Tech Talk: The Lowdown on Cell Phones
by Gene Retske

There are three elements to cellular service: the service plan for minutes, the handset, and special features. If you want a specific handset, like an iPhone, your choice of carriers is limited. If you want a specific carrier, you'll pick a handset that works with that service.

The most common plan is a contractual arrangement for monthly service for a fixed period of time, usually two years. In exchange for committing to service with one carrier for the length of the contract, the carrier pays a part, or all, of the cost of the handset. You usually can get a handset for free, with the commitment.

This makes business sense for the carrier. The acquisition cost of a new customer is about $200, so if the carrier subsidizes the cost of the equipment, and gets a long-term commitment, it has that customer for the contract period. But almost anything you do that changes your service will extend the contract. Upgrade your handset, or choose a different service plan, and you'll extend the contract period.

Not long ago, if you canceled a contract before it expired, you had to pay the entire balance of the monthly payments. Today, a cancellation fee usually runs $200 (there's that number again!) of which you're required to pay a prorated portion for canceling early. For example, cancel after 12 months of a 24-month contract and you owe $100. On the flip side, when consumers switch cellular companies, they can take their telephone number with them, providing the previous carrier is not owed any money. This is called North American Number Portability, or NANP, and allows consumers even to move their landline number to a cellular phone.

When selecting a plan, simplest is usually best. Try to match your existing usage patterns as much as possible. If you have cellular service now, just look at your bill summary, which should show how many calls you make and receive, how many minutes you use and when, and help you decide which plan is for you.

An alternative to a contractual plan is a prepaid, or pay-as-you-go plan, also known as "contractless," since there is no contract involved. You can terminate at any time without penalty. You will probably not get a handset subsidy, but many prepaid companies offer highly discounted handsets. Again, as with the contractual services, make sure to match the plan to your actual usage to get the best deal.

With prepaid, you buy time to top-up the balance. You need to make sure that you understand the terms, especially the expiration policies. The minutes you prepay will expire, if not used, at some point in time—from 30 days to a year.

The third option is a hybrid between contractual and prepaid. Like prepaid, it has no contract, but like contractual, it offers a simple monthly payment with a credit card or bank account withdrawal. The advantages are not having to constantly top-up the balance, and getting a basket of minutes to use every month. The terms vary, so, as usual, read them carefully to understand what you are, and are not, getting.

Take into consideration two things when looking at cellular service. The first is broadband Internet access. Unless your local phone company has "naked DSL," you'll need a local landline phone number to get DSL. (Normally, DSL is added to a local telephone number and travels over the same wires. Naked DSL works the same way, but there is no local telephone number.) Cable is an alternative, and many companies are now offering the naked DSL service. If you decide on the cell phone-only alternative, you'll have to make arrangements if you need broadband DSL at home.

The second consideration is if you use your phone for recording interviews. While it is possible to record interviews made via cellphones, it is often not convenient or reliable because there is no telephone line to which you can connect a coupling device. For this reason, if you have extensive interviewing needs, a landline telephone is probably going to be your best choice.

Finally, how important are other features, such as Internet Web browsing, e-mail access, text messaging and GPS (for driving directions and navigation)? Each has specific equipment requirements, and, usually, service fees. Internet access can be expensive, ranging from $15 per month, on the low end for limited access, to nearly $100 for unlimited access on the high end, depending on the carrier. Text messaging for prepaid often has a per-message rate, which can make texting expensive for gabby people. GPS service fees run about $10-15 a month.

Increased competition in the wireless industry has led to a wide array of choices in handsets and service plans. Spend time carefully considering what your real needs are, and shopping for the best deal will be a breeze.

---

Gene Retske is the author of two best selling books on telecommunications, and has written for magazines from Newsweek to a variety of trade publications. He is also the editor in chief of The Prepaid Press.