Everybody loves their smartphone. And honestly, what’s not to love? It’s a tiny computer that brings to you all the tools and conveniences of the Internet into your pocket. Inversely, everyone hates their cellular carrier because they feel ripped off. But why? Because people love convenience and stink at math.
One of the largest stumbling blocks I’ve had over the years trying to help people save on their cell phone bills has been the issue of people’s smartphones and their data usage. I’ve loosely touched on this subject before, but never really addressed it head-on. Let’s take the time to talk about data usage, smartphones, contracts and cellular carriers directly and play a game of connect-the-dots as we work backward through the issues starting with why people hate their cell phone providers.
The End of Contracts
There’s a reason why Americans love to hate their cellular providers and it comes down to one word: money. People are hemorrhaging money on their cell phone bill and they don’t like it, the contracts, and the lousy service that comes with being indebted to the carrier. As of last year, the CTIA reported that the average cost per active phone in this country runs $47.16 a month and has averaged around that point since 2000, despite a trend towards users using fewer minutes as the prevalence of smartphones have climbed. That’s also not an average user’s cell phone bill, that’s the average per handset, and it factors all users on the network from the cheap prepaid users to the postpaid. Keep in mind that most people are on some form of family plan to “save money” after all. The average cell phone bill was already well in excess of $70 a month (up 31% from 2009) just last year (a decent analysis of this information can be found over at Time Business & Money as well as the WSG), and it’s clear that people are starting to hit their limits since we’ve hit market saturation and people have been going towards more prepaid options. This, of course, presents the big four carriers a need to continue to profitably grow and keep customers after hitting this wall. How? By “listening” to their customer’s complaints.
The truth is, contracts and phone subsidies are their bread and butter. It’s where the most money can be had. You sell your customer an overpriced smartphone teased out with a small introductory price, you lock them into either staying with you or pay a huge wad of money before you can switch to the competition, and then you demand that they have to use a more expensive data access plan to use the phone in the first place. It’s a pretty sweet racket, and of course the customers went along with it because they’re already locked in, they’re paying huge wads of money and they might as well try to get their “money’s worth” out of the deal.
Lo and behold, they find these wonderful conveniences that takes the edge off of that horrendous bill. Now they can have their own custom music station or watch TV while out of the house. Now they can have maps of their drive home from work that tells them about traffic congestion. Now they can look for restaurants and use Facebook and Twitter and never be alone despite being surrounded by numerous strangers that are only a “hello” away from potentially becoming a new friend. Now they don’t have to fear being left with nothing but their thoughts or being bored because there’s always a game that rewards them with some meaningless achievement every 90 seconds for playing. As with all things though, the customer’s wallet was getting hurt so badly they were starting to get wise… and like good little consumers who have now incorporated and grown dependent upon this new technology, they blamed the carrier and the subsidized contract for their woes.
So what does the US cellular market do in response? Abolish contracts, of course! Enter T-Mobile’s Jump, AT&T’s Next, Verizon’s Edge and Sprint’s One Up programs. In exchange for a small amount of money down, you commit to pay $10-20 a month on your shiny new expensive smartphone until it’s either paid off, or you trade it in for another phone and keep paying. In exchange for this, the carrier has revealed ZOMG NEW LOWER PACKAGE PRICE POINTS! about equivalent to the average monthly cost for these new programs. “Hooray!” I hear the masses cry, “No more contracts! Cheaper phone plans because subsidies have come to an end!” Indeed! Now people can either buy their phones outright up front, stay with their paid off older phone, or pay a little extra and stay on the upgrade bandwagon like most people already have been doing, and those that do know that if they want to leave they have to pay off the rest of the phone when they port their number out. What a wonderful and generous setup that fixes all the woes of the modern American cellular market.
But wait… it’s been a while since service with the big four MNOs required a contract in the first place to get service. Heck, T-Mobile had already offered monthly rate discounts for un-subsidized customers for years. Nothing was stopping you from buying a new handset outright without contract. The subsidized handset situation in the past gave you a carrier locked phone and a typical two year contract for a little bit of money down, and if you wanted to switch carriers or upgrade phones, you had to buy out the remainder of the contract or trade in/up with your current handset… this sounds familiar. Oh, right! Guess what American consumer: nothing changed but the words. It’s the same danged pig, they just swapped wigs and the color of lipstick they were painting it up with.
To add insult to injury? Conveniently, the baseline package prices are higher now because of modestly larger mandatory data packages or the introduction of “unlimited” calling and texting they’re so generously blessing you with, or inversely trimming what’s provided at the same price points. Meanwhile, the cheapest calling plans quietly disappear but nobody notices because they’re claiming to simplify their plan options to pass the savings onto you by giving you more whether you need it or not (and trust me, they’re counting on you not actually needing more). It’s a distraction and numbers game to re-jigger these new and improved packages while still raising rates without you noticing. Such a deal!
On the bright side, at least they’re being more honest about the pricing and contractual obligations they’re saddling you with. With marketing and service practices like these, is it any wonder there’s so much animosity towards the big four carriers?
People Stink at Math
And yet despite all this animosity, the cellular providers get away with this stuff. How? Because people are terrible with math when they shop. That’s just the way humans are wired, and they game us because of it the instant we step into a store or start talking with a sales rep. By the time we realize we’ve been had, it’s too late. The 15 day return window on that shiny new smartphone has passed, and you’re in for a two year ride. Then they have you again with more bad math, because the payoff looks so expensive that you think it’ll be cheaper to ride the contract out. Don’t bet your life on it, do the math.
This is why it’s so important for people to sit down with their bills and not let themselves needlessly fall into the “unlimited” trap. Know what you actually need in mobile phone service every month, and shop with those numbers in mind.
But it doesn’t stop there, oh no! Again, the carriers take advantage of you because you stink at math and they’re preying upon your weakness for convenience with your data habit. Let’s go back to the CTIA for a nice little infographic regarding cellphone data storage. If you don’t want to click through, let me quote it for you. As of July 10, 2013, “Today’s average phones can carry 4,000 songs, 2,000 photos, or 20 movies.” On one hand, this statistical analysis is pretty worthless because the real storage capacity isn’t cited. However, it can likely be safely inferred that we’re talking about an average storage space of around 16GB with those numbers if you figure roughly 4MB per MP3 file. Given the average storage capacity of smartphones made these past few years, it’s probably a fairly safe bet, too.
Now, let’s stop and think about this for a moment, and then tuck this little nugget of info away for later: the average cellphone has 16GB of data storage. Remember this.
Springing the Data Trap
You remember all those little conveniences that take the edge off of your cell phone bill? The ability to do custom radio stations, streaming video, combine a GPS navigation system with your phone, that instant cure for boredom. You get conditioned to believe that you need data. Not just any data, a lot of data. Like a good 2GB worth at least or else you might get socked with dreaded expensive overages. But it doesn’t seem like a lot of data, after all, the device is small, right? You can buy an 8GB SDHC card for under $10 after all. It isn’t going to possibly use as much data as that computer in your office, right? The home internet connection has a 150GB data cap after all, and that is a lot of data and you never exceed that, and people complain about it being a small number… so it’s just a little data, right?
Let’s rip this down to the brass tacks, shall we? Between both MNOs and MVNOs, if you crunch all the numbers and look at price tiers, the average going rate for data runs roughly $10/GB with very little deviation. There’s also a general pricing structure that pretty well ensures that you’re going to have to spend at least $40 for wireless service before you even get into the gigabyte range of high speed mobile data with very little deviation. (I could document all this, but just trust me on this point for now – it’s a good rule of thumb and the napkin math is reasonable.) As for these points of deviation, they typically come at the price of nearly no minutes of service or incredibly draconian terms of service from providers that oversell what they’re promising while using the often legally undefined marketing weasel word of “unlimited”. More data can be had for slightly lower than this average rate from the two smallest networks (Sprint and T-Mobile), but high speed data maps are incredibly tiny. This is one of the reasons why I say mobile data is so expensive.
Now that we’ve got data prices out of the way, let’s talk data usage. Remember how I’ve argued on saving money on SMS messaging is through data usage by crunching the numbers? Let’s quote the relevant bit (with a slight edit toward current data prices):
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 6.6¢ a MB data rate, or, or… you get the idea) or already paid for 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.
Why bring this up? Because we need perspective on what text-based communications really uses in the way of data. E-mailing, web browsing with the images turned off, the SMS text replacements… they don’t really use much of any data at all. After all, nearly 7,500 SMS text messages can be sent in a single megabyte of data, and there’s 1024MB to 1GB. For a little extra perspective, the entirety of Herman Melville’s classic novel Moby Dick is only a 1.2MB text file, and that’s uncompressed! Compressed file formats get that tome down to around 500kB! Printed out in dead-tree format, my physical hardcover of this book clocks in at 593 densely printed pages. Further, the entirety of the King James Bible is only 4.2MB uncompressed. There’s a saying that a picture is worth a thousand words, but using the CTIA’s math where they set the average smartphone photo size at 8MB and working off of the statistics of the KJV, one photo stored is actually worth closer to 1.5 million words. I know it’s easy to get jaded about the cheapness of data in an era of terabyte data storage, but are you starting to appreciate the true value and power of just one megabyte of data yet?
Clearly, the real data monsters are images, audio, and video. Remember this point as well moving forward.
Knowing What You Need
I keep talking about the “unlimited” trap and why it’s important to know what you actually need in the way of minutes, texts and data with your fancy mobile communicator. Call minutes and text numbers are pretty easy to quantify for most people on what they’re averaging with usage when they look at their bills, but data’s a whole other beast because everything gets lumped together. However, with this newfound perspective on the true power of one megabyte when it comes to written communications needs, you can begin to appreciate how little one needs in the way of data to actually communicate.
I’ve lost track of the number of times I’ve seen people who have stepped up to “unlimited” talk and text plans just to be able to get a significant quantity of data because they believe they genuinely need 1-2GB of mobile data a month or more, yet their mobile calling and texting needs could be easily addressed for less than $15 of P’tel Real PayGo service or Spot Mobile’s $13 Monthly Savings plan just for a couple examples. This happens with people on both postpaid plans and even prepaid plans with MVNOs. They use so much data, they’re convinced that they must pay $40 or more a month to ensure they’re able to continue to use their cellphone the same way they’ve been conditioned to expect it to work. I’ve even seen some people claim to be paying over $80 a month just to ensure they have enough data to satiate their 2.5GB habit. I even know a guy who claims that it’s impossible for him to reduce his phone bill because he needs several GB of data a month to watch Netflix on his Verizon iPhone, frequently at home where he’s also got an internet connection and cable TV. He’s in debt, his family’s cell phone bill runs over $120 a month last I heard, and has been in and out debt consolidation programs and paying money for Dave Ramsey’s financial advice for years.
Let’s talk hypothetically for a minute and say some feller named George genuinely needs and averages 1000 mobile minutes a month with 800 texts and needs to stick with an AT&T network provider for reliability reasons. George also is convinced that he needs 1.6GB of data a month for his 16GB iPhone 4. Currently, he’s paying $85 a month to AT&T directly on an old grandfathered plan that gave him “unlimited” data. At that usage level with the calling and texting he actually needs, it makes sense to go with an “unlimited” talk and text plan from say Airvoice as their $10 monthly plan or any other MVNO PAYGO plans available on the AT&T network would stick him firmly into the $25+ a month camp anyway, so it makes sense to spend a little extra and get the $30 plan that includes 100MB of data to cover the calling needs. However, George is convinced that he needs that 1.6GB of data a month and that 100MB is wholly insufficient, and refuses to even try and reduce his usage below 1GB because he feels it’s beneath him to try and be “stingy” with his data usage and refuses to detail what that data usage is actually for. At this point, he’s now looking at having to spend at least $60 a month which is a modest savings, but not one readily justifiable to make for the sacrifices encountered with an MVNO switch from the current plan George already has.
What are these people using so much data on? Good question! I think the answer can be reasonably boiled down thusly: entertainment and poor planning.
“I get the whole ‘entertainment’ bit, Daley,” I can hear you say, “but poor planning?” Yes, poor planning. I’m not going to bag on entertainment here, as I too am guilty of indulging in vapid, imagination killing, brain-sucking habits enabled by technology on occasion myself. Can’t toss that stone too far. What I am going to bag on is poor planning, because it can be extended beyond even entertainment. If you recall correctly, we’ve already established that the real source of significant data usage falls to multimedia content: some mix of images, audio and video. Exactly how much of this multimedia content could truly be considered time sensitive to your needs with its access? Meditate on that question for a moment.
The True Cost
Now, you remember that statistic about average phone storage I told you to remember, the one that basically stated that the average mobile phone has 16GB worth of data storage available and the same size as George’s iPhone? Our friend in the example above is effectively paying a $55/month premium to maintain access to 1.5GB worth of on demand mobile data a month for a phone that (even after subtracting system overhead) has somewhere in the neighborhood of eight times that amount in storage capacity available! Effectively, he’s spending $660 a year on 19.2GB of ones and zeroes! From a remote storage perspective, that’s $34 a gigabyte! What is this, 1998?
What could you possibly call this other than poor planning?
Of course, George finally reveals some of his habits: he listens to podcasts regularly while driving and uses Google Maps to help him navigate because his job has him on the road frequently. Now, let’s help him plan ahead and use the data storage on his phone to his advantage! By simply downloading his podcast messages at home and replacing Google Maps for iOS with the offline GPS mapping utility from Sygic ($40 plus an optional $16/year live traffic update subscription), his data habit has dropped by more than half. But for the sake of argument, we’ll still indulge his data habit fears and give him 1GB to play with instead of pushing him down to the 100MB package since he likes his live traffic updates and he’s on the road a lot, so now George can comfortably operate on Airvoice’s $40 plan. Even factoring in the cost of the Sygic maps and service, he’s cut his phone bill in half by just planning ahead and loading as much of the data he uses up in advance. His habits haven’t even changed as he still listens to his podcasts and gets his GPS directions with live traffic updates. The only thing that changed is his approach.
This raises an interesting point. One of the most common excuses I hear for massive data needs is Pandora radio or something similar that’ll peg someone into the 1.5GB+ data usage tier even though their actual minute and text usage is trivial and could easily be covered with $10 a month in prepaid credit. I’ll have someone claim that it’s worth it to them and they just can’t sacrifice listening to their custom streaming music station because they get to listen to what they like and it’s free; but they kvetch about not being able to afford their expensive cell phone plan and even that 2GB/$50 plan from P’tel that will still save them $30 or $40 a month from what they were spending still stings a little. They claim they just can’t reduce their data habit because Pandora is free and it’s non-negotiable and it’s about maintaining their quality of life. Even with the reduced cost, in a situation like this? That free radio station is actually costing them $40 a month to listen to because they won’t listen to terrestrial radio, free podcasts, their own music collection, or even pay for a service like Spotify’s Premium plan or Sirius XM Radio which are both technically cheaper at this point… all for a creature comfort that didn’t even exist a decade ago and was in its infancy just five years ago. Of course, this argument can easily be spun out to any data services – personal or business related.
It’s even worse when you start looking at this sort of thing through that lens and you’re also paying for that streaming media service. Suddenly, that $8 Netflix or $4 Pandora One habit for your commute in reality turns into an absurd $50 habit. Even something as supposedly innocuous as talking to Siri starts to add up fast. It’s a hidden cost, and people miss it because they’re bad at math.
Truthfully, I’ve tried to be downright respectful to the people who make these sorts of arguments in this post defending their mobile data habits in the hopes of landing the news softly, getting them to reconsider their approach and re-evaluate how they use their phones; but the reality is, there is zero respect for these arguments from your often gentle host. Every last one of these “inconveniences” and “issues” are fargin’ FIRST WORLD PROBLEMS, and at times I often have to exercise a great deal of prayer and self-control to refrain from saying and thinking very ugly things about the people who whine about getting enough mobile data to use on these decadent luxuries. It’s incredibly selfish, and it’s clearly financially ridiculous when you re-frame it within the light of a missed opportunity cost, never mind the social and psychological costs associated with being always connected. These are miraculous, real-time, miniature wireless global communicators that most people could easily operate for under $20 a month if they just got their priorities straight and treated the device as a tool instead of an on-demend boredom alleviator and gossip machine that they also use to hide their lazy memory and inability to pre-plan. Quite literally, your lack of self-discipline and penchant for idle gossip is costing you more money in a month – every month – than it takes to provide several people clean drinking water for a year. Is spending this sort of money for these services the sort of thing you could classify as being a good steward?
White Whale Data Plan
There’s so much anger at the wireless providers for supposedly over-charging people, but the thing is… there’s nobody to blame but ourselves when we buy into what they’re selling because alternatives already clearly exist. You don’t need that $600 (or even $300) smartphone or that 2GB data plan to support it. The only thing that ultimately can keep you from taking this opportunity to stop wasting so much money is you. This is your fault, not the telecoms… no matter how messed up it may be that they have put such a price premium on mobile data, and are so ready and willing to exploit your bad math skills and love of soft living for a quick buck.
When shopping for mobile service, you should never be afraid to spend what you should to get the services you need… but you need to understand the difference between need and want, and how much that want on the data front is really going to cost you. Don’t keep up that data habit at the expense of your finances and those around you, and remember how easy it truly is to cut that data habit off at the knees by just planning ahead. Mobile data will continue to be what it is: expensive. Chasing after it torn between an insatiable lust and a burning hatred for its cost is only going to destroy you.
Huh. Sounds a bit like a book I once read.
Feature image entitled “We ignore the people who love us, in order to carry on conversations of dubious relevance” by Ed Yourdon and licensed for use under Creative Commons Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0).