Contracts? We don't need no stinking contracts!

Contracts? We don't need no stinking contracts!

Summary: I've been living with my Nexus 4 for a while now, contract-free and happy to be rid of Verizon. It seems I'm not alone.

TOPICS: Mobility

My Great Debate this week with ZDNet Healthcare blogger Denise Amrich had us looking at the impact of unlocked phones on the wider wireless market. Having lived with an unlocked Nexus 4 for a few months now, I can very confidently paraphrase the classic line from Blazing Saddles (among other books and movies): "Contracts? We don't need no stinking contracts!"

A lot of people use pre-paid, no-contract phones. They’re first phones for kids, first phones for people old enough to remember operator assisted calls and party lines, phones for those with inadequate credit to get a long-term contract from a major carrier, and, increasingly, pre-paid phones are making their way into the hands of the technorati who want an unlocked smartphone.

That said, the majority of these phones are feature phones and pre-paid plans and carriers feel second-rate at best to the average consumer in the US. Even the major wireless providers in the US are getting in on the act, offering their own pre-paid plans (though largely marketed to non-technical buyers).

All of this has changed, though, with the Nexus 4 on deck and unlocked iPhones increasingly available. The Nexus 4 in particular was never intended for sale through a carrier like most phones in the US. Rather, Google bypassed the restrictions, painfully slow Android updates, and other nonsense that carriers bring to the table.

And consumers have spoken. Google can’t keep this unlocked superphone in stock, even with the absence of 4G capabilities. Consumers also gladly plop down top dollar for unlocked iPhones, march out to their nearest convenience score, and activate their phone with a simple SIM card kit.

So why the change? Because contracts are expensive, restrictive, and rarely come with unlocked phones. A variety of Android phones are launching on pre-paid carriers as well at very aggressive price points. The Tracfone of the early 2000’s is long gone (although Tracfone, owned by a Mexican telecom company, actually owns most of the pre-paid brands in the US) and a broad cross-section of consumers is happily jumping on the bandwagon, saving money and switching phones on their terms rather than waiting for the magical end of their 2-year contracts to upgrade. There is simply too much innovation happening in the mobile space for people to be bothered waiting for updates that might never come or foregoing that great new phone they want because they aren’t yet eligible for an upgrade.

As I noted during the Great Debate and moderator Andrew Nusca reiterated, the only sticking point here is the enterprise:

But there's a big asterisk on the pre-paid market, and that's the IT organization. "Procurement becomes an issue," Mr. Dawson said during the rebuttal stage. That's a big blocker here: the traditional one-stop-shop mentality that IT harbors is at risk here, even though most consumers focus on the impact of contracts on their wallets.

Nonetheless, most people know where they stand. As BYOD takes over the enterprise, those people might find themselves on the same side as IT for once. And wouldn't that be nice?

In fact, the wider availability of unlocked phones that can be used with a variety of carriers may be the best thing to happen to the enterprise since companies like Dell and HP started delivering mass market commodity PCs. Imagine the opportunities for resellers to now deliver mass market commodity smartphones, pre-configured for deployment in an organization on whatever carrier could provide the best price for airtime. Being able to negotiate substantial savings with a new breed of wireless resellers by buying in quantity. Or being able to more easily support BYOD, which, as Andrew points out, is where most of us are headed.

Andrew asked us to look into our wireless crystal ball and predict where the industry would sit in four years. I took a pretty big leap, but I don't think I'm out of line to suggest that the current trend towards pre-paid and unlocked phones would have a pretty significant impact on both consumers and the enterprise (in fact, more so on the latter):

Most importantly, though, when consumers and businesses want to buy phones and tablets (the latter, by the way, will replace phones for many individuals who simply use VoIP and a headset to make calls through their tablet which is their primary computing and communication device) will go to the same places where they would purchase computers, networking equipment, televisions, or any other electronics. Consumers will buy unlocked devices from big box stores and businesses will buy them from VARs or direct from OEMs, and manage them in the cloud, allocating bandwidth as appropriate to users. Gone will be the days of buying phones at the Verizon Store.

Or, I should add, through expensive corporate contracts with Verizon or AT&T. And that's a good thing for everyone involved.

Topic: Mobility

Christopher Dawson

About Christopher Dawson

Chris Dawson is a freelance writer, consultant, and policy advocate with 20 years of experience in education, technology, and the intersection of the two.

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  • Welcome To The Rest Of The World

    This is how things are commonly done in GSM markets (pretty much the entire world apart from the US): you can buy a phone, and THEN choose which carrier you want to connect to. Your choice of phone isn't dictated by the carrier.

    Notice how the new phone models appear just about everywhere else first, and the US is the last to get them? That shows you how little competitiveness there is in the US phone market.
  • Unlimited

    That's the only thing that would get me back to AT&T or Verizon and it better include a free Hot spot!

    The carriers got Greedy killing the unlimited plans and forcing people off of them. All for what? Potentially an extra $10 a month? Not for me, I use between 5 and 6 gigs a month and never get throttled or charged extra from Net10. Crud, my wife and I pay half what we used to pay and still use the AT&T 3G Network.
  • Not Blazing Saddles

    It's sad when people don't give the original any credit. The line is from "The Treasure of Sierra Madre". And no, the movie was not the first place the line appeared.

    As far as the article, easier said than done. I don't know how IT is supposed to do all the is blogged and predicted with smaller budgets every quarter.
    • Original credit?

      Original credit would be nice, but at least the author remembers the line from Blazing Saddles. To be honest, most people haven't seen Bogart go crazy in "The Treasure of the Sierra Madre". As long as he's accurate with the credit, and he was, it shouldn't matter whether he attributed it to the original source our a later source.
  • Let's see the specifics

    Chris please specify what prepaid plan you are using and how you are able to achieve savings versus Verizon.
  • FreeMobile

    In France we have a new mobile service provider (just over a year old) called FreeMobile, which offers two subscriptions without contract:
    - 2€/month: 2h of voice and unlimited SMS/MMS
    - 19,90€/month: unlimited voice with free calls to over 40 countries, unlimited sms/mms and unlimited data (with reduce broadband after 3Go)

    And this has made people realize that their phones do not cost 1€ or 150€ but more like 700€ after a 2 year 45€/month contract.
    The competing carriers were just keeping the difference between paying your phone and the voice/data blurry on purpose.

    All this thanks to more competition, and although competitors have lowered their prices almost accordingly their image is deteriorated for having locked customers with expensive contracts.
  • Left Verizon after 8 years and went to T-mobile and could not be happier!

    I bought 2 Nexus 4's (Great Phones!) and went to T-mobile and activated them for my wife and myself. We opened a business account and it costs us $50 each with unlimited data, unlimited calls and unlimited texts. I know that the data is max out at 5 gigs and then gets throttled down, but we both get 5 gigs and we can use it as a hot spot when we want. We were paying $200 a month at Verizon sharing 700 minutes and getting texts all the time telling us that we were almost at our 700 minute mark. Now we just use as much as we want and pay half the money. I will never own a locked service provider phone again!
  • No Contract, but that's different from pre-paid

    I have used prepaid phones for many years, first Tracfone and then the Net10. I don't use my phone much and don't want to pay $50.00 a month or more. I purchase the prepaid cards with time that rolls over as long as you keep your phone active and I have about 13,000 minutes accumulated. This costs about 20 dollars a month.

    I cannot get a smartphone from net10 without switching to a monthly plan that starts at a minimum of $ 45 dollars (auto renewal). Yes, it's nice to not have a contract, but it would be nice for them to support the prepaid plans on these phones as well.
  • US only?

    Here in the UK, there is no rise in unlocked phone purchases. There probably isn't as many routes to unlocked phones as in the US? The closest you'll get is increased sales of unbranded phones through the likes of carphone warehouse.
    However, in terms of contracts, certainly in the UK, it depends how you purchase. If you rush out and buy the first deal you see, you'll pay over the odds. Be selective and it costs the same or cheaper. S3 off-contract was £450+, then you need the monthly plan, at least £10 p/mth for equivalent terms = £690 for 2yrs. Contract at £26 p/mth with up front phone cost of £50. So over 2yrs I effectively pay £16 less. Off-contract I need to shell out 450 notes up front. Why would I do that? It may be different where you are but personally I have no desire to skip around carriers, I'll use the one that the research suggested was the best total value.
    Little Old Man
  • Happy to be ON Verizon!

    Seriously... LTE on Verizon is AWESOME. Can't imagine going back to using 3G after moving over to Verizon on iPhone 5 launch day. Incredibly speedy, works everywhere...even inside Wal Mart... and the bill is competitively priced. Yes there is a data cap... but you can pay for extra if you need it. I haven't gone over it yet and I haven't even paid attention to it until the bill comes... I follow the simple rule of only downloading big things when I am at home on my wi-fi... no big deal there.
  • Would it work...

    ... if I buy a Nexus 4 in the U.S. and bring it to Mexico and place a prepaid Telcel/Movistar SIM card in it? That would be great.
  • Unlocked iPhones

    Anyone demanding Wikr and other security assurances, available only with iOS, must pay a ridiculous order-of-magnitude premium for unlocked vs contract hardware. And, the infamous-engineered security of iOS is gone if the unlocked iOS device is jailbroken.

    Unless buying a used or predecessor model#, it takes 2-years of monthly savings from Movi, or unlimited everything carriers like Straight-Talk, net10, etc.., before unlocked breakeven occurs.

    Yes the unlocked-SIM platform can be used anywhere in the world, but upgrading to the latest, unlocked iOS hardware is ridiculous, and cost more than contracts if you don't wait for breakeven between purchases.

    Cost advantages of unlocked iOS hardware occur only when buying unlocked-obsolete models, such as a new iPhone 4s --32GB than still runs the newest OS--, or risking used unlocked equipment of the latest hardware on secondary markets.
  • Prices Drive Contracts

    While I agree with your premise and even applaud it, I think it misses the point of the discussion concerning contracts. Right now buying a phone with any kind of smart features is more expensive than buying a tablet. A look on line finds me Nexus 7 tablets for $200 all day long but the best price I saw on a Nexus 4 was $450.

    The price of unlocked phones is what drives the contract market right now. You get the new smart phone for only an up front fee of around $100. Sure your in a contract but the fact you actually get a current phone without a big out of pocket expense is a big deal.

    Once we see unlocked phones at the $200 price point or so, then they will be a much more attractive option.
    Edward Crisler
  • My SIM-only contract is the best

    Finally the market is maturing in the US as well.

    Here in Europe signing a 2-year contract to obtain a new phone now seems to be something for adolescents to get their hands on that new shiny phone only. Nowadays a lot of contracts are SIM-only, and I am one happy customer. I recently got a new contract because the conditions just were better. Now I pay € 15 a month instead of € 50 a month a couple of years ago.

    Bought a new model iPhone that needs a smaller SIM-card? No problem, you just get a SIM-swap for € 5 ... If you need a new contract because you call less frequent or just need that extra GB, you just switch to another contract or provider.

    It is also cheaper:
    iPhone € 676 + SIM-only contract 24 x € 15 = € 1036
    iPhone + 2 year contract = € 169 + accompanying 2-y contract 24 x € 46 = € 1153

    Have been on a SIM-only contract for years now, I like it every day!