The Web is buzzing with the news that Cricket, a wireless provider, is offering iPhone service for $55 a month, with no contract. This is the first time that the iPhone has been available by a carrier on a pre-paid basis and it’s an interesting offer. (It will be available on June 22.)
But before you tell AT&T or Verizon to buzz off, you need to evaluate Cricket’s offer and the quality of the company’s service. There’s a whole bunch of “gotchas” nested within, so you’ll need to think hard about how you plan to use your new smartphone.
The most widely reported gotcha is the price. Cricket will charge you a stunning $499 for a 16GB iPhone 4S, and $399 for the 8GB iPhone 4. That compares to $199 for the 16GB iPhone 4S from AT&T or Verizon, and $99 for the 8 GB iPhone 4.
Cricket offers what it calls unlimited data. But that’s a bit misleading. Under the company’s “fair use” policy, it will throttle back your download speeds once you’ve used 2.3GBs of data.
Quality of service and coverage is an issue. I have never used Cricket, but I did spend some time looking up consumer reviews of the company’s service, and they are not pretty. There are lots of complaints about poor customer service, with people saying they have trouble reaching a live person and that the people who handled their calls were not helpful, even rude. There are also a lot of complaints about dropped calls.
Having said that, it’s only fair to mention that Cricket and its parent company probably have millions of customers and the people whose complaints I saw on the Web are obviously far fewer. And people who are mad are much more likely to post something than satisfied customers.
Cricket says its service is nationwide, but when you call up its coverage maps, you need to type in your zip code to see if your area is covered. So it’s crucial that you check that before you sign up.
You can cancel Cricket whenever you want, while you’re stuck with AT&T for two years unless you’re willing to pay an outrageous termination fee. However, Cricket only pays off if you keep the service for six months, which is not very long, but it does mean that the boast of no commitment service isn’t exactly accurate.
As you may know, the reason the big carriers can sell phones relatively cheaply is that they essentially subsidize your purchase, and then make it up by charging you a lot for service over the two years that you’re locked into their contracts. Cricket probably pays Apple the same amount for the phones, or maybe even more than the big carriers, so it has to charge you a lot more for the phone. It claims that you’ll save money by paying a lot less for the service, which is mostly true.
But let’s do some math, comparing Cricket and AT&T.
You’ll pay Cricket $499 for your iPhone, and $55 a month for unlimited voice, data and texts. Taxes aside, you pay $1320 for service over 24 months; add the cost of the phone and you’re paying $1,819.
AT&T no longer offers unlimited data service to new customers, so the closest comparison is $30 for 3GB a month. Unlimited voice costs $70 a month. Texts cost $10 a month for 1000. That’s $110 a month for service which comes to $2,640 plus $199 for the phone or just under $2,839 over two years.
The savings over two years using Cricket are substantial. But you only realize that savings if you stick with the company for six months or more. For the six months of your contract with AT&T you’ll pay $859; in the same timeframe Cricket will cost $829. After that, of course, you’ll save money every month.
There is, though, one more point to consider. AT&T offers plans that are much cheaper than the one with unlimited voice. If you don’t talk a lot, you can happily pay just $40 a month for 450 minutes that you can rollover. I use that plan and never exceed that allotment. I also make a point of using my iPhone on Wi-Fi as much as possible, so I pay just $15 a month for 200 MB of data, plus another $10 a month for 1000 texts, and rarely go over. There are also family plans you might want to consider as well.
You could also knock some more money from your AT&T costs by settling for the old iPhone 3GS, which is free, with the usual two-year contract.
Sure, there are lots of moving parts in this equation. But if you’re a smart consumer, you’ll take the trouble to see which deal is actually best for you.
San Francisco journalist Bill Snyder writes frequently about business and technology. His work appears regularly in CIO.com and the publications of Stanford's Graduate School of Business and the Haas School of Business at the University of California at Berkeley. He welcomes your comments and suggestions.