Until recently, consumers who couldn’t afford, didn’t want or didn’t need a pricey cellphone plan had the option of paying small amounts for small increments of service. Typically, they could pay for small buckets of calling minutes that could be used over a period of say 90 days or even a year.
But in the smartphone era, those plans are going away.
Earlier this year, for example, Sprint canceled its Sprint As You Go service, its own version of the pay-as-you-go plan. While you can still find some pay-as-you-go plans at other carriers, those companies generally don’t promote them, and the plans usually aren’t available for smartphones.
“Those options are diminishing,” said Bill Menezes, an analyst who covers the mobile industry for Gartner, a tech research company.
Pay-as-you go was one of the first versions of prepaid wireless service. With such plans, consumers pay for service in advance of using it and typically have to either provide their own cellphone or buy one outright from the carrier. Instead of having to pay a monthly fee, consumers on pay-as-you-go plans only had to replenish their accounts when they ran out of voice minutes.
The plans were marketed to consumers who couldn’t afford to sign up for monthly service or didn’t have good credit. They were also popular with seniors and consumers on fixed budgets, and those who rarely used their phones.
“Carriers don’t want these people, it’s clear,” said Michael Gikas, who covers the cellphone industry as the senior electronics editor at Consumer Reports. “They’re not making any money on them.”
In place of pay-as-you-go-plans, carriers have been funneling customers, particularly those with smartphones, into prepaid services that look a lot like subscription plans.
Consumers pay a monthly fee and get a set amount of voice minutes, text messages and data usage. Whatever they don’t use expires at the end of the month. The only thing that makes them similar to the older prepaid plans is that consumers can cancel their service at any time and they typically have to provide or pay up-front for their phones.
The new prepaid plans are typically less costly than subscription plans, mostly because they don’t include the cost of subsidizing phones. And on a per-minute or per-megabyte basis, they’re generally a better deal than the old pay-as-you-go plans.
But the monthly service cost, which generally starts at around $40, could be a barrier to the lower-income consumers who formerly used pay-as-you-go services. And they aren’t a good value for folks who rarely use their phones or for people visiting the country who might need phone service only for a week or two.
They are, however, a good deal for carriers because they get recurring monthly fees and less turnover of customers, note analysts.
To be sure, consumers who haven’t made the jump to smartphones can still find pay-as-you-go plans. Among the major carriers, T-Mobile still offers such deals. So too does TracFone, a low-cost carrier owned by global mobile giant América Móvil.
Unlike T-Mobile, TracFone offers similar deals for smartphone owners too. In addition to buckets of minutes and messages, smartphone users can buy buckets of bandwidth as well. For about $20, consumers can get 30 minutes of calling and 300 megabytes of data. While the voice minutes expire at the end of a month, the bandwidth won’t expire and can be used as long at the phone is active.
Consumers looking for low-cost smartphone service without recurring monthly fees have another option: T-Mobile offers two plans that allow users to pay for service by the day. The cheaper of the two costs $2 a day for unlimited calling, texting and bandwidth usage, but only includes slower 2G data access. For $3 a day, consumers get access to 4G data speeds for their first 200 megabytes of bandwidth.
In both cases, consumers only get charged when they actually use their phone. But users can be charged for a day of service even if they receive a single text message. And with both T-Mobile plans, whatever days consumers have purchased will expire 90 days after activation, unless they buy more.
One other possibility is Ting, which charges users only for the minutes, messages or bandwidth they use each month, plus a small service fee. Consumers who didn’t use their phone at all would pay about $6 a month, not including taxes. A consumer who used 500 voice minutes, sent 1,000 messages and used about 500 megabytes of data would pay about $32 plus taxes that month.
For consumers of limited means, those aren’t a lot of options. It’s too bad that as we move into the smartphone era, many of those consumers risk being left behind.