Are Contract-Free Mobile Phones a Better Deal?

When it comes to buying small business mobile devices, is there anything more loathsome than the two-year mobile phone contract? For instance, if you get sick of dropped calls and decide to switch carriers, you must pay the dreaded early termination fee — which can be as high as $350 (Verizon) or $325 (AT&T).

Fortunately, you’ve got options.

A Guide to Pay-As-You-Go Mobile Smartphones

No-contract, pay-as-you-go and prepaid monthly mobile service options abound from AT&T, Verizon Wireless, T-Mobile, Virgin Mobile, Consumer Cellular, Boost Mobile, and TracFone, among others. Depending upon the service provider, you can take advantage of cheaper monthly plans, too. And you can choose from among some of the best smartphones available, such as the Droid X (from Verizon Wireless).

So what’s the catch?

If you exceed your plan’s allotted talk time, you can pay as much as 45 cents per minute. Roaming charges may apply, too, when you venture beyond your coverage area. Or you may not be able to roam to another network at all — for instance, Virgin Mobile, which uses Sprint’s 3G network, doesn’t let you use your phone on another carrier’s network in the U.S.

Forget about 4G coverage on contract-free mobile devices; it ain’t gonna happen, at least not yet. Data plans for Web browsing and email can be pricey or limiting. And while you can get some cool Android and BlackBerry models, the bulk of contract-free phones are older, plainer handsets.

Bottom line: Make sure you carefully read the terms of any no-contract mobile phone plan before you buy.

Given these limitations, when does it make sense for a small business to buy a contract-free mobile phone and plan?

  • If you have temporary employees or interns who need a mobile phone as part of their work for you, a contract-free phone might be your best bet.

  • Do you need a second mobile phone — perhaps one for personal and one for business? A contract-free phone might serve your needs, especially if you won’t be using your second phone as much as your primary one. Also, a Google Voice account makes having a second phone easy. With Google Voice, calls to one number will simultaneously ring on both mobile phones, as well as a landline or other phone.

  • If you’re looking to reduce your monthly mobile phone bill, don’t crave the latest smartphones, and don’t even use a mobile phone that much, contract-free is the way to be.

Prepaid and Pay-as-You-Go Mobile Plans at a Glance

No-contract plans are available in two flavors: prepaid, which gives you a set number of minutes and data per month, or pay-as-you-go, in which you buy a bucket of minutes and when they run out, you buy more (or not).

The January 2011 issue of Consumer Reports rates the following prepaid and pay-as-you-go mobile service providers based on reader scores. Higher numbers are best:

  • Consumer Cellular: 87

  • TracFone: 82

  • T-Mobile: 79

  • Verizon Wireless: 76

  • Virgin Mobile: 75

  • AT&T GoPhone: 68

Here’s a quick guide to four of the more compelling no-contract mobile service providers:

Boost Mobile 

Boost Mobile uses Sprint’s 3G network, offers a number of plans and phones, and has some intriguing differentiators. For instance, at Boost Mobile “shrinkage” is a good thing. For every six months you pay your bill on time, your monthly payment will shrink by $5. Thus, a $50 monthly bill can drop as low as $35 per month.

For $50 per month or $2 a day, you get unlimited nationwide talk, text, 411, Web surfing and email. A similar BlackBerry plan is $60 per month or $3 a day. With an additional $5 monthly international plan, you can call mobile and landline phone numbers in six countries and landline phones in two countries. The phone selection is heavily weighted toward Motorola, including the Motorola i1 Android phone (available only in stores). You can get a BlackBerry Curve 8530–released about a year ago — for $200.

Who’s it for? With its low-cost unlimited talk and data plans, Boost Mobile is a compelling option for budget-conscious small business users with heavy mobile phone and data usage requirements.

Consumer Cellular

Consumer Cellular uses AT&T’s network and has some extremely low rates, beginning at $20 per month for 250 minutes. You can share minutes through a Family Share plan and add family members to your plan for $10 per month per line of service. Plans are geared toward families and seniors in particular. The phones offered are also extremely inexpensive. The Motorola W259 basic cell phone is free, and the priciest model right now is the Samsung A697 touch screen phone for $60.

Who’s it for? Consumer Cellular phones and plans are best suited for small business users who only need a basic mobile handset for phone calls. Anyone looking for a varied selection of phones or cool smartphones for email and Web should look elsewhere.

Verizon Wireless

Verizon Wireless is the carrier to beat for the best smartphones without a contract. As of this moment, you can choose between no less than nine current Android smartphones without contracts, including the Droid Incredible ($345), Droid Pro ($375), and Droid X ($395).

However, those prices are steep compared to the same phones with a two-year contract, at $100, $180, and $200, respectively. Also, you’ll pay $30 for an unlimited data plan (your only option for Android smartphones). Calling plans start at $45 per month for a talk-only plan with 450 minutes or $65 for the same plan with unlimited texting. Both plans are $5 more per month than the same plans with a contract. Also be aware that domestic roaming charges are 20 cents per minute, and you’ll pay dearly if you exceed your prepaid plan’s allotted talk time. With the 450-minute talk or talk-and-text plans, for instance, you’ll pay 45 cents per minute for calls that exceed your allotment.

Who’s it for? Small business users who crave the latest smartphones and don’t mind paying higher prices for the flexibility of a contract-free mobile life.

Virgin Mobile

Virgin Mobile, which uses Sprint’s 3G network, is aimed at young consumers, but small business owners might also appreciate the combination of smartphones and low rates. Example: The Samsung Intercept Android 3G smartphone, which came out in summer 2010, goes for $200. For $60 monthly, you get unlimited text, email, data, Web surfing, and talk time. Less-expensive plans are available, too. Virgin Mobile also offers a line of pay-as-you-go PayLo phones that cost between $10 and $40. The most expensive plan is $30 for 1,500 minutes, 500 text messages, and 10MB of Web access, good for one month.

Who’s it for? Anyone who primarily needs an affordable, contract-free mobile phone in their home coverage area; remember that Virgin Mobile doesn’t offer roaming.

James A. Martin
is the author of Traveler 2.0, a mobile technology blog, and has written about mobile computing since the mid 1990s. You can follow him on Twitter.

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