Bob Sullivan from MSNBC speaks some truth about the prison of cellphone contracts:

One thing you don’t do: You don’t act like a rational consumer in a normal, functioning market economy. You don’t go buy the new phone, or get the cheap new plan. You don’t reward the more efficient company with your business. You can’t. You’re in jail.

[MSNBC] (Thanks, Everyone !)

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  1. jimv2000 says:

    I fail to see the problem here. You sign up for a contract to save $100 to $200 on a phone, but then wine when you have to (basically) pay them back for the phone for breaking the contract. Don’t want to be locked in? Go buy your own phone…it’ll cost you more though.

  2. ARPRINCE says:

    Nice read.

  3. Curiosity says:

    I think the problem comes in when that option is not available which implies an adhesion contract at times.

  4. hypnotik_jello says:

    @jimv2000: Sorry, you’re still locked into a contract if you BYOP.

  5. youbastid says:

    @hypnotik_jello: How so? You can buy unlocked phones at Amazon, or you can pay “full retail” at the company stores. The phones at the company stores are locked in to that service, but you can still sign up without a contract.

  6. Curiosity says:

    @youbastid: True but then as the article points out you may have just “spent” the money up front for breaking the contract.

  7. robdew2 says:

    I don’t know of any carrier that will REQUIRE that you have a contract. You can do month-to-month, prepaid, shorter contracts, etc. with almost all of them. Not to mention you can get good deals by working through a reseller as well.
    If you want to the latest phone at a subsidized price but don’t want to sign a contract, tough.

    It also apparently didn’t dawn on the author that the heavily regulated telecommunications industry might be so uncompetitive BECAUSE of the regulation. The more control the FCC exerts, the more they are likely to be gamed by the carriers — to the carriers’ advantage.
    You can’t even make and sell a phone without FCC approval for the device. Basic economic rules don’t apply, and you shouldn’t expect them to.

  8. jadenton says:

    Most carriers will still require a contract, even with if you bring your own phone. Sprint will allow you to bring your own phone, but will charge you an additional $25 a month on top of the cost of the phone.

  9. Buran says:

    @hypnotik_jello: Not always — prepaid service, for example, and I think a few exceptions probably do exist.

    That said, you can make some changes, like reduce the number of minutes you have per month, or buy a new phone that’s eligible for different plans, etc. A contract says you have to stay with a provider, but increasingly often you can change your plan with that provider.

    Example. I had a Windows Mobile phone that I couldn’t stand along with an $80/month unlimited data/text package. (Thought the phone would work out better than it did). I had bought the phone on my own through AT&T without renewing my contact (no subsidy on it, just employer discount). I switched to an iphone after trying a coworker’s out to see if I liked it, and I did. So I bought one, sold the old phone on ebay for more than I paid for it, and wound up with a better phone with a lower monthly fee ($20/mo less). Win. The only thing that bugs me is that I did have to extend the contract but I will go prepaid or month-to-month when the contract expires.

    The article also doesn’t mention that the example they use is one of the situations in which you can escape a cell contract citing materially adverse contract term changes, so the guy could get out of his Verizon contract if he wished.

  10. nweaver says:

    There are tricks where you can get a serviceable phone cehap.

    EG, I have an unlocked RAZR that cost me $130, which I use for world traveling.

    My Verizon phone (domestic) is a “pre-paid” $60 Nokia which I had transfered onto my main line when my main phone broke, so no contract extension.

  11. bearymore says:

    The big issue is that while you are locked in, the company can change the contract at will. If you (the cell phone company) change the contract, then I should be able to terminate it without penalty. When the person in the article signed a contract for messaging at 2 cents a message, his carrier had already factored in the cost of his phone in his monthly charges. With no change in terms, they would recoup the cost of that phone. If they fundamentally change the terms of the contract by raising message charges by 500%, then the other party to the contract should be allowed to terminate or be alter the terms of his plan (change to the $5 plan in the article’s example) without incurring a penalty or a forced contract extension.

  12. speedwell (propagandist and secular snarkist) says:

    Perfectly happy myself with my unlocked KRZR and T-Mobile prepaid. I use 100 minutes every 4 months or so (from 10 to 30 minutes a month depending on travel) so a contract is no use to me at all.

  13. youbastid says:

    @bearymore: There have been numerous articles posted to consumerist about how to get out of a contract when they change the terms. The person in the article probably never got past a tier 1 rep.

    The only way to counter “Gotcha!” Capitalism is to be “Gotcha!” Consumers.

  14. samurailynn says:

    Sometime last year I called every cell phone company I could think of and asked if there was any way to sign up for their plans without a contract. I specifically stated that I would have my own phone for use with their service. Every single company said that they absolutely would not give anyone service without a 1-2 year contract. There are prepaid phones, but often you have to pay for each minute used, and you’re not able to get the 400 anytime minutes + night and weekend minutes plans that you get with most cell phones.

  15. keith4298 says:

    @jimv2000: One word: iPhone

  16. Scuba Steve says:

    Cell phone companies, as well as cable and insurance companies, generally have their customers by the ball.

  17. mkguitar says:

    “A Detailed Guide To Making Pre-Paid Phones Work For You”

    [www.epinions.com]

    This is a great write up for the “less than power user”

    MK

  18. kc2idf says:

    @jimv2000:

    I fail to see the problem here. You sign up for a contract to save $100 to $200 on a phone, but then wine when you have to (basically) pay them back for the phone for breaking the contract. Don’t want to be locked in? Go buy your own phone…it’ll cost you more though.

    You can not get service from Verizon without signing a contract, except to pay highway-robbery rates for prepaid service. Fortunately, other carriers feel differently.

    Otherwise, you can buy a brand-new, budget-level phone for $70. You can get that same phone for free if you sign up for a two-year contract. If you break that contract, you will pay around $150-200. Even if the carrier pro-rates the cancellation fee, you still pay at least half for cancelling one day early. How is that reasonable?

  19. stinerman says:

    @robdew2:
    Actually the problem is that there is very little regulation, at least in the right areas. Europe figured it out. Define a standard and then let providers compete for service on equal footing. We have competing standards so that you need a new phone just to get on someone else’s network.

    Page 3 of the article details what I’m talking about. They don’t have this problem in Europe.

  20. jamar0303 says:

    I want the US to start following the Japanese model, where you actually get decent subsidies on phones (compare Softbank’s free phones with free phones on AT&T or Verizon- theirs inevitably come standard with a decent camera, QVGA screen, e-mail, movies, music, games, the works while those same phones are high-end on AT&T- the Samsung a717 compared to its Japanese counterpart the 706SC, for example) and an incentive to sign a 2-year contract (in Japan you get 50% off all your monthly fees for signing a 2-year contract and an additional 5% for each year you stay with them, up to 5 years- now that’s an incentive not to switch).

  21. Mr. Gunn says:

    Actually, with the contract subsidies, you DO get the cool new phone, faster than you would if you had to pay hundreds of dollars each time.

    I think the contract periods could be shorter, the subsidies could be higher, and maybe they could offset that with discounts on successive years of service, but I do like the idea of offering discounts for signing contracts.