Contracts vs. prepaid: there are some benefits to knowing what you’re going to get

Contracts vs. prepaid: there are some benefits to knowing what you’re going to get

Summary: Smarting from her Great Debate trouncing, Denise Amrich attempts to explain one last time that prepaid phones are a Wild West of chaos and off-brands. Contracts are the basis of the Service Level Agreements that every IT operation knows and loves, for good reason.


I am not, by nature, a highly competitive individual. I like to live and let live. On the other hand, I’m not exactly a fan of losing.

I say this because of a recent Great Debate between Chris Dawson and myself. I like Chris. In fact, he was the person who introduced me to ZDNet as the potential health blogger, a few years ago. So, when we had the opportunity to engage in a debate, I gamely took it on.

The results were interesting. I took the side of “contracts are good,” looking at the need for contracts from the perspective of the IT organization. Chris took the side of “prepaid is good,” looking at the preference for prepaid (or a lack of lock-in) on the part of most consumers.

You could, in theory (okay, and pretty much in practice) say that Chris won, because 95 percent of the popular vote (and the judgment of our editor) sided with Chris’s argument. You guys gave me a measly 5 percent.

My argument was predicated on a simple concept: the prepaid plans are a Wild West of chaos and off-brands. Sure, the Nexus 4 is now available for purchase without a plan, but there’s no indication on the Google site of what phone service will work with it.

Overall, from the perspective of the typical techie, who is willing and able to research the ins and outs of each individual gadget and plan, prepayment is a freedom that’s hard to beat. But from the point of view of a typical consumer who barely understands the difference between Android (“Isn’t that just a Droid”?) and iOS (“What’s that? I want an iPhone.”), navigating the intricacies of prepaid plans, communications networks, and devices could become seriously problematic.

From the perspective of the IT organization, dealing with a never-ending stream of BYOD users, bringing in phones and devices of all types, from services known and obscure, simply makes the challenge of managing a network substantially more difficult. It also opens the door to an almost mind-boggling array of security problems.

So here’s how I see this whole debate. Prepaid is great for individual techies who want control and want to save some money. I, personally, might even go for a prepaid plan when my iPhone contract is up. I don’t want to spend $100+ a month and not make more than five phone calls.

But contract deals with reliable carriers are far better for IT organizations and may, also, be far better for people who can’t navigate between weird carriers. For example, I got spam the other day hawking CREDO Mobile, a “progressive” phone company that claims to be “more than a network, a movement.” Who knew? There are hundreds of these weird, off-brand, cheap “no-contract” mobile companies out there that IT people are going to be cursed with supporting.

I would venture to guess that there will also be a few scams out there that will make the contract termination fee look like chump change. The support challenge (and possible disappointment level) from those who buy their plans and can’t predict their service levels could be quite substantial.

Also, from an IT perspective, think about this: why do so many companies insist on Service Level Agreements? These are, essentially, contracts. Companies and lawyers and stockholders like contracts. So, I see contracts as here to stay.

You folks, on the other hand, voted against that in unprecedented numbers. 5 percent to 95 percent is quite something. You might say I lost this battle, but I choose to reframe it.

I may have gotten a lower percentage of support from readers for a Great Debate than any other debater in our history. So, from that perspective, I probably set a new record. Let’s see someone beat that!

Slightly amused sour grapes aside, it’s always fun having these conversations with our readers. I truly enjoy these debates and maybe, next time, I’ll take a side y’all agree with just a little bit more.

Let’s see, how about “Fast cars vs. root canals?” I’m thinking if I take the “fast cars” side, I have a better chance of winning. What do you think?

Hey, throw me a bone, here, okay?

P.S. Seriously, I had a blast. I love you guys!

Topics: Great debate, Mobility


Denise Amrich is a Registered Nurse, the health care advisor for the U.S. Strategic Perspective Institute, and a mentor for the Virtual Campus at Florida's Brevard Community College.

Nothing in this article is meant to be a substitute for medical advice, and shouldn't be considered as such. If you are in need of medical help, please see your doctor.

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  • I am one of the 5 percent ...

    I suspect that there were a lot of "I'm undecided" comments which didn't show up in your debate results. I also wonder how many of the "I'm for prepaid" respondents were actually contract customers who just WISHED they could get what they want from a prepaid service.

    I rarely use voice on my smartphone - and I don't use a lot of data because I use my smartphone for e-mail, and a little bit of web surfing. When my contract is up, I am going to 4G LTE so that may up my data usage somewhat.

    To be sure, if you don't use your cell phone every day, and/or you use fewer than 200 minutes per month, prepaid may be less expensive but it doesn't take long for you to reach the sweet spot where your usages exceeds the threshold for prepaid being cost-effective.

    When I got my first smartphone in 2004, I got my wife a "free" Tracfone. Quickly, that $0.20/min rate drove us into buying "service" in advance in order to get a $0.10/min rate.

    Before we knew it, we were paying rates higher than we would if we had a contract.

    Service providers always price their products based upon how much they have to get from each subscriber - balanced against what kind of customer they want.

    In the end, I suspect that most of those supporting Chris' position are paying more than they think they are for their prepaid service - more even than a contract would cost them.

    If you add in data services, the advantages of prepaid fall away even faster!

    I know I am paying a premium for my Verizon service but it is worth it to me to for the convenience and the knowledge that no matter where I travel, I will have voice and data service.
    M Wagner
  • cash-flow insurance

    We pay a fixed monthly charge for natural gas, electricity, satelite TV, home ISP, Netflix. Our usage for everyone of these items fluctuates. I am sure if we paid our exact usage, our accumlated charges might be less, or maybe not. What I do know is the impact on the family budget - our cash flow - is sort of static and predictable.

    The unpredictable part is the 'take or leave it' periodic price increases by virtual monopolies and don't coincide with increases in family income. I think State and local utility oversight functions are semi-useless, but that's a different rant.

    To the extent that I can do pre-pay and maintain cash-flow stability, I am all for it. To the extent that I have to sign a contract to achieve that, I'll deal with it.
    Jim Johnson
  • It pays to do your homework

    Many of the so called "off-brand" carriers are virtual network operators which means they buy wireless from the same big 4 who operate the major cellular networks in the US.

    Consider getting an iPhone on AT&T. Here's how the contract breaks down (per month):

    voice $39.95
    data $20
    messaging $20

    With taxes, that's $90 per month which works out to $2160 over 2-years.
    Even if you leave off the messaging plan, it's still $70 per month or $1680.

    You can use the same phone on AT&T's network with "AirVoice Wireless" for as little as $35/month or StraightTalk for $45/month. If you don't need data outside of WiFi, you can get T-Mobile for under $10/month.

    $35/month for 24 months is $600 plus $250 for an unlocked iPhone 4 works out to $850 over 2-years.

    The benefits of using AT&T over AirVoice are:
    4G LTE
    Visual Voice Mail
    optional Tethering

    For many, these aren't worth an extra $1000.

    As more high end users move to 4G LTE, these lower cost plans provide a continuing revenue stream from legacy 3G networks. There's no magic here, just businesses trying to maximize their return on investment. Market confusion gives them an information advantage which they are happy to exploit.

    Your value as a tech journalist is to help readers sort through the confusion. The recent debate serves just that purpose.

  • The rest of the world uses pre-paid

    It looks like the US is the 5 % and the rest of the world is the 95%.

    If you want freedom to choose your phone then go for the pre-paid, I am an expat (US citizen living outside the US) for the last 7 years. Real freedom is out there and real people are enjoying it.

    I can choose ANY phone, I can use it pre-paid or monthly contract, and I can have it paid as a monthly bill or choose to stop at any 7/11 and top it off. Oh did I say monthly contract, yes I can cancel any time I wish any month with no penalty.

    They have mobile phone departments as big as basketball courts with phones you have never heard of, the choices can make you dizzy. Or you can just go for the any of the popular ones. You don't just get to select from what some carrier is offering.

    It is time to break the strangle hold the carriers have on what phone you can have on their system, and the penalty of stopping a contract when you want. Sure you will pay more initially when buying the phone outright, but in the long run you will have the freedom.