Why I Won’t Sign Another Cell Phone Contract

Americans have a love-hate relationship with cell phone contracts. We love that signing a two-year contract takes $200 to $300 off the price of our new smartphone, but we hate that we are locked in to a carrier for two years and cannot get any more cheap phones. Well, I’m ending this bad relationship today – well as soon as my current contract expires.

Here’s why I’m paying full price for smartphones from now on.

speed

Innovation happens fast

Innovation is Fast

The biggest reason I plan to avoid cell phone contracts like a signal avoids an AT&T iPhone is that innovation happens too fast to lock in for 2 years. In the past 3 months since I signed my last contract we’ve seen a number of amazing phones come out on a number of carriers. iPhone owners may not grasp the fast pace of innovation as much as Android fans, as their upgrades come once a year, but a new purchase-worthy phone comes out on the Android platform every other week.

We saw innovation begin to pick up just two years ago, but the differences between devices was less pronounced. But now that manufacturers take more risks and are willing to go back to the drawing board (Motorola Droid Bionic) we see devices that deliver new features just a few weeks and months after the current hot phone comes out.

Lower Retail Prices

bundle of cash

All about the money.

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When Verizon decided to end 1 year contracts the company also cut the full retail pricing of Android smartphones. The new off-contract pricing for smartphones on Verizon is $100 to $200 cheaper than what you would have had to pay a year ago, increasing the savings and decreasing the value of signing a contract.

Aside from the iPhone, which is still quite pricey off-contract, smartphone prices have dropped to between $459 and $569 at Verizon. This seems expensive. But when you consider that you only get a ~$200 discount on most phones and add a $350 early termination fee to your life, the discount seems quite small. If the purpose of an ETF is to recoup the cost of subsidizing the cost of the phone, why hasn’t it kept up with the smaller discounts? Discounts that are even smaller now that Verizon has ended their “new every two” discount.

Verizon isn’t alone, AT&T, T-Mobile and Sprint offer no commitment pricing in the $400 to $500 price range on new smartphones. Most of these carriers do a better job of offering discounts closer to the ETF price, but not deep enough to take away from the rest of the reasons for avoiding cell phone contracts.

freedom sign

Signing a contract restricts freedom

Freedom

The final reason I am avoiding cell phone contracts is to have more freedom. Now that innovation is happening so fast, if you want the latest device you may need to switch carriers to get it.

As competing networks grow and improve over the next 12 to 18 months we will see less carrier lock due to coverage, but carriers still have us trained to sign contracts, locking us in.

If I avoid signing a contract I can jump from carrier to carrier much easier, allowing me to take advantage of the lower full retail pricing and faster innovation; grabbing the next Google Nexus device, Droid Bionic or iPhone 5 without worrying about breaking a current contract.

Skipping out on contracts isn’t for everyone. There are plenty of normal users who will are happy to save an extra $200 on the purchase price of their phone, and there’s nothing wrong with that. As someone who wants to be able to jump from carrier to carrier and phone to phone, I’m avoiding contracts from this point on.

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Photos: Speedometer – michaelstyne, Money – AMagill, Freedom – Chang’r

Comments

  1. Charles Everett says

    good read and all valid points. Too bad buying a phone off contract doesn’t get you a lower rate plan. T-mobile used to offer when you got a phone at full price the rate plan was about $10 cheaper. Now most pre-paid gsm plans suck the exception of simple mobile (runs off of t-mobile) and all the cheaper pre-paid options on cdma are locked down to only certain phones. 

    The way I see it if I spend over $500 for a phone I would keep it for about a year too two years anyway, maybe 3. Over $500 is basic laptop pricing and that’s about cycle I go through computers. So a contract in my situation while I know it is evil and I hate it makes since for me. 

    • Alan Robertson says

      ” Too bad buying a phone off contract doesn’t get you a lower rate plan.” Wow, really? That’s just appalling! Here in the UK if you don’t take a phone from them you can get a SIM-only plan, which is significantly cheaper than one with a free/heavily subsidised phone. Normally a discount of £15/month or so.

  2. Jlscott says

    I think one of the main things everyone should really look at carefully is how and when you actually use your cell phone.  Way too many people sign into a contract buying much more then they need or will ever use.  I have an unlocked Nokia N8 on a pay as you go T-Moble plan which suits my needs perfectly and I can jump to any carrier at any time I want for whatever reason I want.  Since my actual cell phone usage is much lower then most my monthly cost is very low.

    JS

  3. Anonymous says

    Sounds like Verizon is robbing people to me! T-mobile and Sprint charge $200 ETF

    I paid $199 for my new EVO3D and if I cancelled and paired the ETF…it would be still cheaper than if i had bought it without a contract. So in my case a contract is the better deal

  4. Chrisphickie says

    What I despise most is the exponential increase in size of these cell phone contracts which rival even the EULA for an ipad now.,

  5. Roger J says

    Good for you, Josh.  Here in the UK I was on a monthly contract with Vodafone for several years and always had the feeling that I was being overcharged for my usage, and this was before the smartphones.

    Then in the early 2000s I started doing 95% of my work abroad, so got my first sim-free device and went PAYG, still with Vodafone.

    I probably spend less than $20 a month on calls and SMS when in the UK,, and now that I have my first ‘proper’ smartphone, Galaxy S2 (after Windows Mobile devices) and moved from Vodafone to Three, I can buy data to suit me when I want it, plus I now have Skype on my device.  Every time I top up I get 150 Mb data and if that runs out I can buy 120 Mb at 0.80c per day, 500 Mb for $8 or unlimited for £10 (including more minutes) – all these add-ons are for 30 days use-it-or-lose-it.  And I can tether my smartphone to my notebook.

    Light users are crazy not to go for PAYG.

  6. TARRAT says

    I agree partially with your logic. The pace of innovation and change has made it difficult for me to justify a two year contract that includes a phone that will be obsolete shortly after I purchase it. The weakness in your argument is that in the US at least there are two type of phones CDMA and GSM. If I buy a GSM phone I can only go to two vendors, AT&T and T-mobile – but wait, they’re becoming the same company! So I can get a CDMA phone – but wait, the phones are all locked to their carrier! So if I buy a phone from a carrier at full price I probably can’t use it on any other carrier!

    My contract with T-mobile just ran out and at least for the near term I have chosen to go with a Samsung Prevail from Boost Mobile (I also considered Virgin Mobile). It may not be the latest and greatest phone, but at least I can easily dump it at any time if another carrier comes out with a plan that will cost me less or if the technology advances to the point where I feel it’s worth changing. 

  7. Mommy Gene 666 says

    For me, I just want a cell phone to be able to make & receive calls, text messages, and picture messages.  Saying that, all those carriers can take all their contract crap & shove them where the sun don’t shine.  I have gone pre-paid & haven’t been involved in that contract crap for almost 2 years and I am never looking back.

  8. David says

    I follow your logic somewhat.  In your article you mentioned the $350.00
    ETF but did not mention that it is reduced by $10.00 each month at VZW.  If a person wants to buy a new phone and
    change carriers every month or two they have more money than most.  Each time you do change carriers you have to
    pay an activation fee to start a new account. 
    AT&T charges $36.00, Sprint $36.00 and VZW is $35.00.  It is rare that a person cannot purchase on
    a 2-year contract, pay the prorated ETF and not still come out saving money. 

    Just my thoughts,

  9. Derrick says

    I have 9 months left on my contract. I will not sign another after this point. Verizon charged an ETF when I switched to sprint and refused monthly payments. I owed nearly $1000. Traded my phones in and made large monthly payments. within 90 days after getting charged the ETF fee my credit score dropped 100 points and was put to collections. All of this is cleaned up and paid now. The fact that they jumped into collections when I made over $100 payments each month made me realize a valuable lesson. This spring I am buying 2 prepaid smartphones with T-moble. Now that’s SMART!!

  10. Bill says

    This whole article is stupid. You don’t need to get a new phone every couple of months. Innovation is not happening that fast. Nothing has been innovated on a cell phone for years. People need to understand what innovate really means. Any person that buys a new phone every couple of months because they say their phone is obsolete because a new phone came out with a display that’s a tiny bit better should be punched in the face. Keep dumping your money into cellular phones just so you can sit at your coffee house and go on facebook like an ass. I guess you are just like the guys that are sold by beer commercials with girls in them. The newest cellphone isn’t going to get you more friends or make you cooler. It is just going to make you look like more of a douche that spends his money on whatever a commercial says he needs.

  11. Joseph Ward says

    I was tired of spending so much money on my phone bill so I did some research and found an amazing solution. My family saves almost $200 per month now that we are using Ting. And if you go to this link you can get $25 dollars off your service.
    uvu.ting.com

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