Yes

by Jack Roviere

Created on: July 23, 2008

Long service contracts?! What a pain! Why would any free person who enjoys liberty and justice and all those good things ever want a long service contract?

I've thought about this insufferable tragedy before and I've wondered how it ever could have arisen. I was curious, so I investigated. I wanted to look at the situation from an alternative perspective. So my question now was: what would a world without long service contracts be like? After investigation (just to give a sneak peak of what is to come), I came to the conclusion that our long service contracts are actually reasonable and logical - to a point.

Back to the investigation, I found that many people and nations already prefer not to use long service contracts, so there already is a world where long service contracts, cancellation fees, and their associated evils are looked down upon at the least and are banned at the harshest. Many carriers in continental Europe or in Asia are much more flexible with their plan structures, so what do people living there do instead?

It seemed that many people were very fond of pay-as-you-go or prepaid mobile plans. They could get a certain amount of minutes to their SIM card, pop it in their phones and be on their way with however many minutes they could choose to use. This option seemed particularly attractive to me...especially for people who travel, it's very easy to get a global SIM that will work cheaply in many areas (and because SIM is standardized under GSM technology, it is generally guaranteed to work in any phone - as a plus, Europe and Asia tend to also use the same bands for cell phone communication, so signal strength is not a problem.) People can easily track their voice minute use and curb excessive use (when they are out of minutes...their carrier does not accidentally allow them to overuse and draw overuse charges), and people can flexibly change the features they want on the fly.

So...why not use this in America? I found that...actually...mo st carriers in America also do provide pay-as-you-go plans. However, these plans are often proprietary (such as AT&T's GoPhone system, Sprint/Nextel's Boost Mobile, etc.,) and are limited to particular low level phones. These phones and their SIMs are then limited so that they cannot be easily used with other networks. However, America's cell network already works prohibitively in this fashion: first of all, only AT&T and T-Mobile use GSM which has SIM, but even then, AT&T and T-Mobile tend to use different communication frequencies. AT&T has been known to block access to T-Mobile's frequency from its GoPhone service. As for Sprint and Verizon, they use a competing standard called CDMA which doesn't necessarily have a counterpart to SIM cards (although there is a new movement to create a physical alternative to SIM cards for these). Regardless, Verizon "locks" its phones down well enough to Verizon that a Verizon phone cannot generally be retrofitted to work with Sprint with functionality.

So, I thought, if this is the case in America...then what is Europe's situation? Or how about Asia? Asian and European phones tend not to be "locked" to carriers...meaning that they can be freely used for any plan as long as they have support for the right frequencies. So, consumers take more ownership of their phones.

This unlocking deal seemed interesting, so I looked more into it. Americans can buy unlocked phones and if they support the American technologies and frequencies, then these phones can be used with American plans.

However, and this is the big reason why long service plans are NOT such a bad deal, the cost of phones increase by several hundred dollars when you buy unlocked.

What's the reason for the price increase? This is actually a situation where the prices actually represent *real* prices. As most Americans have definitely experienced with their carriers, many times you can get a phone for a severely reduced price...*IF* you get a 2 year (or more) contract.

This is the reason why cell phone providers should be allowed to hold customers to long service contracts: it DIRECTLY allows the provider to SUBSIDIZE the upfront price of the phone.

The question is then personal: for an iPhone, would you rather pay $600 upfront for it and have a cheaper plan or would you rather pay $200 and pay $70 per month for this smartphone? For most Americans, the answer is they would rather pay the latter. For most Europeans and Asians, they'd rather pay the former. That is all.

How can this be so simple!? Some will raise that contracts actually lead to *worse* deals. After all, the iPhone 3g, despite costing significantly less than the iPhone 2g upfront, ends up costing MORE over the two-year period. However, the convenience of paying less upfront is still a most alluring draw...and seeing as cell carriers make little (if any) money pushing the actual device (because they must buy from the manufacturers and pay them for the privilege, instead), it's much worth it to offer the phone for cheaper and then increase their coffers with the contract.

The great thing about this system is that...if you don't want a long service, you generally can buy a phone without contract. You will not pass go and you will not collect the subsidized price, but you generally can do it. However, carrier plan benefits just might make a long service contract it more worth it for *anyone* in the long run.

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