The MyRatePlan.

com Guide to Buying a Cell Phone and Rate Plan

A Road Map to the Right Service at the Right Price 2nd Edition

By Allan Keiter
Founder of MyRatePlan

Copyright © 2005-2006 by, LLC All rights reserved For information about permission to reproduce content from this guide, e-mail Visit our website: Order online:

This guide contains references to companies, products, and services in the wireless industry as well as a number of cell phone images. The inclusion of these images is for example purposes only, and should not be construed as an endorsement of these offerings. The names mentioned herein may be trademarks or registered trademarks of their respective companies.

Introduction The Checklist The Purchase Transaction Finding the Best Service for Your Needs Coverage Area and Reception Selecting a Cell Phone Choosing a Rate Plan Plan Types Calling Area Anytime Minutes Plan Benefits Long Distance and Roaming Push-to-Talk International Calling Data Services Other Rate Plan Costs Contract Length Protecting your Phone Indoor Phone Reception Wireless Network Technology Accessibility Cell Phones and Children Using Your Phone Outside the U.S. Why Are Replacement Phones So Expensive? Disposing of a Surplus Phone Using a Cell Phone as Your Only Phone Wireless Number Portability Appendix: Economics of the Wireless Industry About the Author

2 3 5 6 7 9 13 14 18 19 20 22 24 24 25 29 31 32 33 34 36 36 38 40 42 43 45 46 49 was launched in October 1999, with the goal of making it easier for consumers to make unbiased comparisons of wireless phones and plans. Much like the then-evolving market for comparing airfares online, we saw the Internet as a way to simplify the even more complex purchase of a phone and plan together. By creating interactive software that lets users find solutions unique to their needs, MyRatePlan has become a destination site visited by thousands of people daily to get the facts they need to make an informed purchase decision. Since our founding, the wireless industry has consolidated into five national carriers*; cell phones have morphed from bricklike objects into lightweight color marvels; and the price for making calls has fallen to the point that more than 200 million people in the U.S. have a cell phone, with many of them using it as their primary or only telephone. Furthermore, the carriers are giving users more choice, and with the advent of number portability in late 2003, consumers have more flexibility than ever. However, added choices can mean added confusion, and we’re finding that many of the same questions we heard in the early days are still being asked today. The goal of this guide is to convey what we’ve learned over the past seven years, to help you find the best phone and the most efficient plan for your unique calling needs, while minimizing the amount you spend for wireless service each month.

*Two of these five, Sprint and Nextel, merged in 2005, but these two carriers use different technologies and branding messages, so we continue to view them as separate.


Here’s a quick list of some important things to think about as you read through this guide and your purchase of a cell phone and calling plan: A carrier’s rate plans don’t vary by where you buy; phone prices can (and do) vary widely. See page 5. Finding the best wireless service is done by optimizing three elements — coverage and reception, the cell phone, and the rate plan. See page 6. Coverage maps don’t tell the whole story. See page 7. All national carriers offer a minimum two-week trial period for you to test their service. See page 8. A more expensive phone doesn’t necessarily mean better reception. See page 8. Your choice of phones is limited both by a carrier’s network technology and wireless industry economics. See page 10. When buying a cell phone, look at the “out-the-door price,” as well as the final price (after rebates). See page 12. To save money, consider a family plan for two to five members of a household. See page 14. If you are a light or emergency-only user, a prepaid option may save you money — but watch those expiration dates. See page 16. Choose a plan with slightly more airtime than you will need; extra minutes can quickly double your bill. See page 19.


Plan benefits can significantly reduce the anytime minutes you will need. See page 20. ‘Free’ long distance can, in some cases, actually be quite expensive. See page 22. Buy bundled packages if you plan to use any significant amount of data (messaging, downloading, etc.) with your phone. See page 25. Taxes are unavoidable, but can usually be minimized just by staying with the right rate plan. See page 29. Unless you go prepaid, it is getting harder to avoid a two-year contract. See page 31. Cell phone insurance might be a good idea, but there are many factors to consider. See page 32. Need a phone that will also work outside the U.S? You may need to balance convenience and cost. See page 38. The deals you see advertised are only for new lines of service, not for those looking to upgrade or replace their phone. See page 40. Your old cell phone may have some value. See page 42. Lots of people are “cutting the cord” and going totally wireless. That doesn’t mean it is right for everyone. See page 43. If you are transferring (porting) your phone number, sign up for new service before canceling the old. See page 45. How to Use This Guide
Unless otherwise specified, the information in this guide relates to the purchase of a cell phone and plan only in the U.S. The purchase of phones and plans in other countries can vary significantly from the process in the U.S. This is an interactive guide — if you are viewing this guide on your computer screen, note that words or terms in blue are hyperlinked, either to another place in the guide, to a page on, or to another website. These links will provide more information on the subject matter, including MyRatePlan software tools to help you locate the phone and plan that best meets your needs.


The Bottom Line Phone prices vary by where you buy; a carrier’s rate plans do not. You’ll often find noticeably better phone deals online, from independent retailers, than you will by buying directly from the carrier. There are thousands of places you can sign up for new wireless service, including retail stores, mall kiosks, or online. Regardless of the location, you will either be buying directly from the carrier or from an independent retailer acting as an authorized agent on behalf of the carrier. Additionally, no matter where you make your purchase, it will consist of a package containing a rate plan and a cell phone. Clearly understanding the connection between these two elements can save you quite a bit of money, not only on the day you make the initial purchase but throughout your ongoing relationship with the carrier. Since the carriers provide the service, they are the ones who set the terms and conditions of their plans. Each carrier’s terms and conditions (e.g., the number of minutes you get each month) will be the same regardless of from whom you make your purchase. So, while it is important to choose the right calling plan to minimize your monthly bill, there is no reason to visit a lot of different places to seek out different calling plans for the same carrier. This also means that there is no advantage in buying directly from the carrier, either from one of their retail stores or from their website. In fact, buying directly from the carrier is usually a bad idea, as they often charge the highest prices for the phones. On the other hand, independent retailers set their own cell phone prices individually, and the differences can be dramatic (see box on next page). Additionally, you will usually find that online retailers, lacking the overhead of physical stores, have the best prices of all. When you choose a cell phone, you have effectively selected your carrier, as phones are generally preprogrammed to work on a specific carrier’s network. Once you select one of the carrier’s rate plans to complete your order, the retailer will ship you the phone (if you bought online), and the carrier will activate your service based on the calling plan you have chosen. Your new phone should be ready to use when it arrives at your door. Your ongoing relationship for billing, customer service, and rate plan and phone changes/upgrades will be with the carrier.


It Pays to Shop Around
On April 16, 2006, a survey of the Cingular, Verizon, and T-Mobile websites showed the very popular Motorola RAZR V3 selling for $129.99 to $149.99 with new service. That same day, the best price on the MyRatePlan site was free, a difference of almost $150! For those seeking a family plan, the difference was $300. For current comparisons, click here. While MyRatePlan is not a retailer, we do partner with a number of online organizations we have chosen for both their excellent customer service and low prices. One of the benefits of using MyRatePlan for your research is that we strive to show you a comprehensive list of cell phones and the lowest price for each phone from among our partners.

As the graphic above illustrates, when thinking about the best service for your needs, there are three interrelated things to consider. Coverage Does the phone work where and when I need it? Cell Phone Does the phone have the features I want? Is it within my budget, and am I getting the best deal for it? Rate Plan Am I spending as little as possible each month to get what I need from my service?


The Bottom Line Carrier coverage maps are only a starting point; check with friends or neighbors who use the carrier you are considering to find out their experiences. Take full advantage of the trial period offered by most carriers. Coverage is the foundation of our triangle because it is the most fundamentally important element. No matter how cool your phone looks, it is little more than a paperweight if it doesn’t work where you need it. Unfortunately, coverage is also the most difficult element to assess ahead of time, because, like fingerprints and snowflakes, each person’s calling patterns are unique. We think it pays to do a two-step analysis here. First, find out if the carrier generally has a good service reputation in the places you are likely to use your phone — for example, along certain highways on which you commute, or in an office building where you work. You can get a sense for this by asking others who have that carrier what their experience has been and by reviewing the carrier coverage maps. Don’t forget to ask others about data speed and reliability if you’ll be using your phone for more than voice calls. More difficult is figuring out if the phone is going to work in places that are unique to you. For example, if you have a home office where you’ll need clear and reliable service, the only way you can really know is to try it out.

About Those Coverage Maps
Every carrier provides maps that show off the areas where they claim to have service. Some carriers’ maps are more detailed than others, and some carriers now offer street-level detail on their websites, but even the best ones only go so far. Do not assume you’ll have service just because the map indicates that you will. All carriers have “dead spots” that are rarely shown on these maps. Wireless is an imperfect technology, and your ability to make a call at any given time is going to be affected by such varied elements as weather, topography, system demand, and even where you are in a building.


The Bottom Line Put your phone to heavy use the first week — try it anywhere and everywhere you’ll need good service. A contract is a reality if you want the best phone pricing and lowest rates. However, it is very difficult to know ahead of time if your new phone will work everywhere you need it to. The good news is that all national carriers and many regional providers now subscribe to the wireless industry’s Consumer Code. The most important provision of this code is that new customers will get at least 14 days to try out a carrier’s service, with no contract termination penalty if service is canceled. If you do cancel, you will still need to pay for any airtime or other services used during the trial period. Additionally, you must return the phone in good condition, so be sure you hang on to all the original packaging.

It is worth noting that a more expensive phone doesn’t necessarily mean better reception. Higher-priced phones are often more feature-rich, and may have slightly better microphones, yielding better voice clarity. However, all phones sold for a given carrier’s service are built to the specifications of that carrier, so they should all have roughly the same signal strength in a given location. If you are having ongoing reception issues, you are more likely to resolve those by moving to a carrier with better service where you need it than you are by switching phones with the same carrier.


The Bottom Line Finding the cell phone that’s best for you is a balancing act between price and features. Consider which features you want, and then look for the phone that best matches your list, yet still falls within your budget. Useful Link Interactive Cell Phone Finder

While choosing a carrier based on coverage is an important first step, the cell phone is what you will use to interact with the carrier’s network, whether to make a call, browse the web, or send a text message. As a result, choosing the right phone for your specific needs is critical. Cell phones continue to evolve rapidly; most now offer far more than the ability to make and receive calls. In fact, they are morphing into full communications devices capable of taking digital photos, capturing video, managing business communications, and even handling streaming TV. Given the ever-improving quality of these and other features in new models, the day is coming when some people may decide that there is no longer a need to have multiple communication/entertainment products, when their phone can fulfill all those needs — and fulfill them well. Cell phone prices for new accounts are usually heavily discounted, and this makes it fairly expensive for carriers to get new customers. That is one reason why most phones are “locked” to work only on the selling carrier’s network. It also explains why carriers require a contract. Prepaid, no-contract options are available, but you’ll find that the phones (and rates) are more expensive. Say Cheese!
One of the most popular features of a phone is an integrated camera. While quality has been improving, phone camera resolution has remained far behind that of stand-alone cameras. But that may be changing. The first 3+ megapixel camera (Samsung A990) was introduced by Verizon in July 2006 and more are on the way. This amount of resolution is equal to that of the best digital cameras a couple years back, and is good enough for taking sharp pictures. As a result, we may be on the cusp of a convergence between phone and camera, enabling many people to do away with a stand-alone camera. A current list of higher-end camera phones can be found here.


The Bottom Line Technology and economics combine to limit your choice of cell phone, both as a new customer and when switching providers. As mentioned elsewhere, most cell phones sold with service in the U.S. are preprogrammed to work on a specific carrier’s network. There are a couple issues at work here. The first is a technological one: Phones are only compatible with the digital network technology for which they were designed; a CDMA phone, for instance, will not work on a GSM network. So, for example, if you today have Verizon service (CDMA), and want to switch to Cingular (GSM), technology will force you to buy a new phone. See page 34 for more on the different technologies in use in the U.S. The second issue has to do with the economics of the wireless industry (see page 46). Most new phones bought with service are heavily subsidized by the carrier as a way to attract new customers. As a result, the carrier wants to protect the investment it has made in you. One way they do this by contract, of course, but another method is by having the phone manufacturers “lock” the phones so they can’t easily be used with another provider, even one with the same technology. Unlocked cell phones are available, but they generally cost several hundred dollars more than the same phone purchased with service from a carrier. If you are a frequent international traveler, having an unlocked phone may provide you with some benefits (see page 38). Be Careful What You Wish For
Some people complain about locked phones, and there have been lawsuits filed around the topic, although none had made much progress through the court system as of the summer of 2006. The issue has come more clearly into focus since number portability made it easier to move around one’s phone number. (“If I can take my number, why can’t I take my phone?”) If a legal challenge is ultimately successful, the wireless carriers may be forced to provide unlocked phones to their customers. However, this could be one of those “be careful what you wish for” things, as the end result would likely be much higher phone prices — carriers would be reluctant to subsidize a phone for a customer who could easily walk away with it.

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The feature sets of cell phones are expanding all the time. As might be expected, phones with more features, particularly the latest ones, tend to be the most expensive. The size, weight, and design also have an impact. However, all phones eventually come down in price. When it was first introduced, the Motorola RAZR was priced at more than $500 with a contract; it is now available for free with most carriers. Here’s a list of some of the major features and options you’ll come across as you review cell phone models. Note that the functionality of some choices (e.g., data speed) is dependent on the carrier’s network. For expanded definitions, see the wireless glossary. Physical Characteristics Design Open, flip/clamshell, slider, swivel/pivot Size and weight Lightweight, slim profile Battery Type, talk time, standby time Antenna Internal, external, retractable Display Color, black-and-white o Size How big is the screen display? o External For flip phones, an outside display for caller ID, etc. Fun Features Camera Resolution, zoom, flash Music FM radio, MP3 player Messaging Multimedia, text only, predictive entry o Keyboard QWERTY keyboard for easier messaging Gaming Preinstalled games, Java-enabled Ringtones Mono, polyphonic, real tone Video Length of video capture Productivity Features Calling Caller ID, photo caller ID, voice dialing (may be speakerindependent), vibrating alert, speakerphone Phone book Size, entries per name PDA E-mail synchronization, calendar, organizer Connectivity Bluetooth, infrared Push-to-talk Walkie-talkie functionality Data/Internet Mobile web browser, POP3 e-mail o Download speed/technology Wi-Fi, EDGE, GPRS, EVDO, 1XRTT, 1xEVDO, HSDPA, UMTS Operating system Windows Mobile, Palm OS Memory Expandable/Removable storage, capacity, type

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Network Technology Interface GSM, CDMA, TDMA, ESMR (iDEN), analog Bands Single, dual, tri, quad o International Compatibility with overseas networks Modes Single, dual, tri o Analog Digital backup, mostly for rural locations Accessibility Hearing aid compatibility M3 or M4 Keypad buttons Are they too small or too close together? Display font size Can fonts be increased or decreased?

The Bottom Line When shopping, consider the price to be charged to your credit card when you buy as well as the final price — after all rebates. Useful Links Free Out-the-Door Cell Phones (Pay $0 Today) Cell Phone Rebate Offers Cell phone offers often include one or more mail-in rebates, which can dramatically lower the final price of your phone. This also means, of course, that the amount your credit card is charged at the time of purchase might be higher than the advertised final price. Some rebates may require several months to redeem, so be aware that your cash might be tied up for a while. TIP Depending on the phone you buy, there could be several different kinds of rebates, including offers from the phone manufacturer, from the carrier you are subscribing to, and/or from the retailer from which you are purchasing. Therefore, it is important that you print out the terms and conditions of any rebates at the time you place your order so you’ll have the information you’ll need to qualify for them. The redemption requirements will likely include some combination of receipts, rebate forms, wireless bills, and the UPC/bar code. This last item is usually located on the exterior of the box in which the phone is packaged — so don’t throw it away.

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The Bottom Line Making the wrong plan choice can lead to a much higher bill than necessary — month after month. Useful Link Interactive Rate Plan Finder Now let’s look at choosing a rate plan (see box below). From a monthly dollars-and-cents perspective, choosing the right rate plan is the most important piece of the entire selection process. If you live in a typical city, you’ll find five to seven carriers and upward of 50 plans from which to choose. This extensive choice means that there is likely to be a plan out there that comes pretty close to matching your calling patterns. Figuring out which plan that is . . . well, that’s another matter altogether. The easiest way to sort through these myriad options is to visit an unbiased website that will take your estimated calling patterns and compare them against the plans available where you live. MyRatePlan’s interactive rate plan finder — CellCalc™ — does just that. It lets you select the features that are important to you (e.g., free mobile-to-mobile), while enabling you to estimate your monthly bill for almost all the plans available in your local market. The Chicken or the Egg?
Although you’ll be buying a rate plan and phone together, the options are much more manageable if you think of each piece separately. To that end, we suggest you pick your phone first, and then your rate plan. We used to recommend doing it the other way around, but competition has caused most carriers to offer basically the same rate plans. Therefore, if you first find the phone that you want, it becomes much easier to choose a rate plan, as you will only need to choose among the rate plans offered by the carrier associated with the cell phone you have chosen.

In the next several sections, we review the underlying factors that make up a rate plan. These sections begin with headers in yellow type.

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While most wireless subscribers have a standard, single-line plan, family plans have been gaining in popularity over the past couple of years, and prepaid plans represent the fastest growing segment of the industry. Overview of the Calling Plans*
Feature Single Plan Family Plan Number of Users 1 2-5 Number of Bills 1 1 Billing Postpaid Postpaid Subsidized Phones Yes Yes Free Mobile-to-Mobile Some Plans Yes Contract Usually 2 Years Usually 2 Years Credit Check Yes Yes Shared Airtime No Yes *Information in this table reflects general characteristics; there are Prepaid Plan 1 0 Prepaid No No No No No exceptions.

Each rate plan type has its own unique quirks. To account for those, and to make it much simpler to choose among competing rate plans within each of the three categories, MyRatePlan has created a tool called CellCalcTM, that combines a rate plan filter with a sophisticated bill optimizer (called TruBillTM). There is a separate version of CellCalc for each type of plan — single, family, and prepaid.

The Bottom Line Consider a family plan for two to five members of a household or a small business as a way to minimize and better manage wireless costs. Useful Link Interactive Family Plan Finder

Cell phone family plans contain two or more (up to five) lines combined on a single bill, with one shared family rate plan. Each person on the family plan gets his or her own phone and his or her own phone number. Most family plans are priced with two lines included; additional lines are commonly priced at about $10 each.

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Family plans can save subscribers 25% or more each month off the cost of having a single line for each user. Here are a few more things to think about as you consider a family plan. It is possible to get more than one model of phone with a family plan. We have created a mix and match page to make it easy to develop your own customized arrangement. While the family plan offers you see displayed online are for two phones only, you can sometimes get as many as five for the same per-phone price. Check the retailer’s website for details. Sign up for all the lines you’ll need at the time of purchase to avoid higher phone prices. For example, if you want to add a third line to a family plan two months after the contract is established you won’t be considered a new customer, and you may have to pay substantially more for the third phone. Since a family plan is usually approved on the credit of the primary account holder, additional subscribers may be able to get service even though they might have a lower credit score that would otherwise relegate them to prepaid phone service. Since “mobile party pays” in the U.S., minutes are spent two at a time when family members call one another, unless the plan has free mobile-to-mobile airtime. Most family plans include this feature, but check the plan you are considering to confirm it. Family plan members need not be related; a small office would also qualify if there is a single responsible party and a single bill. If you want to stay with your carrier when your contract ends, but you discover that they won’t give you a good deal on new phones, consider doing this: Set up an entirely new family plan in the name of one of the plan members (other than the current primary account holder). Since a new person is qualifying for service, the account will be seen as new, and thus eligible for new customer phone pricing. The old plan can be canceled whenever you wish, as it is unrelated to the new transaction. The catch: You won’t be able to keep your same phone numbers and you will have to pay activation fees.

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The Bottom Line More expensive than standard wireless, a prepaid plan might be an option if you don’t want to sign a contract or if you have credit issues. Useful Link Interactive Prepaid Plan Finder Prepaid service is one of the fastest growing areas in wireless, as carriers are using it to reach new subscribers, including students and emergency-only users. A prepaid setup offers the opportunity of going wireless with no contract, no credit check, and no commitment. You might want to consider pay-as-you-go wireless if you: Don’t want to sign a contract Have credit issues Want to budget yourself or a family member Only want wireless for very limited emergency-only purposes There are a large number of prepaid programs on the market, but each generally falls into one of two main categories: Pay-As-You-Go With this more traditional form of prepaid, you buy the phone and use refill cards (physical or electronic) to add airtime as needed. This is best if your usage varies from month to month, if you are on a budget, or if you want to provide service to, but limit the talk time of, another family member (e.g., a child). Pay Monthly (Hybrid Prepaid) Hybrid plans are more like a traditional postpaid offering, with a recurring monthly charge. This type of plan is best for those whose usage is fairly consistent from month–to–month and who want a traditional service, but have credit issues or don’t want a contract. Rates are higher than for contract plans, but lower than for pay-as-you-go. Prepaid wireless has two main disadvantages. First, although prepaid per-minute rates have come down, they remain significantly more expensive than with traditional postpaid service. Second, since the carriers don’t offer as many price subsidies for prepaid, the phone you will buy is much more expensive.

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Prepaid Tricks Some carriers impose a daily access charge on some of their pay-as-you-go programs. Additionally, all airtime refill cards expire after a certain period of time. These facts mean that your effective perminute rate can be very high. The CellCalcTM tool for pay-as-you-go helps users find the right plan and the optimal airtime refill card to buy. Also, be aware of what we call the “soft commitment.” While prepaid plans have no contract, sometimes the phone rebates associated with the programs require you to maintain service for a certain amount of time. In a sense, you are obligated for that period should you want to take advantage of the rebate. Prepaid Portability Prepaid phone numbers are generally* portable, as number portability is independent of the type of plan you have. However, to be portable the number must be in your possession — meaning that your prepaid account must be active. Since prepaid airtime is bought in advance, you will likely forfeit any unused airtime remaining on your account at the time the port is completed.
*Some carriers have chosen not to accept number transfers for prepaid accounts, while others won’t allow the transfer from another prepaid account. While carriers can’t keep you from taking your number, there is no requirement forcing your new carrier to accept your number into their service.

In an Emergency…
Many people would like to get a cell phone to throw in their car just for emergency use. Unfortunately, it isn’t profitable for a wireless carrier to have active lines not generating any revenue, so obstacles are created — like airtime card expiration periods — to force subscribers to pay up periodically to keep service active. The trick to spending as little as possible, while maintaining service for an emergency, is to find the lowest value refill cards that offer the longest expiration periods. For our opinion on the best current options for emergency only cell phone service, click here.

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It is important to keep in mind that “calling area” refers to where you are physically located when you are making or receiving a wireless call, not where the other party is (see page 23). The simplest way to look at coverage area vis-à-vis price is to recognize that the rate-per-minute tends to increase as you buy a larger coverage area. Therefore, while you can find local and national plans that have the same price, the local plan will likely have more minutes. Local The smallest coverage, generally centered around a single metropolitan area, although it might include an entire state or more. When you are outside the local area, you will pay roaming charges to make/receive calls. The regional calling area covers a larger geographic part of the country, from two or three adjacent states to an entire region, such as the Midwest. When you are outside the regional area, you will pay roaming charges to make/receive calls. The most commonly sold plan, these generally cover your carrier’s entire nationwide network, and may include some off-network coverage on a similar technology. If your phone supports analog service where no digital signal is available, you would pay roaming charges while utilizing those analog signals. A true 50-state plan, with generally no roaming charges anywhere your phone can get a signal. An extension of the national plans, these include airtime for calls made or received in parts of Canada or Mexico.


National Network

National North America

The vast majority of rate plans currently sold are “national network” plans. Local and regional plans remain available in some areas, and while these still offer more anytime minutes per dollar, they often don’t come with benefits such as free long distance or mobile-mobile, and so have become progressively less attractive for most people.

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The Bottom Line Buy a plan with slightly more minutes than you think you will need; this will minimize the need to use additional minutes — which are often very expensive. Most rate plans include a certain number of anytime minutes plus what we call “plan benefits” (e.g., free night and weekend or free mobile-tomobile), in exchange for a monthly fee. Overage and optional features, along with fees and taxes can significantly increase your bill. The key to choosing the right rate plan is to figure out how many anytime minutes you’ll need, add a small buffer to that, and then find the least expensive plan with that many minutes in it. However, the number of anytime minutes needed will vary by plan, depending on the plan benefits — and to what extent you can take advantage of this free airtime. The TruBillTM calculator in MyRatePlan’s rate plan finder will make these calculations for you, saving you both time and money.

Overage charges, usually 35 to 45 cents a minute, can add up fast. Let’s say your rate plan gives you 500 minutes for $39.99, with each additional minute costing 40 cents. If you end up talking for 560 minutes (one extra hour) your bill will be $63.99, an increase of 60%. Talk 100 extra minutes, and your bill is doubled.

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One way to lessen the risk associated with overage is to consider an adjustable minute plan. These plans, including Cingular Rollover and Sprint Nextel Fair & Flexible, are particularly helpful if your airtime needs vary significantly from month to month. Unlike most plans, Cingular’s Rollover lets you keep unused airtime for use in a subsequent month. However, you lose those banked minutes after a certain time period or if you make certain rate plan changes. With Fair & Flexible, a block of minutes is added (e.g., 30 minutes for $5) if you exceed your allowance of anytime minutes. The catch here is that Sprint doesn’t add exactly the number of minutes you need, so in certain cases — particularly if you just barely exceed your package allowance — this doesn’t turn out to be such a great deal.

The following features, when included for free in your rate plan, can significantly reduce the number of anytime minutes you’ll need each month. Consider them in conjunction with your own calling patterns to determine how advantageous each one would be for you. Where not included in the rate plan, airtime otherwise associated with these benefits will count against your anytime minutes.

Carriers build their wireless networks to accommodate the busiest times of the week, which tend to be Monday through Friday, particularly during morning and late afternoon commuting times. This leaves lots of excess capacity, which the carriers basically give away for free as a plan benefit. Originally an add-on option, competition has made night and weekend time free in most rate plans sold today. Some carriers now offer an option to start free nights at 7:00 pm; Sprint and Nextel even offer a 6:00 pm option. The ability to advance the start of free nights to an earlier hour often incurs an additional monthly charge, but some plans include it for free.

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Once limited to certain family plans, many rate plans now offer free mobile-to-mobile calling between customers of the same carrier. As with free night and weekend airtime, the real benefit of free mobile-to-mobile calling is that it can reduce the number of anytime minutes you need each month, potentially allowing you to select a lower-priced rate plan. However, the benefit of free mobile-to-mobile is limited to a single carrier, so it requires the consumer to be more proactive in figuring out which carrier is used by those he or she calls the most.

For those who receive a lot of incoming calls, Sprint and Nextel now have a series of “free incoming” plans, whereby all inbound airtime is free. These plans often include fewer minutes than similarly priced plans that lack the feature, making them a less attractive choice for most people. Mobile Party Pays
In most countries, billing for wireless calls is similar to that for landline calls in the U.S. — “calling party pays.” In other words, the person making the call is charged for it. However, the cell phone system in the U.S. evolved as “mobile party pays,” with the mobile customer paying for both outgoing and incoming calls. One probable reason: Until fairly recently, wireless calls were much more expensive than home phone calls. Therefore, this billing convention minimized confusion for landline customers accustomed to consistency in the size of their bills.

Some carriers are offering the “calling circle” feature. The basic idea is that you can designate a group of phone numbers (usually five or ten) and get unlimited calling to and from those numbers, without using your anytime minutes. It is like mobile-to-mobile, except you are not limited to wireless lines, nor are you limited to subscribers of the offering carrier. This sounds like a good idea, but when you pull back the curtain there isn’t much benefit. Usually, there is a monthly fee for the service or only certain (more expensive) rate plans apply. In most cases, this will offset the benefit associated with this feature.

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With national rate plans now the norm, additional long distance and roaming charges don’t have the direct impact on wireless bills that they once did. However, these features do come into play when considering the right rate plan, and can be influential in unexpected ways.

Many cell phone plans sold today include free long distance (from the plan’s calling area). Plans that don’t have free long distance charge about 20 cents a minute for this feature; these plans should be avoided by those who make long distance calls with their cell phone. Unlike many of the plan benefits listed in the prior section, free long distance actually increases the number of anytime minutes that many people need and use, as the cell phone is used instead of the home phone for making long distance calls. However, it is important to remember that wireless long distance isn’t really free, in that the minutes you use count against your monthly airtime allowance. This creates an interesting possibility: “Free” long distance on your cell phone can end up being quite a bit more expensive than paying for it on your landline! Example Let’s say you have a $39.99 plan with 500 anytime minutes and a 40-cents-per-minute overage charge. And let’s say you talk for 560 minutes, of which 100 are on long distance calls that you would have made from your home phone except for the fact that they are “free” with your cell service. The chart below shows the impact on your bill.
Cell Phone Only $39.99 $24.00 Cell Phone + Home LD $39.99 — $2.75 $42.74

Cell Calling Plan Overage: 60 Minutes @ 40¢/min. Home Long Distance* — (100 Minutes) Total $63.99 *Based on a 2.75¢/min. interstate rate.

Your “free” long distance increased your bill by $21.25, about 50% more than you actually needed to spend.

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Toll-Free Calls
The cost for 800 numbers from a landline is borne by the recipient of the call; with no charge to the caller. From a cell phone, however, toll-free numbers are just like any other long distance call, and will count against your bucket of minutes.

Roaming calls are those made or received when you are physically outside your rate plan’s home coverage area. If you are traveling outside that area, you can incur roaming charges when talking to someone regardless of where they are, even if they happen to be standing right next to you. Most roaming charges can be avoided with the selection of a national rate plan (see page 18).

Some people confuse roaming with long distance, leading them to buy a national plan even though they don’t use their phone much outside their local area. The above diagram shows the distinction between roaming and long distance for someone who has a local plan. Assuming the plan has free long distance, you will be able to call anywhere in the country from your home calling area using the airtime minutes in your package. The Evolution of Roaming
The definition of the term “roaming” has evolved over the years. Wireless started as a very fragmented business, with dozens of carriers offering service in limited geographic areas. To enable users to have service outside this limited area, the carriers created roaming agreements, and roaming became known as airtime a subscriber of one carrier used while on another carrier’s network. The “outside” carrier would bill the subscriber’s carrier for that airtime, and the carrier would pass that charge (with a nice markup) on to their subscriber. Today, carriers have established networks that cover much of the nation and the above situation occurs much less frequently. However, roaming charges persist as carriers offer lowcost local plans with smaller coverage areas, and then charge roaming outside those areas — usually 69 cents or more per minute. Since much of this roaming is actually on the carrier’s own network, these calls are hugely profitable for the carrier.

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Popularized by Nextel, push-to-talk enables one person to speak to another person (or group of people) with the push of a button, similar to a walkie-talkie. Connecting to the other party is almost instantaneous, and the “call” bypasses the cellular network, so this talk time doesn’t count against your plan’s anytime minutes. Currently, push-to-talk is only available between subscribers of the same carrier; interoperability will likely arrive at some point. This feature may incur additional fees; check your rate plan for details. For carriers (other than Nextel) that offer push-to-talk, only certain phones have the push/talk capability.

International calling encompasses two distinct areas: Using your phone to call another country from your plan’s U.S. calling area and using your phone when in another country. The latter is more complex, as it involves both price and technological issues. For a fuller analysis of overseas options, visit page 39. Calling another country on your cell phone is generally the same as calling from a landline — there are more digits to dial, and it costs more money. Most wireless rate plans don’t include calls to other countries. However, certain carriers now offer special bundled rates, particularly to Canada and Mexico. Check with your carrier for more information.

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The Bottom Line Your cell phone isn’t just for talking anymore. If you utilize data services, search for bundled or flat rate pricing to avoid billing surprises. The price-per-minute to make wireless calls has fallen rapidly over the past several years, putting downward pressure on wireless bills. That’s good for consumers, but bad for wireless carriers and their investors, who look at “average revenue per subscriber” as an important measure of how well the company is doing. To reverse this trend, carriers are counting heavily on data services to generate additional revenue. These include things like messaging, music, information, e-mail, and ringtones. Unlike voice services, which have become fairly easy to compare, each carrier is packaging these newer services in different ways, at different prices, with different brand names. Further complicating things is the fact that not all phones have the same data capabilities, and that many of these services (e.g., games or ringtones) can often be purchased from a third party, and billed through your carrier. It can be quite confusing, and likely will continue to be for the foreseeable future. In the next few paragraphs, we discuss the most important data categories. Review the optional features on the rate plan you are considering, as this will tell you what combinations are relevant for the carrier and the phone.

Text Messaging The most popular of non-voice services, text messaging lets you use your phone’s keypad (or QWERTY keyboard, if available) to send short messages to other cell phones. Usually, there is a charge (10 cents is common) both for sending and receiving these messages. Most carriers offer bundled packages, which can range from about 100 messages, all the way up to unlimited. Expect to pay $5 to $15 a month for a bundle of text-only messages, although in some cases your carrier may offer text messaging with other data services as part of a package.

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Premium Messaging Premium messaging is text messaging that incurs a surcharge. A good example is the voting associated with reality TV shows. For these messages, you’ll pay a flat fee, usually around $1. If you don’t have a messaging bundle from your carrier, you’ll also incur the per-message charge, usually about 10 cents. TIP In most cases (all cases in which a sweepstakes is involved), the sponsor of the text program will offer a free method of voting or entering, usually via the Internet. Take advantage of this, particularly if you want to vote or enter multiple times, because premium text messages can quickly add up on your bill. Besides, why pay for something that you can have for free? Picture and Video Messaging Picture messaging allows the upload of photos taken with your cell phone to a computer or another cell phone. Unlike text, where messages can be sent across carriers, picture transmission is usually limited to subscribers of the same carrier. Many phones also have picture caller ID, letting you “put a face with the name,” so to speak. You can also use one or more of your photos as a screen saver. This is a feature of your phone and not a feature of your service plan. In other words, if your phone has this capability, you can use it for free. Some services also support the ability to send short videos from your phone to an e-mail address. Longer videos can become difficult to send, due to the size of the files. Instant Messaging Mobile versions of common instant messaging (IM) programs, such as those from AOL, Yahoo, or MSN, let you communicate instantly with friends and family. When these services are enabled on your phone, your status will appear as online to your friends, just as if you were at a PC. TIP If you choose to enable instant messaging on your phone, you will want to make sure that you have subscribed to unlimited text messaging. Each IM, even one as simple as “LOL,” counts as a text message. It isn’t hard to see how IMs can quickly grow into the hundreds, becoming quite costly if paid on a per-message basis.

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While the text messaging discussed above is actually a form of e-mail, most cell phones will also let you send and receive e-mails from webbased providers such as AOL Mail, MSN Hotmail, and Yahoo! Mail. Most PDA devices will let you retrieve POP3 e-mail (e.g., Microsoft Outlook/Outlook Express).

The information services category includes Internet access and downloads of things such as sports scores, stock quotes, games, weather, movie times, horoscopes, television programming, and more. Keep in mind that data speeds and available content vary widely, not only across carriers, but also with the same carrier in different locations or with different phones. Most carriers are in the process of upgrading their networks for faster speeds, but it will be awhile before these faster speeds are universally available. Removable Memory If you plan on using your phone for storageintensive activities, such as music or videos, look for a phone that has a slot for removable memory. There are several card types. Some cell phones can now support over one gigabyte of expanded memory.

Some phones come with installed games, and many more can be purchased, either from your carrier or a third party. Companies like Electronic Arts (formerly Jamdat) offer a full library of games designed for mobile phones. As with other data services, your phone and carrier will dictate which games are available to you.

Many phones now have an integrated MP3 player that will allow you to download and play music on your phone. Many of these phones are designed so that the music will pause when a call comes in, and begin again from that spot after the call ends. Downloaded music is a complex topic, as the carriers, in an effort to grab a piece of the huge market, have created a maze of restrictions. For example, your carrier may only allow you to purchase and download - 27 -

music from their proprietary music store. In another example, phones that are compatible with iTunes are currently limited to 100 songs. In addition to downloadable music, some carriers offer the ability to listen to streaming music. A small number of phones, mostly from Nokia, offer a built-in FM radio.

Ringtones are short snippets of sound that people often use to personalize their ring, or to create a distinctive ring for certain callers. A ringback is a sound file that those calling you hear while waiting for you to pick up. It replaces the phone “rings” one normally hears when calling someone. As with ringtones, different ringbacks can be assigned to different people on your contact list, enabling you to customize what your friends will hear when they call you.

Define ‘Free,’ Please
There are plenty of third-party sites from which ringtones can be purchased and downloaded to a phone. Often these sites offer a “free” ringtone as an inducement. You access your free tone by entering your cell number on their site, and agreeing to the terms. But be careful. Often hidden in these terms is the fact that you are agreeing to an ongoing subscription for ringtones. You may be completely unaware of this until you get a charge of up to $10 on your next cell phone bill. We’re not saying these ringtone sites don’t have a good product and that you shouldn’t buy from them — just be aware of what you are agreeing to when you sign up.

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Most carriers charge an activation fee for setting up new service. These fees vary, but most are currently around $35. Family plans incur an activation fee for each line, although it may be lower for each line after the first one. Activation fees are pretty much pure profit for the carrier. However, they are an accepted part of the industry pricing structure; everyone has them, so they are not likely to be part of the equation when choosing one carrier over another. Just be aware that they exist, and that they will have to be paid either at sign-up or with your first bill. Speaking of that first bill, most carriers will prorate charges for the partial first month of service and then bill you in advance for the first full month. So, for example, if you sign up for a $40 plan on January 15, you may get a bill on or before February 1 that charges you $20 for January and $40 for February. Your Second Bill The second bill you get is likely to be the first one reflecting a full month’s usage. This is a good time to make sure you have the right number of minutes in your plan. If you find yourself with overage charges, and you think your usage for the month was typical, call your carrier ASAP and change your plan to include enough minutes to avoid these charges going forward. Most carriers are quite agreeable to this; after all, a user committing to a higher rate plan is a more valuable customer.

As with many other purchased services, a number of government taxes will be added to your bill. These vary by jurisdiction, but will likely add 15% or more to your bill. These taxes can’t be avoided, but most are percentage based, so if you are able to minimize your monthly cost for service, you will also be minimizing the dollar amount of your taxes. Some good news on the tax front: As of July 2006, the 3% federal excise tax, previously assessed on subscribers’ wireless bills was no longer being collected.

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Cost Recovery Fees In addition to required taxes, most carriers charge a monthly amount for “cost recovery.” These fees are theoretically to recoup expenses the carrier incurs to administer mandatory government programs like number portability, universal service, and “E911,” but they are not required fees. The government allows these fees to be listed separately on the bill. Monthly cost recovery fees (per line) among the major carriers are as follows: • • • Cingular Up to $1.25 Nextel Up to $2.83 Sprint $0.55 • • T-Mobile Verizon $0.86 $0.05

As of 08/2006 per carrier websites

Unlike the above cost items, directory assistance is optional, and you are getting some benefit (a useful phone number) back from the operator. However, calling 411 is relatively expensive, so we include it here because the charges can quickly add up on your bill. Per-call charges to 411 for the major carriers are as follows: • • • Cingular $1.79 Nextel $1.40 Sprint $1.40 • • T-Mobile Verizon $1.49 $1.70

As of 08/2006 airtime additional

Getting a Cell Phone Number from Directory Assistance
Today, cell phone numbers are generally unavailable via directory assistance. With more people using their cell phone as their primary phone, some would like to have their number available to others. As a result, an industry effort is under way to make these numbers available via a wireless 411 service. However, this will be an opt-in list; you would have to specifically approve the inclusion of your cell phone number. No printed directory will exist.

Don’t Bother Me
It is illegal for telemarketers to call a cell phone number with an automated dialer. However, if you want added protection, you can add your cell phone number to the National Do Not Call Registry. There is an e-mail that occasionally goes around saying that the ban on telemarketing will end in some other short timeframe. This is false, and can be ignored.

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The Bottom Line Two-year contracts have replaced those of shorter length. For most people, the choice is a two-year deal or a pay-as-you-go program with no contract. As previously mentioned, since carriers tend to subsidize the phones that are sold to new postpaid customers, they generally require a contract to help ensure that they will recoup their investment in that customer. Until recently, that meant a one-year contract. However, a combination of market factors has led to the two-year contract becoming the standard. One-year deals can still be found, but usually there are heavy penalties associated with that shorter length — phone prices can be significantly higher, or there might be a higher activation fee. For most people, the choice now comes down to whether to sign a twoyear contract or to go prepaid, with no contract at all. The latter obviously offers more flexibility, but you will pay for that flexibility in both a higher phone cost and higher per-minute charges. If you do go with the two-year contract, just remember to really put your service to the test during the trial period so you can cancel if it isn’t working out for you. Otherwise, you are stuck for quite a while.

Here are some reasons two-year contracts have become the norm: Ever decreasing per-minute pricing means it takes carriers longer to recoup their initial investment in a new customer. Phones are getting more complex and therefore more expensive. Since most consumers still want a cheap or free phone, this means carriers need to spend more upfront to acquire a new customer. Industry consolidation has led to fewer national carriers, making it easier to get all competitors to “go along” with the change. Longer contracts offset some of the increased risk of customer defections that were a side effect of wireless number portability.

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When signing up for service, you will likely be presented with an option to insure your phone. Whether or not to buy this insurance is a tough decision — one made even more difficult with two-year contracts now standard, meaning there is a much longer period during which your phone could be lost, stolen, or damaged. Before you commit to insurance, here are some questions you should get answers to: How much is the monthly or annual premium? Do I have to enroll at the time I get service, or can I do it later on? Can I cancel coverage at any time? Is there a waiting period before coverage starts? What does the policy cover? (Most cover loss, theft, or accidental damage; in some cases you can pay more for an extended warranty.) How much is the deductible? (Usually it is $50, but on more expensive phones it may be more.) In a claim, will I get a new phone or a refurbished one? What happens if my particular model is not available? Is there a maximum claim? Are there a maximum number of claims per year? What hurdles do I have to go through to file a claim? (You may need to file a police report.) Is Insurance a Good Idea? There’s no clear-cut answer to that question. What you may want to do is take a look at the replacement cost for the phone you are buying and compare that to what you will pay in insurance premiums. Of course, one never knows when or if a phone will be lost or stolen. If you have a $50 deductible and are paying $5 a month in premiums, you’ll have paid $110 for a replacement if you lose it after a year and $140 after 18 months. On average, insurance probably makes most sense if you have a highend phone, like a PDA, and you would want to replace it with the same thing if something happened to it. If you have an entry-level phone, or would be okay replacing your expensive phone with an entry-level phone, then you can probably skip the insurance. Of course, like all insurance, it ultimately depends on your risk tolerance.

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TIP If you lose an expensive phone and don’t have insurance, one option is to terminate your contract and sign up with a new provider. You’ll get hit with a cancellation penalty, of course, but this might be more palatable than paying up to $600 for a new PDA. Insurance or not, if your cell phone is lost or stolen, contact your carrier to suspend your service. They will turn off the phone’s ability to access its network, preventing unauthorized calls. Once you get a replacement phone, your carrier can activate your number again. You are responsible for all calls and activity from your phone, so report the loss as quickly as possible to minimize your exposure to unauthorized charges.

Most cell phones purchased new from a carrier or its authorized agents come with a one-year manufacturer’s warranty. If the phone is defective out of the box, or shortly thereafter, return it to the point of purchase for a replacement. (Make sure you keep the phone box and accompanying materials until you are sure the phone is in good working order.) If there is a problem with the phone after the initial period, contact your carrier for warranty service. Note that Sprint requires enrollment in its “Equipment Service & Repair Program,” which carries a monthly charge, to get repair service during the first year.

No matter what technology your phone uses, or how much it cost, you may find that the signal is weak in many indoor locations. With more people using their cell phone as their primary or only phone, this can be more than an annoyance. One possible solution is a signal booster. These devices capture the strongest available signal within range, bringing it inside, to give you improved coverage. However, they are fairly expensive; we’ve seen some recently featured at just under $300. Another option is to purchase a Bluetooth phone with a wireless headset. While at home, you can keep the phone in the location with the strongest signal, and use the headset for mobility. Over the next couple of years, a better solution is expected to come in the form of wireless phones that will also be able to connect via the Internet, using an available Wi-Fi connection.

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The original cellular technology, dating back to the 1980s, was based on an analog signal. Basically, it was a radio signal, but unlike your local FM station, cellular radio signals traveled only a short distance. This enabled the carriers to let lots of people all use the same frequency across a particular geographic area. During the 1990s, new wireless licenses were auctioned off, and the newly licensed carriers built out their systems using digital technology. (The term PCS, or personal communication system, became popular, but it referred to a digital system.) These new digital systems had numerous advantages over traditional cellular analog, including: More secure phone calls, as voice conversations are digitized More feature-rich (caller ID, text messaging, etc.) Less fading and static Generally longer phone battery life More capacity per channel The last item is particularly important. Since digital capacity is much more efficient than analog, the carrier can offer a lot more service for the same amount of capital investment. This cost advantage allowed the entry of new digital players into the game, with prices below those being offered by the older analog carriers. To level the playing field, the older carriers began to develop their own systems, overlaying a digital system on top of their existing analog setup. This added even more capacity to each market; the resulting glut is one reason why airtime prices fell rapidly and are continuing to drop. CDMA, TDMA, GSM: What’s with All These Different Digital Technologies?
Imagine buying a TV that picked up only NBC, and having to buy another to pick up ABC or CBS. That is basically how digital wireless evolved in the U.S. Competing digital technologies — CDMA, TDMA, iDEN, and GSM — are supported by various carriers, and your phone won’t work from one system to another. Contrast this to the way things work in Europe, where a single GSM standard evolved, albeit one incompatible with the U.S. GSM frequencies. Progress is being made, however. The major TDMA carriers switched over to GSM, as this is a much better technology for supporting data services. Additionally, many U.S. GSM phones now offer multiple bands, including those that will work in much of the world (although often at very high rates).

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Alltel, Sprint, U.S. Cellular, Verizon Cingular, T-Mobile Nextel

Cingular (including the former AT&T Wireless) and U.S. Cellular were formerly on the TDMA standard; they have now changed over to the technologies listed above. Although the TDMA protocol remains available in some markets, it is primarily for existing customers with older phones. Nextel uses a proprietary technology called iDEN. It is basically digital cellular combined with a two-way radio feature. Mobile Virtual Network Operator (MVNO)
An MVNO is a cell phone company that doesn’t own any wireless spectrum, but instead buys it from a network operator such as Sprint. Essentially, an MVNO is a marketing company that believes it can build a profitable business targeting niche markets such as Hispanics or teenagers. Prior to 2006, most MVNOs offered prepaid service, with TracFone and Virgin Mobile among the notable-name providers. Recently, the market has seen the launch of several postpaid MVNOs, including Helio, Disney Mobile, and Amp’d Mobile.

While largely forgotten these days, the original analog network will continue to be maintained by the wireless industry at least through 2008. There are still some situations where analog is the only signal available, although these are now primarily in remote rural locations. If you have a CDMA or TDMA phone that has an analog mode (these phones are often called “tri-mode”) and your carrier doesn’t have digital service where you want to use your phone, you may be able to utilize the analog network. Depending on your rate plan, such usage may incur roaming charges, but having it available does provide an added layer of coverage for anyone visiting sparsely populated regions. Analog backup is generally not available on GSM or Nextel phones and most of the newer CDMA phones support digital bands only.

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For those with special needs, selecting the right cell phone is far more than finding one with a fun camera or an MP3 player — it can be the cornerstone to independence. The right phone offers the freedom to be mobile, yet enables communication at a moment’s notice with friends or family should the need arise. Progress on developing cell phones to assist with specific needs has been a bit slow in coming. For example, we are often asked about phones for senior citizens — basic phones that are easy to operate, with larger keys and more legible display fonts. However, these needs run up against a market moving toward ever-smaller phones packed with more revenuegenerating data features.

One area where progress has definitely been made, thanks to government prodding, is in reducing electrical interference between cell phones and hearing aids. By February 18, 2008, all wireless carriers must ensure that 50% of their phones are hearing aid compatible. Phones are certified for this compatibility when they meet the Federal Communication Commission’s M3 or M4 standard for interference (M4 is the more rigid of the two; most phones that comply are M3). A phone that has this certification doesn’t ensure compatibility with any individual hearing device, but it does narrow the list to those phones that are most likely to work.

Does your eight-year-old need a cell phone? The cell phone industry, running out of untapped markets, would like you to think so. There are now phones specifically designed for the preteen years, as well as a new generation of cell phones with parental controls.

The Firefly and LG Migo, both introduced in late 2005, were the first phones specifically designed for preteens. The Firefly is available through Cingular or as a pay-as-you-go service from major retailers. The LG Migo

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is available through Verizon. Both phones have a limited number of buttons, making a quick speed-dial call to Mom, Dad, or 911 easier. Introduced in 2006, the Sanyo SCP-2400 for Sprint has a full numerical keypad, but allows parents to control what contacts are in the phone book — and to limit incoming and outgoing voice calls to those numbers. TIP For those with existing service with one of the above carriers, we’d suggest adding your child(ren) to your existing plan, turning it into (or adding another line on to) a family plan. This should be a much less expensive option than getting your child his or her own plan.

Content With the increasing use of phones to download games, ringtones, graphics, and other content, companies are making it easier for parents to restrict what their children have access to. This serves not only to limit billing surprises but also to protect children from mature material. However, there is no rating system in effect, so the carriers are the ones that decide what is mature, and this may vary from carrier to carrier. Note: Not all phones have the ability to control content. Locator Services Thanks to the global positioning system (GPS), some cell phones are now able to transmit the exact location of the phone in real time. This has many uses in the business world, and can be used by emergency personnel (in some areas) to respond to 911 calls. Most new cell phones are GPS-capable. GPS can also let parents know where their kids are at any given time (or at least where their phone is). Some carriers are beginning to offer this location-based service as an optional “peace-of-mind” feature. For example, Verizon offers Chaperone for the LG Migo phone. In addition to letting you know where the phone is, an additional feature lets you receive an alert when your child enters or leaves a specified zone (e.g., school). Sprint Family Locator service offers many of the same features, and is available with many Sprint and Nextel phones. Wireless AMBER Alerts
AMBER Alerts notify the public of an abducted child. You can receive these notifications, via text message, on your cell phone through an arrangement between the wireless industry and law enforcement agencies. There is no charge. Using Zip Codes, you can limit the alerts you receive to those relevant for your location. To receive AMBER Alerts on your phone, click here.

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While several competing digital technologies are in use in the United States, much of the rest of the world uses GSM exclusively. Further complicating matters is the fact that the frequency band used by the GSM carriers in the U.S. (e.g., Cingular and T-Mobile) is not the same as that used in other countries.

Where Different GSM Frequencies Are Used . . . a Sample List 850 Band 900 Band 1800 Band 1900 Band Canada Africa Australia Canada United States Argentina Europe Caribbean Asia (except 3G* Chile countries) Guam Australia Latin America Brazil Mexico Europe Peru Middle East United States South Pacific
Visit for more specific country and provider information. *3G is the next generation of wireless technology. It has been widely adapted in Japan and South Korea, and phones sold in the U.S. will not work on the networks in these countries.

If you think you’ll need a phone outside the United States, there are several ways you could go. Here are a few of the main ones:

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Option 1 — Get GSM service from a U.S. carrier and select a multiband GSM phone as your handset. Carriers now offer multiple-band phones, including some that work on all four GSM frequencies (often described as quad-band). Visit our international page to compare phones that work on the dominant 900 MHz band. Before you travel, check with your carrier to make sure international service is enabled (it is often disabled by default for security purposes). Example You subscribe to T-Mobile and have a phone that works in the 900 MHz band. Your phone will work where that frequency is available, and you will be billed by T-Mobile for calls made overseas. People can call you on your U.S. number and find you around the world, but it can be expensive; rates can be more than $1 a minute. Check with your carrier for packages that might offer a lower price. Option 2 — Buy an unlocked GSM phone. GSM phones are controlled by a “brain” called a SIM card. SIM stands for “subscriber identity module.” If your GSM phone is unlocked, that means you can swap out SIM cards as needed. Your phone number will change with each new SIM card, so those calling your U.S. number will not be able to reach you. Example You buy an unlocked GSM phone that works on the 900 MHz band because you frequently travel to Europe. For each trip, you can purchase a prepaid SIM card at your destination from a network provider, or ahead of time from a U.S. roaming broker. The per-minute cost for this approach will be less than with option 1, and your incoming calls will often be free, but you will pay much more for the phone, as you are not purchasing it in conjunction with the wireless service of a specific U.S. GSM carrier. Option 3 — Rent an unlocked GSM phone. At the end of the day, this is the same as option 2, except that you will only have the phone for the duration of your trip. This may be a good idea for anyone who makes infrequent overseas trips, but who doesn’t like option 1, either because their phone isn’t compatible (e.g., they subscribe to a CDMA technology carrier) or because they don’t want to pay the high per-minute rates from their GSM carrier.

Electrical current in many foreign countries is different from that used in the U.S. When you travel abroad, make sure you have the necessary converter and/or adapter to keep your phone charged.

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As with computers and other newer technologies, the feature set on phones is growing all the time. For the consumer, this translates into a desire to have a new phone frequently. However, if you’ve ever tried to ask your carrier for a new phone, you’ve probably run into trouble getting it for anywhere near the price you see in the ads. This seeming paradox (new customers get better pricing than existing ones) occurs because most carriers spend considerable amounts of money to gain new business (see page 46). Since it takes the better part of a year for a carrier to start making a profit on a new customer, it would be economic suicide to give out a new phone annually. This situation leads to a high defection (churn) rate in the industry, as consumers with limited loyalty can (and do) switch carriers as their contract ends in order to get a new phone. This is particularly true in a world with number portability, which is one reason why we are seeing more two-year contracts and more linked pricing (see box below). While some carriers are beginning to change their thinking in this area, with discounted upgrade programs for long-term customers, the situation is still far from ideal. Linked Pricing
Remember MCI’s program Friends and Family of a few years back? It was a brilliant strategy to build loyalty, by getting MCI’s customers to recruit other members. Many of the wireless industry pricing strategies that we have seen of late, including an increased emphasis on family plans, the introduction of “walkie-talkie” service by some of Nextel’s competitors, and free mobile-to-mobile calling, all have one thing in common — they require multiple subscribers to take full advantage of them. This linking makes it more of an effort for users to switch to another service, and so it is a subtle way the carriers are using pricing to reduce defections.

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Once you are a customer of a certain carrier, you usually won’t be able to take advantage of the phone deals you see online or in stores unless you are adding a new line of service. This is true even if your contract has expired. Even the offers on the carrier sites themselves are generally reserved for new customers. With that in mind, your replacement phone options boil down to these: Change Carriers Easier to do these days with number portability (assuming you want to keep your number), but can be expensive if you are still under contract. The good news is that there are plenty of free or very low-cost phones available with new service; if you haven’t upgraded your phone in the last year or two you are likely to be surprised at the range of features you will get for very little money. Buy a New Phone Call or visit a retail store of your carrier and find out the price for one of their current model phones. Try negotiating for a better deal from the one they first offer. It never hurts to ask. Your chances of success will depend on how much leverage you have. If you are no longer under contract, if you have been a long-term customer, and/or if you are a high-revenue customer you might be able to cut a deal. Note that in most cases you’ll have to sign a new contract or extend your existing one. Alternatively, you can buy an “unlocked” version of a GSM phone from an independent retailer that you can then take to your GSMtechnology carrier for activation. Buy a Used Phone For those needing a low-cost replacement while still under contract, MyRatePlan works with a third party that sells used phones. Alternatively, you can try an auction website. But that can be a bit tricky. You’ll need to know whether or not the phone is locked or unlocked and what technology it uses. You should check with your carrier before you acquire a replacement phone from a third party to confirm it can be activated on their network.

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Millions of phones go out of service each year, usually because their owner upgraded to a new phone or switched carriers. Unfortunately, many of these unwanted phones end up in landfills, creating an environmental waste problem that is growing larger each year. Fortunately, the wireless industry and some entrepreneurs have responded with alternatives. Selling Your Phone You can now ship your phone to a company that will pay cash for it. The amount will vary, based on the model, its age, and its original selling price. These companies refurbish these phones and then sell them in bulk, often in other countries. In some cases, this provides a more affordable solution to those abroad who might not otherwise be able to afford a cell phone. Donating Your Phone There are a number of charities that will be happy to take your phone. Whether for victims of domestic violence, for the elderly, for public safety, or for the disabled, the device you can no longer use might help someone in need.

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Millions of Americans now rely on their wireless phone as their only phone. Younger people with more mobile lifestyles are leading the charge in this area. After all, if a teenager gets a cell phone and/or uses wireless exclusively while in school, they might not even consider a landline when they move out into their first apartment. But many other people are beginning to think the same way, and there is little doubt that the wireless-only population will grow. To determine if you might be a good candidate for “cutting the cord”, consider the following questions and answers. How mobile is your lifestyle? If you frequently travel or you find that most people are reaching you on your cell phone anyway, then you may no longer have need for a wired phone. How big is your household? Let’s say you have a spouse and two children and currently have a phone in each of four rooms. This can be handled by a single wired line. To replicate this with cell phones, you would need four separate phone lines. There are wireless family plans available to reduce the total cost, but this can still be far more expensive than a single landline number. Do you talk a lot? Most landlines are priced at a flat “all-you-cantalk” rate. At today’s prices, moderate users of wireless will find their bills competitive with landline bills. However, as the amount of talking you do increases, the cost advantage tilts toward the landline. Additionally, since airtime is counted whether you make or receive the call, you might find that talking exclusively on your cell phone results in using more minutes than you might expect. Are you okay with occasional dropped calls and/or bad reception? Every time you pick up a landline, there is about a 100% chance that you will hear a dial tone. Wireless technology is not that reliable; signals can be influenced by network congestion, weather, and topography. Are you likely to need 911 services? If you call 911 from your landline, emergency services can locate you even if you can’t speak. The same is not yet true in all areas with wireless. If access to 911 is essential to you, we recommend maintaining some level of landline service.

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How do you get your Internet access? Cable modem service comes through cable TV lines. However, DSL and dial-up modem access will usually require you to maintain a landline. In addition, you may want to consider the impact of the following: Data use Burglar alarm monitoring, satellite TV, faxing, and a digital video recorder may all need a landline. In some cases, work-arounds are possible, but these should be investigated before you cancel your service. Number portability You can now take your home phone number with you when you go wireless if the wireless carrier you choose covers the same local area as your landline carrier. Note that wireline-to-wireless porting requests may take several days to complete. Telemarketing Historically, most telemarketing calls have been to landline phones. As people go totally wireless, and start providing those phone numbers when making purchases, it is inevitable that telemarketing calls to cell phones will increase. Number portability adds to this possibility, as it will be less clear to telemarketers over time which numbers are landline and which are wireless. Battery life Cell phones, particularly those with the newest features, often require recharging after just a few hours of use. Contracts Unlike your home phone, wireless plans usually require a one- or two-year contract, with cancellation penalties of $150 or more. White pages There is no centralized directory for finding a cell phone number today. As a result, people may not be able to find you if you are completely wireless. (Of course, this may not be a bad thing.) All-you-can-talk plans If you decide to go totally wireless, but only need your phone locally, consider an all-you-can-talk plan, offered by carriers like SunCom, Cricket, and MetroPCS in certain areas. These plans offer unlimited wireless service in a small local area.

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In the past, when someone switched wireless providers, they were required to change their phone number. The arrival of wireless number portability in late 2003 enabled customers to take their phone numbers with them if they changed carriers. Important Things to Keep in Mind about Portability Most important Sign up with your new carrier before you cancel your old service. If you cancel your existing service first, the number might not be transferable. Once the process is complete, service to your old phone should be automatically disconnected. You can port your number to another carrier even if you are under contract. However, you must still honor the terms of your contract, which in this case probably means a contract termination penalty. You can port your number even if you still owe your current carrier money. However, this does not release you from that obligation. While your number is portable, your phone usually isn’t; in most cases, you’ll need to get a new one (see page 10). You can port your number between wireline and wireless numbers. Keep in mind that while wireless ports can take as little as a couple hours, wireline-to-wireless moves may take several days. Portability is local. This means, for example, that if you have a Boston number on your cell phone but move to Miami, you generally won’t be able to port it directly with a Miami carrier. Prepaid numbers are portable (see page 17), as are fax numbers; 800 numbers and pager numbers are not portable. To be eligible to port a number, you must be the primary account holder. So, for example, if your service is in your company’s name, you will not be able to transfer that number. During the porting process, your ability to call 911 may be impacted. As you move from one carrier to another, it is possible that 911 calls may be relayed incorrectly.

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Throughout this guide, we’ve highlighted a number of issues that affect what you will pay for your cell phone and your plan. In this section, we offer a bit of background on the economic factors of the wireless industry to help explain why plans and phones are priced the way they are and how wireless companies make money.

It costs a cell phone company about $350 to acquire a new customer. This amount varies depending on where the customer signs up (carrier store, independent retailer, or online), but when the commissions, phone subsidies, and marketing are added in, $350 is a reasonable ballpark figure. So, basically the carrier is $350 in the hole when you start your service and they need to make that up before you become profitable to them. Thus, the carrier wants you to commit to spending as much as possible each month so they can recoup that $350 as quickly as possible. One way they do this is by making rate plans progressively more attractive as you agree to a higher monthly commitment. So, while a carrier might offer just 250 minutes for $29.99 a month, it might offer 600 minutes for $39.99 a month, with a free phone and unlimited nights and weekends. The other carrier goal is to try to make you stick with them at least long enough for them to get that $350 back. This is partially the reason for requiring a contract.

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Most of a carrier’s costs are fixed, except for the initial outlay they spent to acquire your business; they don’t have to put up any new cell towers or hire extra staff just because they signed you up. Therefore, the customer who uses 1,000 minutes a month really doesn’t cost them much more than the customer who uses only 200 minutes. So the more you spend each month, the faster you will be profitable for the carrier.

As you can see in the above chart, the $59.99 customer becomes profitable three or four months sooner than the $39.99 one, while the $29.99 customer may take longer than a year to reach the point of profitability. Since the price for voice airtime has been falling in recent years, the ability to gain additional customer revenues through new data services is going to prove critical to industry profitability in the years ahead. How You Can Benefit Because of the importance of revenue, you will often find that the best deals on phone prices come when you commit to a rate plan of $39.99 or more per month. This is particularly true when buying online from an independent retailer. Carriers tend to pay less commission — and thus phones are subsidized less (and thus more costly for you) — on lower-priced plans.

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Ignoring acquisition costs, let’s take a look at how the carrier makes money on you each month. Let’s say you have a $39.99 rate plan that includes 600 minutes, with additional minutes costing 40 cents each.

As you can see, up to 600 minutes, you are paying the carrier $39.99, so their profit decreases a bit with each minute of airtime you use. As discussed above, this is not a great immediate cost for the carrier, but use of the network does affect capital spending they will be forced to make over time, so ideally they’d like to take your $39.99 and have you not use the phone at all. However, in reality the carrier would like you to talk more than your allotted minutes on your $39.99 plan. This overage rapidly increases your bill — and thus raises profits. Overage used to be a huge moneymaker for the wireless industry, but this has become less true as competition has forced the carriers to bundle more and more minutes into lower-priced plans. How You Can Benefit. On the long-running TV game show The Price Is Right, a contestant’s objective is to get as close to the right price of a particular product with his or her guess without actually exceeding the price. That is exactly your goal in selecting a plan — to get as close to the actual number of minutes you need without exceeding that number.

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Allan Keiter is the founder and president of MyRatePlan. After earning an MBA from Columbia University in 1991, Mr. Keiter embarked on an eightyear path working on the pricing and revenue management strategies and tactics for several large service companies, including United Parcel Service, Continental Airlines, and BellSouth Cellular (now Cingular). During this period, Mr. Keiter was constantly amazed at the layers of complexity that often accompanied the pricing rules for these industries. Sometimes, the exceptions and fine print in advertisements were lengthier than the ad copy itself. With the advent of the Internet, a tool became available to cut through the fine print and make consumers comfortable that the service being purchased was indeed what they needed. This led to the formation of MyRatePlan in early 1999. Under Mr. Keiter’s leadership, MyRatePlan has been and remains a profitable Internet company, posting significant growth from year to year. The company’s niche as a comprehensive resource for unbiased information has been noted in a variety of publications, including The Wall Street Journal and Money magazine, and on NBC’s Today show. Mr. Keiter’s career began with a B.S. degree in accounting, followed by five years of financial accounting and analytical work for Citicorp, Salomon Brothers, and a start-up investment management firm. During this time, he passed the CPA exam in his home state of Pennsylvania.

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