Verizon has been my carrier since high school, and I have a lot of good things to say about their service, but it wasn’t until I started paying my own cell phone bill that I could appreciate the economics at play. If you are like me, you are accustomed to being able to call or text anyone from anywhere at any time, and to download and run apps to boot. These abilities are not free, but they are very useful, and therefore worth a certain cost. I’d even go so far to say that these abilities are worth as much as $86/month (what I had been paying Verizon). But we live in a free-market economy and luckily Verizon is not the only option. After researching my options, I chose a new carrier and plan that made more sense considering my usage. This is the story of that experiment.
Last summer I was really looking forward to my cell phone upgrade. I had the date memorized, and when it arrived I walked into the Verizon store hoping to leave with a free new phone. On that day, I learned that their “free upgrade” program had changed to a “discounted upgrade” program due to the ubiquity of higher-cost smartphones. Instead of biting the bullet and forking over my hard-earned cash, I gave myself some more time to think about it.
The first good thing I have to say about Verizon is that their web portal for account maintenance is excellent. I’m sure the other big carriers are comparable. My usage statistics were easy to find and interpret, and I present them to you. On average, I was using 95 minutes and 172 texts per month. This was far below what I was allotted based on my current plan, which I had chosen because it was the smallest available at the time. Why was I paying for unused minutes and texts? I couldn’t tell you.
My research turned me on to MVNOs (Mobile Virtual Network Operators). Their business model is to buy access to the major networks at wholesale rates and offer their own retail packages. This Airvoice Wireless plan was recommended by Mr. Money Mustache, so I crunched the numbers. 95 minutes at $0.04 per minute is $3.80 and 172 texts at $0.02 per text is $3.44 which comes out to a total of $7.22 for my projected monthly cell phone usage! Even if I talked or texted more than usual I would be unlikely to use up all $10 per month. This was the plan for me.
It was a good thing I didn’t take Verizon up on their discounted upgrade, because that would have locked me in to a contract with them again. On the other hand, my cell phone was locked with Verizon (even if I wasn’t) and had no SIM card slot. Even though my old cell phone worked fine, I would have to buy a new unlocked phone in order to switch services. Looks like I get to upgrade after all! I settled on a $300 refurbished Galaxy Nexus. The cost was justified, since it will pay for itself after 4 months on the new plan. I may also be able to sell my old phone on Craiglist or eBay.
A week later both my new phone and my new SIM card from Airvoice Wireless had arrived. I called up Airvoice’s support number and had them port my existing phone number. No phone number change required! I was put on hold for a while, but that is to be expected with a smaller company (the second good thing I have to say about Verizon is that their customer service is excellent). After my phone number was ported I was good to go!
I spent the next week getting to know my new phone, and installing all the apps I was used to. I spend 90% of my life in wi-fi hotspots, so I disabled the cellular data transfer setting and took advantage of my new free unlimited wi-fi data plan. I also set up a number with Google Voice and use their app for texting, making all of my texts free as well. Every time I make a call, or text without using Google Voice, I am notified of my current balance.
So there you have it. By waiting out my old contract and breaking free of the comfort of “unlimited” plans that really cost you more than cheaper plans that explicitly define each of the individual costs, I saved $76 a month. This translates to $912 a year, or the amount generated by $22,800 of retirement savings with a 4% withdrawal rate.