT&T invested more than $115 billion in operations and spectrum.
  • Mobile traffic grew at more than 20,000 percent in 2011
  • AT&T Added 7.7 million subscribers in 2011

The Plan:

I'm currently paying $2k per year ($167 per month) for two AT&T mobile lines with a mix of voice/text/data services.  Straight Talk offer unlimited talk/text/data for $45 per month per line, or $1,080 per year. To get two Nexus phones, I'm going to pay a $200 premium relative to a comparable carrier-subsidized Samsung Galaxy S3.  So after 2.6 months, I'll recover the premium that I paid for the phones.  And moving forward, I'm saving $924 per year for more minutes, more texts, and unlimited data on both lines.

Stay tuned to this series, as I review the switch, number port, etc.  Ready for part 2?

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1 comment:

Cynthia said...

Hmmm interesting! I may look into going prepay after my contract runs out.