Dial S for Savings

Yesterday, Mr. Money Mustache posted his long anticipated article covering his cell phone savings switch to Airvoice Wireless. It was an excellent article in that it helped inspire a great deal of savings for a lot of people. I also did something that I don’t normally do, which is read and post to the article comments section. Normally, I hang out and keep my assistance contained to the MMM forums as it’s a bit more of a one-to-one exchange of information instead of a bit of a free-for-all, but this was a special occasion.

While trying to help answer what questions I could, I noticed a few themes crop up overall in the comments. The biggest ones being an unhealthy attachment to people’s phones with the illusion of needing “unlimited” service, the misunderstanding of how prepaid service works, and a lot of Canadians wanting options. My first series of posts are going to try and fill in some of those gaps for those people needing it.

The Falsehood of Needing Unlimited Anything

First, let’s address the issue of “unlimited” service. Odds are, you don’t actually need real unlimited service… you just think you do. When was the last time you actually sat down with your current cell phone bill and actually looked at your monthly usage? One of the most frequent statements I hear from people is never in response to their voice usage, they usually regard that as relatively low; what they do frequently state is that they’re really heavy SMS text users and they really need unlimited texting. Almost invariably when I convince them to sit down with a few of their past statements, their text usage winds up averaging around the 750 messages per month mark, and frequently half or more of those messages are between them and only one other person. Boy howdy, do I have news for you! You’re voluntarily getting ripped off thinking you need unlimited texting.

Let’s change your perspective, shall we? We’ll start with the math of SMS messages, and how much of a cash cow they are even in the prepaid MVNO market. A single SMS text message is roughly 1120 bits in size (8 bits to 1 byte, 1024 bytes to 1 kilobyte, 1,048,576 bytes to 1 megabyte, 1120 bits = 140 bytes). By the math alone (if I did it right), you should be able to send at least 7,489 text messages in 1MB of data. This means, at even 2¢ an SMS message at PlatinumTel, you’re paying $149.78 for 1MB of data, and that’s one of the cheapest available per-message SMS rates in the United States! On one hand, it makes those $5 or $10 unlimited text bolt on plans look more attractive, but you know what looks even more attractive still? PlatinumTel’s 10¢/MB data rate (or Airvoice’s 33¢ a MB data rate, or, or… you get the idea) or free data off of your own home WiFi connection if your phone supports it. Granted, this tip relies on owning a smartphone to take advantage of it, but I don’t think that’s much of a stretch as nearly every text junkie I’ve met these days owns a smartphone.

Reducing SMS Message Costs

If a significant portion of your “huge amount” of text messages a month are with only a couple three other people who also have smartphones, you can probably easily convert them over to Kik instant messenger. Kik is like BBM (for those Blackberry enthusiasts out there) or a hybrid SMS/MMS/IM client for the rest of you, and has clients for iPhone, Android, Blackberry, Windows Mobile, and SymbianOS… or roughly about 99% of the smartphone OS market. Their clients are light-weight, easy to use, and incredibly lean on data usage. How lean on data usage are we talking? So long as you aren’t sending photos or sound clips, expect about 1,000 messages per MB of data. That’s right, even if you used your prepaid carrier’s data exclusively, that thousand message exchange would only cost you around 33¢ at the most through Kik (depending on your prepaid provider). No exercising discipline on usage, no depriving yourself of communicating with others, just changing how you message between a couple people saves you a wad of cash… and it’s even cheaper when you use it over WiFi. Granted, it’s not as great as that 7,500 or so messages sent via the SMS protocol, but you’re simply not going to get that level of data efficiency with anything but the SMS protocol on your cell phone.

“What about the rest of those SMS messages, though?” I hear you ask. Good question! Well, odds are, you’re now under 500 messages a month with the switch to Kik. Congratulations, that’s no longer an unsurmountable amount (not that 1,000 is really a huge number, either). Next step is to ask yourself how important and necessary those messages are, because an easy price point can now be put on those 500 messages: ten bux. That’s right, a crisp portrait issued by the Federal Reserve of the guy shot by Aaron Burr can now pay for your monthly texting habit. If you can’t justify that $10 (which is understandable, $10 is still a pretty potent chunk of cash), then you can’t justify it. Exercise some discipline and text less, or consider using Google Voice and texting them that way for the price of data! Unfortunately, Google Voice isn’t as lean on data as Kik is, averaging about 30-40 messages per MB of data, but if you’re mostly on WiFi, I doubt that’ll matter much to you. The nice thing about Google Voice is that it’s a seamless SMS replacement with a phone number you can receive calls on. I’m not crazy about the service for a variety of reasons that can wait for another day, but it’s decent at what it does and usually doesn’t drop SMS messages. Sometimes though, it’s just nice to keep things simple and not have to have a half dozen apps and accounts to message people just to save a couple bucks. Kik is one thing, but Kik and GV and multiple phone numbers and and… you get the idea. Some people won’t mind the juggling, others will. Decide what’s right for you.

Now that we’ve gone over the task of gutting your text message habit, we can dive into the traps and fallacies of the term “unlimited” in prepaid service.

The Unlimited Trap

Unlimited is a tricky word that pokes at our selfish and greedy buttons, and makes us do stupid things like getting banned from the local “all you can eat” Chinese buffet or spending more money than you need to for what you actually use, and advertisers know this. Companies also know that they can’t protect themselves from gluttons without providing the option to terminate accounts for whatever reason they like through legal terms that you have to agree to when you sign up. This is an important topic and it highlights the necessity of reading the Terms of Service (or Terms & Conditions) legal boilerplate from the MVNO you’ll be doing business with before signing up, and accept that they can change those terms without notifying you. Again, I repeat: PAY ATTENTION TO THE TERMS OF SERVICE, AND EXPECT THEM TO CHANGE WITHOUT NOTIFICATION.

Normally, this isn’t a big deal and you shoudn’t let it scare you off… but sometimes these changes can introduce wonks in your service (like the current Airvoice issues) and changes you might not have expected. It’s also how some less ethical companies promising something that sounds too good to be true like unlimited everything for $45 wind up biting you in the bum. Frequently unlimited is anything but, and often they won’t even disclose what their soft caps are that they’ll terminate your services for without notice. If your cell number is important to you and you’re a heavy user, remember this fact.

Basically, what a lot of these companies will do is promise you unlimited, and then have either these artificial or realistic unspoken caps in place. A great example would be with AT&T MVNOs. AT&T sells blocks of minutes, texts and data to the MVNOs in set chunks. A great example showing this was with Airvoice Wireless back before their $35 and up Talk & Text plans went “unlimited”, as that $35 got you 5,000 minutes and 10,000 SMS messages, which coincidentally are the sizes of those voice and text blocks AT&T sells to their MVNO partners. Now, that’s a LOT of talking… over 83½ hours, in fact! Plus, 10k text messages for $35! Heck of a lot for the money, and it’s why I laugh when people think their 750 text message a month habit is huge… but it’s not unlimited. Now, here’s where they get you. Airvoice, StraightTalk, and other AT&T MVNOs who claim “unlimited” packages aren’t actually claiming unlimited packages. You’ll find that there’s a relatively universal soft cap on voice and text numbers withing AT&T based MVNOs that offer unlimited packages of around 5,000 minutes or 10,000 messages, at which point their Terms of Service kicks in with the concept of “network abuse” and they drop you like a hot potato and disconnect your service without so much as a warning.

Now, for most of us, those numbers are insane and unreachable. If you’re truly a road warrior who wants simplicity and a dumbphone for all that talking and texting, those packages are perfect for you. Have at it! However, there’s a far more insidious form of unlimited offerings amongst the prepaid market, and that’s for unlimited data. Don’t buy this idea for a second! America Movil does this a lot with this term, and it’s why I’m not keen on recommending their services. The reality is, that “unlimited” data you’re getting has an undisclosed soft cap of 2GB a month for BYOD customers, and their Terms of Service explicitly forbid any forms of usage that involves the usage of any real data outside of surfing and e-mail.

Now, if a company is basically offering 5,000 minutes, 10,000 messages and 2GB of data for $45, and all the other AT&T MVNOs paying the exact same price for these blocks of service are charging around the $60-70 mark per month, what does this tell you?

I don’t know about you, but it tells me that a) certain MVNOs are oversubscribing their customers for the services purchased, and b) these outfits can probably make far more money off of a customer who buys a $15 SIM card for his iPhone and gets booted off a week in from his $45 a month unlimited plan (or, Heaven forbid, paid for a full year up front!) for not reading their posted ToS on data usage than the profits they could make actually supplying even the capped “unlimited” service for a year.

This is why I’ve always recommended in the forum guide and in general advice to be a light user, avoid the word “unlimited”, and pick a plan where you know exactly the number of minutes/texts/MB of data you’re paying for. Terms of Service agreements can easily twist the definition of unlimited, but they can’t trump up network resource abuse accusations to kill your account if you’re only using the minutes you pay for.

Do you really need an UNLIMITED service?

Now that you’ve taken the opportunity to better understand your usage patterns and understand how many cell phone providers (both the postpaid network owning giants and the MVNOs who ride on them) take advantage of pushing your greed button when using that word in their marketing, you can probably better answer this question for yourself. The reality is, none of us actually need these global portable communicators as civilization has existed for thousands of years without them; but they’ve really caught on the past decade and a lot of people want them while others need them due to their jobs. If you’re going to carry one, you might as well pay for what you’re actually using at a fair price instead of continuing to light your cigars with $100 bills. Once you know what you actually need and want in a provider, it can make pricing the plethora of prepaid MVNO options a bit less daunting and easier to avoid the potentially raw deals out there, which can help you save some cash in a very no-fuss manner that much sooner.

Next post, I’ll be addressing the basics of how prepaid service and MVNOs work. Shabbat Shalom, have a great weekend!