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What is the Down Side of Having a Prepaid Cell Phone?

My contract term with my current cell provider ended recently, and I am contemplating dropping the service in favor of a prepaid plan. Some of the different providers' prepaid plans appear rather enticing, but I feel as thought there must be a reason providers still offer contracted plans. Yes, I know that phones are (typically) subsidised when you sign a contract, but is that the only real difference between prepaid and contracted services? Is there any difference in call and/or data quality or reliability?

Thanks!
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käµfm³d   👽
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käµfm³d   👽
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2 Solutions
 
mmichaCommented:
I think the biggest thing contracted plans have over prepaid is the type of phones.  Verizon and AT&T offer the top notch phones at subsidized prices with contracts.

I imagine some of the prepaid stuff doesn't have the "peering" agreements and coverage could be a little flakey.

Might be worth opening up a prepaid and testing before cancelling/porting existing number to see if it works in the areas you live/travel.
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Frosty555Commented:
Contract plans give the carrier a number of advantages:

1) It guarantees a minimum amount of revenue they will get from you every month, for a guaranteed duration of time
2) Because of the early termination fees, it dissuades customers from leaving in favor of a better sounding plan

Essentially it keeps customers loyal and keeps them paying. Carriers (and any business, really), loves recurring, reliable revenue streams. To entice customers into a contract, they usually offer freebies and bonuses like subsidized phones.

Prepaid plans have only a couple advantages to customers - you pay only for what you use, and you are free to leave any time you like without penalties.

In general the downside to prepaid plans - they're expensive, and you don't get a subsidized phone out of it. Many carriers have some fine print requiring you to make a minimum $15 or so payment to your plan every month otherwise your balance "expires", the per-minute rates are usually very expensive, and any additional functionality like data, texts, voicemail, caller ID etc incurs extra charges. Most pre-paid plans are not eligible for value-added features like "free evenings and weekends", and those minutes can add up fast. Some pre-paid plans the balance depreciates every month with monthly fees and charges.

Usually the target market for pre-paid plans are low-consumption users who rarely use the phone.

Depending on your personality, some people do not like pre-paid plans because they are constantly "watching their balance" and they are painfully aware that every minute they spend on the phone costs them money. For me, this psychological aspect was the worst part of being on a pre-paid plan - constantly watching the clock.

Depending on how you use your phone, a pre-paid plan might be the correct choice for you. Or it might not. The only way to tell is to calculate what your effective monthly bill will be based on your estimated usage.
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mmichaCommented:
MVNO carriers are common now a days as well. They ride on top of carriers like AT&T/Verizon/Sprint Networks.  Like I said, I am a bit leary you don't get the "peering" you get with contracted service.  So even though you get to use Verizon's network, you will only connect to Verizon owned cell towers and not Sprint's if they peer with them in an area.

http://en.wikipedia.org/wiki/Mobile_virtual_network_operator
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Frosty555Commented:
Maybe I'm not getting it because I'm in Canada, not the USA, but what is "peering" and why is it so important? Is that the idea of sharing a single data plan between a tablet and a cell phone?
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käµfm³d 👽Author Commented:
Maybe the prepaid I'm thinking of is different than what was described above. Let's try this:  I bought my g/f a prepaid T-Mobile phone. They have three tiers of data (all come with unlimited talk and text):  $50 - 100 MB; $60 - 2 GB; $70 - 5 GB. In this case there really is no "watching the clock." When the 30 days is over, the service is disconnected, and all she has to do is "re-up" the plan. Other carriers have something comparable, I believe. Based on the costs I list above, my cost would go down, but I would lose a few features (which I don't use so much anyway). I use my phone primarily for data, but occasionally appreciate the convenience of having a phone with me. I guess my main concern is with the data connection among both options. The reps at the store always seem to tell you what you want to hear, so I am just concerned that maybe there is some sort of throttling going on with the prepaid lines. I know that carriers prefer contracts for the aforementioned provable revenue stream, so I cannot see how prepaids are in their best interest.
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käµfm³d 👽Author Commented:
@Frosty

Based on the comment above, I believe "peering" is when your carrier contracts with other carriers to carry your phone calls on the other carrier's towers when your own carrier is out of range.
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mmichaCommented:
"Peering" may be the wrong term.  Apparently it seems more of "Cell Phone Tower Sharing".  It isn't related to sharing data, but a way for carriers to expand/improve their coverage.

My thought was that prepaid are limited to certain towers only reducing coverage/quality of service.
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Frosty555Commented:
Ah I see. I think that's pretty hard to determine unless your carriers make it public knowledge. I'm certain there are business arrangements between the carriers so they can share tower space, and possibly even equipment and bandwidth. I know for us the little guys like Wind mobile get screwed since they have to provide their own, limited infrastructure, or "rent" space on competitors towers for exorbitant fees. As a result, the smaller companies generally have poorer coverage.

But ultimately this complexity is abstracted away from the customer. Each carrier has a specific advertised coverage area which varies from one carrier to another, some might be better than others, but I'm pretty sure that the type of plan you have with one particular carrier shouldn't have an impact on your coverage or quality of service.

E.g. there ought to be no difference in coverage between, say, a Rogers 3-year contract plan, and a Rogers Pay-As-You-Go monthly plan.
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käµfm³d 👽Author Commented:
Thank you for your comments!
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