When Gadgets and Spreadsheets Collide

Mark and I discovered early on just how complex and expensive cell phones can be in the US. Because we already owned carrier unlocked smartphones, we went with Straight Talk, an MVNO running on AT&T’s network. Straight Talk offers unlimited talk, text and data (technically your data is capped at 2GB/month) for $45/month/line. This definitely beat the comparable option with AT&T directly, which runs $85/person, $130/month for 2 people sharing 1GB of data, or $150/month for 2 people sharing 2GB of data. Unfortunately, it’s still been a relative downgrade from our UK service, where, with an out of contract phone, you can get near unlimited (or certainly surplus to our needs) talk & text + 1GB data for £17.50/month ($28-ish) with pretty much any of the major carriers. 12- and 18-month contracts also still exist in England, which is unheard of this side of the Atlantic.

The Straight Talk service has been pretty good. Unlike some other MVNOs, you can sign up for auto-enrollment rather than having to manually log in each month before your service runs out (if the service does run out, your SIM is rendered useless and your phone number is lost forever). Mark and I have had a few data issues, like slow connection speed and occasional data drop out completely (despite showing a 4G connection). My issues are primarily concentrated around when I leave a wifi connection (like home). I have to momentarily disable data entirely (switching airplane mode on and off) in order to actually get it to connect to the data network properly. It’s been a minor inconvenience (especially for gadget junkies like Mark and me), but not a a major issue to be fair.

When the iPhone 5 was announced, I contemplated whether or not to upgrade. A lot of people, especially people with a 4S like me, can’t justify the marginal improvements. Lighter, thinner, longer, more powerful chip – most of it is negligible or unnecessary for the ordinary user. But, I’m an admitted geek and a bit of a gadget junkie. Aside from their very first iPhone release, Apple has effectively been on a 2-year upgrade cycle (likely driven by the US cell phone carrier model with 2-year contracts). I initially started on the generational rather than incremental upgrade path – the iPhone, then the 3, then the 4 (skipping the 3S). Last year, I decided to upgrade to the 4S a little late in the game (in late November rather than during the October release), partly because of the much improved camera, but also – to be honest – as a Christmas present to myself following an unexpected bonus. I’ve really loved my 4S, but it left me in a bit of a conundrum – do I stay on the -S upgrade cycle, or do I ditch this phone less than a year in for the next model? Ultimately Mark and I decided together that I might as well upgrade to the 5, and simply vow not to get a 5S next year. Our logic is that you’re benefitting from the newest technology more quickly if you adopt the new generation immediately rather than waiting until the incremental tech upgrade the following year. We also figured I might as well switch over to the new Lightning adapter sooner than later, since we don’t currently own any plug-in accessories.

Unfortunately the exclusivity agreements between Apple and US carriers mean you can’t buy an unlocked iPhone 5 on release day. Patience isn’t really my strong suit, so I momentarily considered upgrading on one of the main carriers so I could upgrade immediately. I figured since I was promising to wait another 2 years to upgrade, it didn’t make a huge difference whether I was under contract or not. However, running the numbers, it didn’t make sense:

iPhone 5 out of contract: $749 handset + $45/month = $1,829 total cost after 2 years**

iPhone 5 with AT&T: $299 handset + $85/month = $2,339 total cost

iPhone 5 with Verizon: $299 handset + $90/month = $2,459 total cost

The spreadsheet won, and I didn’t want to pay an extra $500-600 over 2 years on account of impatience. Plus, I didn’t like the idea of having a locked phone, which I couldn’t use overseas (we’ve kept our UK SIMs so we can use our old numbers and carriers when we visit, and also found it easy and helpful to be able to buy a local SIM for phone, email and map usage when we’re on long trips like last year’s New Zealand adventure).

This morning, however, reading Mr. Money Mustache’s article about downgrading his service, I had an aha moment*. He called $120/month for 2 data lines a “Cadillac service”. $120/month on a major carrier? With 2 MVNO data lines, we’re paying $90; Now we were talking about an extra $30/month between 2 people (plus the benefit of subsidized handset costs) rather than an extra $40/month for one person. This might make a difference, especially since Mark will be upgrading his phone imminently, too, and with more justification than me. You see, Mr. O – always an avid Windows lover, supporter and developer – embraced the iPhone early on (I won him over to the Think Different side several years ago when I bought him his first iPod, and again when I gave him an engagement iMac to thank him for my engagement ring). However, he switched to a Windows Phone last year (he still uses Mac hardware elsewhere, so I’ve not lost the war!), because he supports Windows new technology and (more importantly) can easily leverage his existing C#/.NET programming knowledge to write apps. Because he is an active Windows Phone app developer in his personal time and now collaborating with a friend who started another successful WP app, he has a legitimate ‘need’ to stay technically current. So, it was time to run the numbers again.

This time, we were comparing our existing MVNO, Straight Talk, with Verizon. The aforementioned dev friend has been raving about Verizon’s LTE speeds, and we (ok, I) have been more than a little jealous. If we’re going to tie ourselves to a carrier, we might as well get a better data speed. Plus, it’s been widely reported (and confirmed) that Verizon’s iPhones are actually carrier unlocked, so I could still use it while travelling abroad (unfortunately I’m doubting the same will be said for Mark’s future phone, but, as my Mum would say, it is what it is). Another benefit with Verizon, which we forgot to consider before, is the corporate discount through Mark’s employer (something I also realized reading the MMM article this morning). These 2 year total cost of ownership figures factor in resale value of our current handsets (based on selling the phone to a reseller for a fixed price rather than dealing with the uncertainty, hassle and cost of eBay auctions):

Option 1 – Do nothing: (maintain existing phones on existing network): $0 handset, $0 resale, $90/month = $2,160

Option 2 – New out of contract phones on Straight Talk: $1400 handsets, -$479 resale, $90/month = $3,081

Option 3 – New phones on Verizon, sharing 1GB data: $500 handsets, -$479 resale, $110.50/month = $2,673

Option 4 – New phones on Verizon, sharing 2GB data: $500 handsets, -$479 resale, $119/month – $2,877

Assuming we are both definitely going to upgrade our handsets (ie excluding option 1), it is actually cheaper to switch. And we get LTE! In fact, should we be so blown away with the data speed, we start hammering the service and need to upgrade to 4GB/month (3GB isn’t an option), the total 2 year cost is $3,081 – exactly the same as Straight Talk (which does offer flexibility, but also an inferior service).

Contacting Verizon this morning, I also learned a few other things.

– We can upgrade or downgrade our data allowance at any time. So, we can start off with 1GB and upgrade as necessary, rather than trying to predict our usage. If we upgrade our allocation and then reduce our usage, we can downgrade the plan.

– Verizon’s early termination agreement for these fancy phones is $350 minus $10/month for however many months of your contract you’ve fully completed. Honestly, I’m surprised this hasn’t been changed again (it was $175 minus $5/month until 2009, at which point ‘premium phones’ adopted a higher fee). You could technically get a cheaper out of contract iPhone 5 by buying one at the contract price and paying the termination fee immediately ($300 + $350 = $650), rather than buying one out of contract for $750 (it would also be a crafty way of getting an unlocked phone now; all prices assume a 32GB model).

– Because we plan to use Mark’s employee discount, the phones need to be registered in his name. Being a brand new resident in the US, with a sub-2 month old SSN, he has no credit history. Like, at all (we’ve gotten him a secured card we use for gas purchases just to develop some history and get him into ‘the system’). With our current pre-pay phones, it’s not an issue, but with services like Verizon, you are effectively offered a line of credit, because you can run up huge overage or roaming charges. We’ll be required to pay a deposit of $400/line to activate service in his name. Thankfully, however, after 12 months of on time payments, they refund your deposit with 3% interest (which is actually better than pretty much any savings account right now!).

So… I think we’ll be making the switch. We are still begrudging the relative rip-off status compared to the UK (although the unlocked handset in the UK is more pricey – £599 or $960, the total cost over 2 years for 2 unlocked handset is only $2,306). But, given our geekiness, gadget affinity and options, the numbers indicate it’s time to go contract (in fact, if we do opt to upgrade again in a year and pay the termination fees, our total ‘premium’ is only $300 between the 2 of us. We’re still planning to keep our new devices for 2 years though).

*It is possibly the ultimate irony that a MMM article about dropping his monthly service to $10/month/person inspired me to want a $110/month phone contract. In fact, I was extremely reluctant to post the link to his article, just in case he finds his way back here as a result. However, as an early Mustachian adopter, I’ve interacted with MMM for some time now and even met the Mustache family in person. He has relatively detailed info on our personal finances and knows a combination of luck, hard work, planning and lifestyle choices have put us in a nice place. Disparaging remarks and complaineypants jokes aside, I am certain he’d agree this is a conscious spending decision we can afford to make. 🙂

**Yes, I realize some people will brand me outright crazy for even considering spending nearly $2k on a phone over 2 years. I know, I know. I don’t have a huge number of expensive hobbies or interests, but gadget love is kind of my weakness.


One comment

  1. […] the basis of my husband’s livelihood, it is brings us a lot of joy. We love gadgets – especially if we can have lengthy discussions about how to get the optimal technical solution in the… (a recurring theme for us). We love entertainment – whether it’s keeping up to date with or […]

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