The MyRatePlan.

com Guide to Buying a

Cell Phone and Rate Plan

A Road Map to the Right Service at the Right Price

2nd Edition

By Allan Keiter
Founder of MyRatePlan
 Copyright © 2005-2006 by MyRatePlan.com, LLC
All rights reserved

For information about permission to reproduce content from this guide, e-mail
permissions@myrateplan.com

Visit our website: www.myrateplan.com

Order online: www.myrateplan.com/book_sales

This guide contains references to companies, products, and services in the

wireless industry as well as a number of cell phone images. The inclusion of
these images is for example purposes only, and should not be construed as an
endorsement of these offerings. The names mentioned herein may be
trademarks or registered trademarks of their respective companies.
Introduction 2
The Checklist 3
The Purchase Transaction 5
Finding the Best Service for Your Needs 6
Coverage Area and Reception 7
Selecting a Cell Phone 9
Choosing a Rate Plan 13
Plan Types 14
Calling Area 18
Anytime Minutes 19
Plan Benefits 20
Long Distance and Roaming 22
Push-to-Talk 24
International Calling 24
Data Services 25
Other Rate Plan Costs 29
Contract Length 31
Protecting your Phone 32
Indoor Phone Reception 33
Wireless Network Technology 34
Accessibility 36
Cell Phones and Children 36
Using Your Phone Outside the U.S. 38
Why Are Replacement Phones So Expensive? 40
Disposing of a Surplus Phone 42
Using a Cell Phone as Your Only Phone 43
Wireless Number Portability 45
Appendix: Economics of the Wireless Industry 46
About the Author 49
MyRatePlan.com was launched in October 1999, with the goal of making it easier
for consumers to make unbiased comparisons of wireless phones and plans.
Much like the then-evolving market for comparing airfares online, we saw the
Internet as a way to simplify the even more complex purchase of a phone and
plan together. By creating interactive software that lets users find solutions
unique to their needs, MyRatePlan has become a destination site visited by
thousands of people daily to get the facts they need to make an informed
purchase decision.

Since our founding, the wireless industry has consolidated into five national
carriers*; cell phones have morphed from bricklike objects into lightweight color
marvels; and the price for making calls has fallen to the point that more than 200
million people in the U.S. have a cell phone, with many of them using it as their
primary or only telephone. Furthermore, the carriers are giving users more
choice, and with the advent of number portability in late 2003, consumers have
more flexibility than ever. However, added choices can mean added confusion,
and we’re finding that many of the same questions we heard in the early days are
still being asked today.

The goal of this guide is to convey what we’ve learned over the past seven
years, to help you find the best phone and the most efficient plan for your
unique calling needs, while minimizing the amount you spend for wireless
service each month.

*Two of these five, Sprint and Nextel, merged in 2005, but these two carriers use different
technologies and branding messages, so we continue to view them as separate.

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 Here’s a quick list of some important
things to think about as you read through
this guide and your purchase of a cell
phone and calling plan:

‰ A carrier’s rate plans don’t vary by where you buy; phone prices
can (and do) vary widely. See page 5.

‰ Finding the best wireless service is done by optimizing three

elements — coverage and reception, the cell phone, and the rate
plan. See page 6.

‰ Coverage maps don’t tell the whole story. See page 7.

‰ All national carriers offer a minimum two-week trial period for you
to test their service. See page 8.

‰ A more expensive phone doesn’t necessarily mean better reception.

See page 8.

‰ Your choice of phones is limited both by a carrier’s network

technology and wireless industry economics. See page 10.

‰ When buying a cell phone, look at the “out-the-door price,” as well

as the final price (after rebates). See page 12.

‰ To save money, consider a family plan for two to five members of a

household. See page 14.

‰ If you are a light or emergency-only user, a prepaid option may

save you money — but watch those expiration dates. See page 16.

‰ Choose a plan with slightly more airtime than you will need; extra
minutes can quickly double your bill. See page 19.

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 ‰ Plan benefits can significantly reduce the anytime minutes you will
need. See page 20.

‰ ‘Free’ long distance can, in some cases, actually be quite

expensive. See page 22.

‰ Buy bundled packages if you plan to use any significant amount of

data (messaging, downloading, etc.) with your phone. See page 25.

‰ Taxes are unavoidable, but can usually be minimized just by

staying with the right rate plan. See page 29.

‰ Unless you go prepaid, it is getting harder to avoid a two-year

contract. See page 31.

‰ Cell phone insurance might be a good idea, but there are many
factors to consider. See page 32.

‰ Need a phone that will also work outside the U.S? You may need to
balance convenience and cost. See page 38.

‰ The deals you see advertised are only for new lines of service, not
for those looking to upgrade or replace their phone. See page 40.

‰ Your old cell phone may have some value. See page 42.

‰ Lots of people are “cutting the cord” and going totally wireless.
That doesn’t mean it is right for everyone. See page 43.

‰ If you are transferring (porting) your phone number, sign up for

new service before canceling the old. See page 45.

How to Use This Guide

Unless otherwise specified, the information in this guide relates to the purchase of a cell phone
and plan only in the U.S. The purchase of phones and plans in other countries can vary
significantly from the process in the U.S.

This is an interactive guide — if you are viewing this guide on your computer screen, note that
words or terms in blue are hyperlinked, either to another place in the guide, to a page on
MyRatePlan.com, or to another website. These links will provide more information on the
subject matter, including MyRatePlan software tools to help you locate the phone and plan that
best meets your needs.

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 The Bottom Line
Phone prices vary by where you buy; a carrier’s rate
plans do not. You’ll often find noticeably better
phone deals online, from independent retailers, than
you will by buying directly from the carrier.

There are thousands of places you can sign up for new wireless service,
including retail stores, mall kiosks, or online. Regardless of the location,
you will either be buying directly from the carrier or from an independent
retailer acting as an authorized agent on behalf of the carrier.
Additionally, no matter where you make your purchase, it will consist
of a package containing a rate plan and a cell phone. Clearly
understanding the connection between these two elements can save you
quite a bit of money, not only on the day you make the initial purchase
but throughout your ongoing relationship with the carrier.

Since the carriers provide the service, they are the ones who set the
terms and conditions of their plans. Each carrier’s terms and conditions
(e.g., the number of minutes you get each month) will be the same
regardless of from whom you make your purchase. So, while it is
important to choose the right calling plan to minimize your monthly bill,
there is no reason to visit a lot of different places to seek out different
calling plans for the same carrier. This also means that there is no
advantage in buying directly from the carrier, either from one of their
retail stores or from their website.

In fact, buying directly from the carrier is usually a bad idea, as they
often charge the highest prices for the phones. On the other hand,
independent retailers set their own cell phone prices individually, and
the differences can be dramatic (see box on next page). Additionally, you
will usually find that online retailers, lacking the overhead of physical
stores, have the best prices of all.

When you choose a cell phone, you have effectively selected your carrier,
as phones are generally preprogrammed to work on a specific carrier’s
network. Once you select one of the carrier’s rate plans to complete your
order, the retailer will ship you the phone (if you bought online), and the
carrier will activate your service based on the calling plan you have
chosen. Your new phone should be ready to use when it arrives at your
door. Your ongoing relationship for billing, customer service, and rate
plan and phone changes/upgrades will be with the carrier.

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It Pays to Shop Around

On April 16, 2006, a survey of the Cingular, Verizon, and T-Mobile websites showed the very
popular Motorola RAZR V3 selling for $129.99 to $149.99 with new service. That same day,
the best price on the MyRatePlan site was free, a difference of almost $150! For those
seeking a family plan, the difference was $300. For current comparisons, click here.

While MyRatePlan is not a retailer, we do partner with a number of online organizations we

have chosen for both their excellent customer service and low prices. One of the benefits of
using MyRatePlan for your research is that we strive to show you a comprehensive list of cell
phones and the lowest price for each phone from among our partners.

As the graphic above illustrates, when thinking about the best service for
your needs, there are three interrelated things to consider.

¾ Coverage Does the phone work where and when I need it?
¾ Cell Phone Does the phone have the features I want? Is it within
my budget, and am I getting the best deal for it?
¾ Rate Plan Am I spending as little as possible each month to get
what I need from my service?

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 The Bottom Line
Carrier coverage maps are only a starting point;
check with friends or neighbors who use the
carrier you are considering to find out their
experiences. Take full advantage of the trial period
offered by most carriers.

Coverage is the foundation of our triangle because it is the most

fundamentally important element. No matter how cool your phone looks,
it is little more than a paperweight if it doesn’t work where you need it.
Unfortunately, coverage is also the most difficult element to assess ahead
of time, because, like fingerprints and snowflakes, each person’s calling
patterns are unique.

We think it pays to do a two-step analysis here. First, find out if the

carrier generally has a good service reputation in the places you are
likely to use your phone — for example, along certain highways on which
you commute, or in an office building where you work. You can get a
sense for this by asking others who have that carrier what their
experience has been and by reviewing the carrier coverage maps. Don’t
forget to ask others about data speed and reliability if you’ll be using
your phone for more than voice calls.

More difficult is figuring out if the phone is going to work in places that
are unique to you. For example, if you have a home office where you’ll
need clear and reliable service, the only way you can really know is to try
it out.

About Those Coverage Maps

Every carrier provides maps that show off the areas where they claim to have service. Some
carriers’ maps are more detailed than others, and some carriers now offer street-level detail on
their websites, but even the best ones only go so far.

Do not assume you’ll have service just because the map indicates that you will. All carriers
have “dead spots” that are rarely shown on these maps. Wireless is an imperfect technology,
and your ability to make a call at any given time is going to be affected by such varied
elements as weather, topography, system demand, and even where you are in a building.

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 The Bottom Line
Put your phone to heavy use the first week — try it
anywhere and everywhere you’ll need good service.

A contract is a reality if you want the best phone pricing and lowest
rates. However, it is very difficult to know ahead of time if your new
phone will work everywhere you need it to.

The good news is that all national carriers and many regional providers
now subscribe to the wireless industry’s Consumer Code. The most
important provision of this code is that new customers will get at least 14
days to try out a carrier’s service, with no contract termination penalty if
service is canceled.

If you do cancel, you will still need to pay for any airtime or other
services used during the trial period. Additionally, you must return the
phone in good condition, so be sure you hang on to all the original
packaging.

It is worth noting that a more expensive phone doesn’t necessarily mean

better reception. Higher-priced phones are often more feature-rich, and
may have slightly better microphones, yielding better voice clarity.
However, all phones sold for a given carrier’s service are built to the
specifications of that carrier, so they should all have roughly the same
signal strength in a given location.

If you are having ongoing reception issues, you are more likely to resolve
those by moving to a carrier with better service where you need it than
you are by switching phones with the same carrier.

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 The Bottom Line
Finding the cell phone that’s best for you is a
balancing act between price and features.
Consider which features you want, and then look
for the phone that best matches your list, yet still
falls within your budget.

Useful Link
Interactive Cell Phone Finder

While choosing a carrier based on coverage is an important first step, the

cell phone is what you will use to interact with the carrier’s network,
whether to make a call, browse the web, or send a text message. As a
result, choosing the right phone for your specific needs is critical.

Cell phones continue to evolve rapidly; most now offer far more than the
ability to make and receive calls. In fact, they are morphing into full
communications devices capable of taking digital photos, capturing
video, managing business communications, and even handling streaming
TV. Given the ever-improving quality of these and other features in new
models, the day is coming when some people may decide that there is no
longer a need to have multiple communication/entertainment products,
when their phone can fulfill all those needs — and fulfill them well.

Cell phone prices for new accounts are usually heavily discounted, and
this makes it fairly expensive for carriers to get new customers. That is
one reason why most phones are “locked” to work only on the selling
carrier’s network. It also explains why carriers require a contract.
Prepaid, no-contract options are available, but you’ll find that the phones
(and rates) are more expensive.

Say Cheese!

One of the most popular features of a phone is an integrated camera. While quality has been
improving, phone camera resolution has remained far behind that of stand-alone cameras.
But that may be changing. The first 3+ megapixel camera (Samsung A990) was introduced
by Verizon in July 2006 and more are on the way. This amount of resolution is equal to that
of the best digital cameras a couple years back, and is good enough for taking sharp
pictures. As a result, we may be on the cusp of a convergence between phone and camera,
enabling many people to do away with a stand-alone camera. A current list of higher-end
camera phones can be found here.

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 The Bottom Line
Technology and economics combine to limit your
choice of cell phone, both as a new customer and
when switching providers.

As mentioned elsewhere, most cell phones sold with service in the U.S.
are preprogrammed to work on a specific carrier’s network. There are a
couple issues at work here. The first is a technological one: Phones are
only compatible with the digital network technology for which they were
designed; a CDMA phone, for instance, will not work on a GSM network.
So, for example, if you today have Verizon service (CDMA), and want to
switch to Cingular (GSM), technology will force you to buy a new phone.
See page 34 for more on the different technologies in use in the U.S.

The second issue has to do with the economics of the wireless industry
(see page 46). Most new phones bought with service are heavily
subsidized by the carrier as a way to attract new customers. As a result,
the carrier wants to protect the investment it has made in you. One way
they do this by contract, of course, but another method is by having the
phone manufacturers “lock” the phones so they can’t easily be used with
another provider, even one with the same technology.

Unlocked cell phones are available, but they generally cost several
hundred dollars more than the same phone purchased with service from
a carrier. If you are a frequent international traveler, having an unlocked
phone may provide you with some benefits (see page 38).

Be Careful What You Wish For

Some people complain about locked phones, and there have been lawsuits filed around the
topic, although none had made much progress through the court system as of the summer of
2006. The issue has come more clearly into focus since number portability made it easier to
move around one’s phone number. (“If I can take my number, why can’t I take my phone?”)

If a legal challenge is ultimately successful, the wireless carriers may be forced to provide
unlocked phones to their customers. However, this could be one of those “be careful what you
wish for” things, as the end result would likely be much higher phone prices — carriers would be
reluctant to subsidize a phone for a customer who could easily walk away with it.

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The feature sets of cell phones are expanding all the time. As might be
expected, phones with more features, particularly the latest ones, tend to
be the most expensive. The size, weight, and design also have an impact.
However, all phones eventually come down in price. When it was first
introduced, the Motorola RAZR was priced at more than $500 with a
contract; it is now available for free with most carriers.

Here’s a list of some of the major features and options you’ll come across
as you review cell phone models. Note that the functionality of some
choices (e.g., data speed) is dependent on the carrier’s network. For
expanded definitions, see the wireless glossary.

Physical Characteristics
¾ Design Open, flip/clamshell, slider, swivel/pivot
¾ Size and weight Lightweight, slim profile
¾ Battery Type, talk time, standby time
¾ Antenna Internal, external, retractable
¾ Display Color, black-and-white
o Size How big is the screen display?
o External For flip phones, an outside display for caller ID, etc.

Fun Features
¾ Camera Resolution, zoom, flash
¾ Music FM radio, MP3 player
¾ Messaging Multimedia, text only, predictive entry
o Keyboard QWERTY keyboard for easier messaging
¾ Gaming Preinstalled games, Java-enabled
¾ Ringtones Mono, polyphonic, real tone
¾ Video Length of video capture

Productivity Features
¾ Calling Caller ID, photo caller ID, voice dialing (may be speaker-
independent), vibrating alert, speakerphone
¾ Phone book Size, entries per name
¾ PDA E-mail synchronization, calendar, organizer
¾ Connectivity Bluetooth, infrared
¾ Push-to-talk Walkie-talkie functionality
¾ Data/Internet Mobile web browser, POP3 e-mail
o Download speed/technology Wi-Fi, EDGE, GPRS, EVDO,
1XRTT, 1xEVDO, HSDPA, UMTS
¾ Operating system Windows Mobile, Palm OS
¾ Memory Expandable/Removable storage, capacity, type

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Network Technology
¾ Interface GSM, CDMA, TDMA, ESMR (iDEN), analog
¾ Bands Single, dual, tri, quad
o International Compatibility with overseas networks
¾ Modes Single, dual, tri
o Analog Digital backup, mostly for rural locations

Accessibility
¾ Hearing aid compatibility M3 or M4
¾ Keypad buttons Are they too small or too close together?
¾ Display font size Can fonts be increased or decreased?

The Bottom Line

When shopping, consider the price to be charged to
your credit card when you buy as well as the final
price — after all rebates.

Useful Links
Free Out-the-Door Cell Phones (Pay $0 Today)
Cell Phone Rebate Offers

Cell phone offers often include one or more mail-in rebates, which can
dramatically lower the final price of your phone. This also means, of
course, that the amount your credit card is charged at the time of
purchase might be higher than the advertised final price. Some rebates
may require several months to redeem, so be aware that your cash might
be tied up for a while.

TIP Depending on the phone you buy, there could be several different
kinds of rebates, including offers from the phone manufacturer, from the
carrier you are subscribing to, and/or from the retailer from which you
are purchasing. Therefore, it is important that you print out the terms
and conditions of any rebates at the time you place your order so you’ll
have the information you’ll need to qualify for them. The redemption
requirements will likely include some combination of receipts, rebate
forms, wireless bills, and the UPC/bar code. This last item is usually
located on the exterior of the box in which the phone is packaged — so
don’t throw it away.

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 The Bottom Line
Making the wrong plan choice can lead to a much
higher bill than necessary — month after month.

Useful Link
Interactive Rate Plan Finder

Now let’s look at choosing a rate plan (see box below). From a monthly
dollars-and-cents perspective, choosing the right rate plan is the most
important piece of the entire selection process. If you live in a typical city,
you’ll find five to seven carriers and upward of 50 plans from which to
choose. This extensive choice means that there is likely to be a plan out
there that comes pretty close to matching your calling patterns. Figuring
out which plan that is . . . well, that’s another matter altogether.

The easiest way to sort through these myriad options is to visit an

unbiased website that will take your estimated calling patterns and
compare them against the plans available where you live. MyRatePlan’s
interactive rate plan finder — CellCalc™ — does just that. It lets you
select the features that are important to you (e.g., free mobile-to-mobile),
while enabling you to estimate your monthly bill for almost all the plans
available in your local market.

The Chicken or the Egg?

Although you’ll be buying a rate plan and phone together, the options are much more
manageable if you think of each piece separately. To that end, we suggest you pick your
phone first, and then your rate plan. We used to recommend doing it the other way around, but
competition has caused most carriers to offer basically the same rate plans. Therefore, if you
first find the phone that you want, it becomes much easier to choose a rate plan, as you will
only need to choose among the rate plans offered by the carrier associated with the cell phone
you have chosen.

In the next several sections, we review the underlying factors that make
up a rate plan. These sections begin with headers in yellow type.

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While most wireless subscribers have a standard, single-line plan, family
plans have been gaining in popularity over the past couple of years, and
prepaid plans represent the fastest growing segment of the industry.

Overview of the Calling Plans*

Feature Single Plan Family Plan Prepaid Plan
Number of Users 1 2-5 1
Number of Bills 1 1 0
Billing Postpaid Postpaid Prepaid
Subsidized Phones Yes Yes No
Free Mobile-to-Mobile Some Plans Yes No
Contract Usually 2 Years Usually 2 Years No
Credit Check Yes Yes No
Shared Airtime No Yes No
*Information in this table reflects general characteristics; there are exceptions.

Each rate plan type has its own unique quirks. To account for those, and
to make it much simpler to choose among competing rate plans within
each of the three categories, MyRatePlan has created a tool called
CellCalcTM, that combines a rate plan filter with a sophisticated bill
optimizer (called TruBillTM). There is a separate version of CellCalc for
each type of plan — single, family, and prepaid.

The Bottom Line

Consider a family plan for two to five members of a
household or a small business as a way to minimize
and better manage wireless costs.

Useful Link
Interactive Family Plan Finder

Cell phone family plans contain two or more (up to five) lines combined
on a single bill, with one shared family rate plan. Each person on the
family plan gets his or her own phone and his or her own phone number.
Most family plans are priced with two lines included; additional lines are
commonly priced at about $10 each.

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Family plans can save subscribers 25% or more each month off the cost
of having a single line for each user. Here are a few more things to think
about as you consider a family plan.

¾ It is possible to get more than one model of phone with a family

plan. We have created a mix and match page to make it easy to
develop your own customized arrangement.

¾ While the family plan offers you see displayed online are for two
phones only, you can sometimes get as many as five for the same
per-phone price. Check the retailer’s website for details.

¾ Sign up for all the lines you’ll need at the time of purchase to avoid
higher phone prices. For example, if you want to add a third line to
a family plan two months after the contract is established you
won’t be considered a new customer, and you may have to pay
substantially more for the third phone.

¾ Since a family plan is usually approved on the credit of the primary

account holder, additional subscribers may be able to get service
even though they might have a lower credit score that would
otherwise relegate them to prepaid phone service.

¾ Since “mobile party pays” in the U.S., minutes are spent two at a
time when family members call one another, unless the plan has
free mobile-to-mobile airtime. Most family plans include this
feature, but check the plan you are considering to confirm it.

¾ Family plan members need not be related; a small office would also
qualify if there is a single responsible party and a single bill.

¾ If you want to stay with your carrier when your contract ends, but
you discover that they won’t give you a good deal on new phones,
consider doing this: Set up an entirely new family plan in the name
of one of the plan members (other than the current primary
account holder). Since a new person is qualifying for service, the
account will be seen as new, and thus eligible for new customer
phone pricing. The old plan can be canceled whenever you wish, as
it is unrelated to the new transaction. The catch: You won’t be able
to keep your same phone numbers and you will have to pay
activation fees.

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 The Bottom Line
More expensive than standard wireless, a prepaid
plan might be an option if you don’t want to sign a
contract or if you have credit issues.

Useful Link
Interactive Prepaid Plan Finder

Prepaid service is one of the fastest growing areas in wireless, as carriers

are using it to reach new subscribers, including students and
emergency-only users. A prepaid setup offers the opportunity of going
wireless with no contract, no credit check, and no commitment.

You might want to consider pay-as-you-go wireless if you:

¾ Don’t want to sign a contract

¾ Have credit issues
¾ Want to budget yourself or a family member
¾ Only want wireless for very limited emergency-only purposes

There are a large number of prepaid programs on the market, but each
generally falls into one of two main categories:

¾ Pay-As-You-Go With this more traditional form of prepaid, you buy

the phone and use refill cards (physical or electronic) to add
airtime as needed. This is best if your usage varies from month to
month, if you are on a budget, or if you want to provide service to,
but limit the talk time of, another family member (e.g., a child).

¾ Pay Monthly (Hybrid Prepaid) Hybrid plans are more like a

traditional postpaid offering, with a recurring monthly charge. This
type of plan is best for those whose usage is fairly consistent from
month–to–month and who want a traditional service, but have
credit issues or don’t want a contract. Rates are higher than for
contract plans, but lower than for pay-as-you-go.

Prepaid wireless has two main disadvantages. First, although prepaid

per-minute rates have come down, they remain significantly more
expensive than with traditional postpaid service. Second, since the
carriers don’t offer as many price subsidies for prepaid, the phone you
will buy is much more expensive.

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Prepaid Tricks Some carriers impose a daily access charge on some of
their pay-as-you-go programs. Additionally, all airtime refill cards expire
after a certain period of time. These facts mean that your effective per-
minute rate can be very high. The CellCalcTM tool for pay-as-you-go helps
users find the right plan and the optimal airtime refill card to buy.

Also, be aware of what we call the “soft commitment.” While prepaid

plans have no contract, sometimes the phone rebates associated with the
programs require you to maintain service for a certain amount of time. In
a sense, you are obligated for that period should you want to take
advantage of the rebate.

Prepaid Portability Prepaid phone numbers are generally* portable, as

number portability is independent of the type of plan you have. However,
to be portable the number must be in your possession — meaning that
your prepaid account must be active. Since prepaid airtime is bought in
advance, you will likely forfeit any unused airtime remaining on your
account at the time the port is completed.
*Some carriers have chosen not to accept number transfers for prepaid accounts, while
others won’t allow the transfer from another prepaid account. While carriers can’t keep
you from taking your number, there is no requirement forcing your new carrier to
accept your number into their service.

In an Emergency…

Many people would like to get a cell phone to throw in their car just for emergency use.
Unfortunately, it isn’t profitable for a wireless carrier to have active lines not generating any
revenue, so obstacles are created — like airtime card expiration periods — to force
subscribers to pay up periodically to keep service active.

The trick to spending as little as possible, while maintaining service for an emergency, is to
find the lowest value refill cards that offer the longest expiration periods. For our opinion on
the best current options for emergency only cell phone service, click here.

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It is important to keep in mind that “calling area” refers to where you are
physically located when you are making or receiving a wireless call, not
where the other party is (see page 23).

The simplest way to look at coverage area vis-à-vis price is to recognize

that the rate-per-minute tends to increase as you buy a larger coverage
area. Therefore, while you can find local and national plans that have the
same price, the local plan will likely have more minutes.

Local The smallest coverage, generally centered

around a single metropolitan area, although it
might include an entire state or more. When you
are outside the local area, you will pay roaming
charges to make/receive calls.
Regional The regional calling area covers a larger
geographic part of the country, from two or three
adjacent states to an entire region, such as the
Midwest. When you are outside the regional
area, you will pay roaming charges to
make/receive calls.
National The most commonly sold plan, these generally
Network cover your carrier’s entire nationwide network,
and may include some off-network coverage on a
similar technology. If your phone supports analog
service where no digital signal is available, you
would pay roaming charges while utilizing those
analog signals.
National A true 50-state plan, with generally no roaming
charges anywhere your phone can get a signal.
North America An extension of the national plans, these include
airtime for calls made or received in parts of
Canada or Mexico.

The vast majority of rate plans currently sold are “national network”
plans. Local and regional plans remain available in some areas, and
while these still offer more anytime minutes per dollar, they often don’t
come with benefits such as free long distance or mobile-mobile, and so
have become progressively less attractive for most people.

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 The Bottom Line
Buy a plan with slightly more minutes than you think
you will need; this will minimize the need to use
additional minutes — which are often very expensive.

Most rate plans include a certain number of anytime minutes plus what
we call “plan benefits” (e.g., free night and weekend or free mobile-to-
mobile), in exchange for a monthly fee. Overage and optional features,
along with fees and taxes can significantly increase your bill.

The key to choosing the right rate plan is to figure out how many anytime
minutes you’ll need, add a small buffer to that, and then find the least
expensive plan with that many minutes in it. However, the number of
anytime minutes needed will vary by plan, depending on the plan
benefits — and to what extent you can take advantage of this free
airtime. The TruBillTM calculator in MyRatePlan’s rate plan finder will
make these calculations for you, saving you both time and money.

Overage charges, usually 35 to 45 cents a minute, can add up fast. Let’s

say your rate plan gives you 500 minutes for $39.99, with each
additional minute costing 40 cents. If you end up talking for 560 minutes
(one extra hour) your bill will be $63.99, an increase of 60%. Talk 100
extra minutes, and your bill is doubled.

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One way to lessen the risk associated with overage is to consider an
adjustable minute plan. These plans, including Cingular Rollover and
Sprint Nextel Fair & Flexible, are particularly helpful if your airtime
needs vary significantly from month to month.

Unlike most plans, Cingular’s Rollover lets you keep unused airtime for
use in a subsequent month. However, you lose those banked minutes
after a certain time period or if you make certain rate plan changes. With
Fair & Flexible, a block of minutes is added (e.g., 30 minutes for $5) if
you exceed your allowance of anytime minutes. The catch here is that
Sprint doesn’t add exactly the number of minutes you need, so in certain
cases — particularly if you just barely exceed your package allowance —
this doesn’t turn out to be such a great deal.

The following features, when included for free in your rate plan, can
significantly reduce the number of anytime minutes you’ll need each
month. Consider them in conjunction with your own calling patterns to
determine how advantageous each one would be for you. Where not
included in the rate plan, airtime otherwise associated with these
benefits will count against your anytime minutes.

Carriers build their wireless networks to accommodate the busiest times

of the week, which tend to be Monday through Friday, particularly
during morning and late afternoon commuting times. This leaves lots of
excess capacity, which the carriers basically give away for free as a plan
benefit.

Originally an add-on option, competition has made night and weekend

time free in most rate plans sold today. Some carriers now offer an
option to start free nights at 7:00 pm; Sprint and Nextel even offer a 6:00
pm option. The ability to advance the start of free nights to an earlier
hour often incurs an additional monthly charge, but some plans include
it for free.

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Once limited to certain family plans, many rate plans now offer free
mobile-to-mobile calling between customers of the same carrier. As with
free night and weekend airtime, the real benefit of free mobile-to-mobile
calling is that it can reduce the number of anytime minutes you need
each month, potentially allowing you to select a lower-priced rate plan.
However, the benefit of free mobile-to-mobile is limited to a single carrier,
so it requires the consumer to be more proactive in figuring out which
carrier is used by those he or she calls the most.

For those who receive a lot of incoming calls, Sprint and Nextel now have
a series of “free incoming” plans, whereby all inbound airtime is free.
These plans often include fewer minutes than similarly priced plans that
lack the feature, making them a less attractive choice for most people.

Mobile Party Pays

In most countries, billing for wireless calls is similar to that for landline calls in the U.S. —
“calling party pays.” In other words, the person making the call is charged for it. However, the
cell phone system in the U.S. evolved as “mobile party pays,” with the mobile customer
paying for both outgoing and incoming calls. One probable reason: Until fairly recently,
wireless calls were much more expensive than home phone calls. Therefore, this billing
convention minimized confusion for landline customers accustomed to consistency in the size
of their bills.

Some carriers are offering the “calling circle” feature. The basic idea is
that you can designate a group of phone numbers (usually five or ten)
and get unlimited calling to and from those numbers, without using your
anytime minutes. It is like mobile-to-mobile, except you are not limited to
wireless lines, nor are you limited to subscribers of the offering carrier.

This sounds like a good idea, but when you pull back the curtain there
isn’t much benefit. Usually, there is a monthly fee for the service or only
certain (more expensive) rate plans apply. In most cases, this will offset
the benefit associated with this feature.

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With national rate plans now the norm, additional long distance and
roaming charges don’t have the direct impact on wireless bills that they
once did. However, these features do come into play when considering
the right rate plan, and can be influential in unexpected ways.

Many cell phone plans sold today include free long distance (from the
plan’s calling area). Plans that don’t have free long distance charge about
20 cents a minute for this feature; these plans should be avoided by
those who make long distance calls with their cell phone.

Unlike many of the plan benefits listed in the prior section, free long
distance actually increases the number of anytime minutes that many
people need and use, as the cell phone is used instead of the home
phone for making long distance calls.

However, it is important to remember that wireless long distance

isn’t really free, in that the minutes you use count against your
monthly airtime allowance. This creates an interesting possibility: “Free”
long distance on your cell phone can end up being quite a bit more
expensive than paying for it on your landline!

Example Let’s say you have a $39.99 plan with 500 anytime minutes
and a 40-cents-per-minute overage charge. And let’s say you talk for 560
minutes, of which 100 are on long distance calls that you would have
made from your home phone except for the fact that they are “free” with
your cell service. The chart below shows the impact on your bill.

Cell Phone Cell Phone +

Only Home LD
Cell Calling Plan $39.99 $39.99
Overage: 60 Minutes $24.00 —
@ 40¢/min.
Home Long Distance* — $2.75
(100 Minutes)
Total $63.99 $42.74
*Based on a 2.75¢/min. interstate rate.

Your “free” long distance increased your bill by $21.25, about 50% more
than you actually needed to spend.

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Toll-Free Calls

The cost for 800 numbers from a landline is borne by the recipient of the call; with no charge
to the caller. From a cell phone, however, toll-free numbers are just like any other long
distance call, and will count against your bucket of minutes.

Roaming calls are those made or received when you are physically
outside your rate plan’s home coverage area. If you are traveling outside
that area, you can incur roaming charges when talking to someone
regardless of where they are, even if they happen to be standing right
next to you. Most roaming charges can be avoided with the selection of a
national rate plan (see page 18).

Some people confuse roaming with long distance, leading them to buy a
national plan even though they don’t use their phone much outside their
local area. The above diagram shows the distinction between roaming
and long distance for someone who has a local plan. Assuming the plan
has free long distance, you will be able to call anywhere in the country
from your home calling area using the airtime minutes in your package.

The Evolution of Roaming

The definition of the term “roaming” has evolved over the years. Wireless started as a very
fragmented business, with dozens of carriers offering service in limited geographic areas. To
enable users to have service outside this limited area, the carriers created roaming
agreements, and roaming became known as airtime a subscriber of one carrier used while on
another carrier’s network. The “outside” carrier would bill the subscriber’s carrier for that
airtime, and the carrier would pass that charge (with a nice markup) on to their subscriber.

Today, carriers have established networks that cover much of the nation and the above
situation occurs much less frequently. However, roaming charges persist as carriers offer low-
cost local plans with smaller coverage areas, and then charge roaming outside those areas —
usually 69 cents or more per minute. Since much of this roaming is actually on the carrier’s
own network, these calls are hugely profitable for the carrier.

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Popularized by Nextel, push-to-talk enables one person to speak to
another person (or group of people) with the push of a button, similar to
a walkie-talkie. Connecting to the other party is almost instantaneous,
and the “call” bypasses the cellular network, so this talk time doesn’t
count against your plan’s anytime minutes. Currently, push-to-talk is
only available between subscribers of the same carrier; interoperability
will likely arrive at some point. This feature may incur additional fees;
check your rate plan for details. For carriers (other than Nextel) that offer
push-to-talk, only certain phones have the push/talk capability.

International calling encompasses two distinct areas: Using your phone

to call another country from your plan’s U.S. calling area and using your
phone when in another country. The latter is more complex, as it
involves both price and technological issues. For a fuller analysis of
overseas options, visit page 39.

Calling another country on your cell phone is generally the same as

calling from a landline — there are more digits to dial, and it costs more
money. Most wireless rate plans don’t include calls to other countries.
However, certain carriers now offer special bundled rates, particularly to
Canada and Mexico. Check with your carrier for more information.

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 The Bottom Line
Your cell phone isn’t just for talking anymore. If
you utilize data services, search for bundled or flat
rate pricing to avoid billing surprises.

The price-per-minute to make wireless calls has fallen rapidly over the
past several years, putting downward pressure on wireless bills. That’s
good for consumers, but bad for wireless carriers and their investors,
who look at “average revenue per subscriber” as an important measure of
how well the company is doing.

To reverse this trend, carriers are counting heavily on data services to

generate additional revenue. These include things like messaging, music,
information, e-mail, and ringtones. Unlike voice services, which have
become fairly easy to compare, each carrier is packaging these newer
services in different ways, at different prices, with different brand names.
Further complicating things is the fact that not all phones have the same
data capabilities, and that many of these services (e.g., games or
ringtones) can often be purchased from a third party, and billed through
your carrier. It can be quite confusing, and likely will continue to be for
the foreseeable future.

In the next few paragraphs, we discuss the most important data

categories. Review the optional features on the rate plan you are
considering, as this will tell you what combinations are relevant for the
carrier and the phone.

Text Messaging The most popular of non-voice services, text messaging

lets you use your phone’s keypad (or QWERTY keyboard, if available) to
send short messages to other cell phones. Usually, there is a charge (10
cents is common) both for sending and receiving these messages. Most
carriers offer bundled packages, which can range from about 100
messages, all the way up to unlimited. Expect to pay $5 to $15 a month
for a bundle of text-only messages, although in some cases your carrier
may offer text messaging with other data services as part of a package.

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Premium Messaging Premium messaging is text messaging that incurs
a surcharge. A good example is the voting associated with reality TV
shows. For these messages, you’ll pay a flat fee, usually around $1. If
you don’t have a messaging bundle from your carrier, you’ll also incur
the per-message charge, usually about 10 cents.

TIP In most cases (all cases in which a sweepstakes is involved), the

sponsor of the text program will offer a free method of voting or entering,
usually via the Internet. Take advantage of this, particularly if you want
to vote or enter multiple times, because premium text messages can
quickly add up on your bill. Besides, why pay for something that you can
have for free?

Picture and Video Messaging Picture messaging allows the upload of

photos taken with your cell phone to a computer or another cell phone.
Unlike text, where messages can be sent across carriers, picture
transmission is usually limited to subscribers of the same carrier.

Many phones also have picture caller ID, letting you “put a face with the
name,” so to speak. You can also use one or more of your photos as a
screen saver. This is a feature of your phone and not a feature of your
service plan. In other words, if your phone has this capability, you can
use it for free.

Some services also support the ability to send short videos from your
phone to an e-mail address. Longer videos can become difficult to send,
due to the size of the files.

Instant Messaging Mobile versions of common instant messaging (IM)

programs, such as those from AOL, Yahoo, or MSN, let you communicate
instantly with friends and family. When these services are enabled on
your phone, your status will appear as online to your friends, just as if
you were at a PC.

TIP If you choose to enable instant messaging on your phone, you will
want to make sure that you have subscribed to unlimited text
messaging. Each IM, even one as simple as “LOL,” counts as a text
message. It isn’t hard to see how IMs can quickly grow into the
hundreds, becoming quite costly if paid on a per-message basis.

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While the text messaging discussed above is actually a form of e-mail,
most cell phones will also let you send and receive e-mails from web-
based providers such as AOL Mail, MSN Hotmail, and Yahoo! Mail. Most
PDA devices will let you retrieve POP3 e-mail (e.g., Microsoft
Outlook/Outlook Express).

The information services category includes Internet access and

downloads of things such as sports scores, stock quotes, games,
weather, movie times, horoscopes, television programming, and more.
Keep in mind that data speeds and available content vary widely, not
only across carriers, but also with the same carrier in different locations
or with different phones. Most carriers are in the process of upgrading
their networks for faster speeds, but it will be awhile before these faster
speeds are universally available.

Removable Memory If you plan on using your phone for storage-

intensive activities, such as music or videos, look for a phone that has a
slot for removable memory. There are several card types. Some cell
phones can now support over one gigabyte of expanded memory.

Some phones come with installed games, and many more can be
purchased, either from your carrier or a third party. Companies like
Electronic Arts (formerly Jamdat) offer a full library of games designed for
mobile phones. As with other data services, your phone and carrier will
dictate which games are available to you.

Many phones now have an integrated MP3 player that will allow you to
download and play music on your phone. Many of these phones are
designed so that the music will pause when a call comes in, and begin
again from that spot after the call ends.

Downloaded music is a complex topic, as the carriers, in an effort to grab

a piece of the huge market, have created a maze of restrictions. For
example, your carrier may only allow you to purchase and download

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music from their proprietary music store. In another example, phones
that are compatible with iTunes are currently limited to 100 songs.

In addition to downloadable music, some carriers offer the ability to

listen to streaming music. A small number of phones, mostly from Nokia,
offer a built-in FM radio.

Ringtones are short snippets of sound that people often use to

personalize their ring, or to create a distinctive ring for certain callers. A
ringback is a sound file that those calling you hear while waiting for you
to pick up. It replaces the phone “rings” one normally hears when calling
someone. As with ringtones, different ringbacks can be assigned to
different people on your contact list, enabling you to customize what
your friends will hear when they call you.

Define ‘Free,’ Please

There are plenty of third-party sites from which ringtones can be purchased and downloaded
to a phone. Often these sites offer a “free” ringtone as an inducement. You access your free
tone by entering your cell number on their site, and agreeing to the terms. But be careful.
Often hidden in these terms is the fact that you are agreeing to an ongoing subscription for
ringtones. You may be completely unaware of this until you get a charge of up to $10 on your
next cell phone bill.

We’re not saying these ringtone sites don’t have a good product and that you shouldn’t buy
from them — just be aware of what you are agreeing to when you sign up.

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Most carriers charge an activation fee for setting up new service. These
fees vary, but most are currently around $35. Family plans incur an
activation fee for each line, although it may be lower for each line after
the first one. Activation fees are pretty much pure profit for the carrier.
However, they are an accepted part of the industry pricing structure;
everyone has them, so they are not likely to be part of the equation when
choosing one carrier over another. Just be aware that they exist, and
that they will have to be paid either at sign-up or with your first bill.

Speaking of that first bill, most carriers will prorate charges for the
partial first month of service and then bill you in advance for the first full
month. So, for example, if you sign up for a $40 plan on January 15, you
may get a bill on or before February 1 that charges you $20 for January
and $40 for February.

Your Second Bill The second bill you get is likely to be the first one
reflecting a full month’s usage. This is a good time to make sure you have
the right number of minutes in your plan. If you find yourself with
overage charges, and you think your usage for the month was typical,
call your carrier ASAP and change your plan to include enough minutes
to avoid these charges going forward. Most carriers are quite agreeable to
this; after all, a user committing to a higher rate plan is a more valuable
customer.

As with many other purchased services, a number of government taxes

will be added to your bill. These vary by jurisdiction, but will likely add
15% or more to your bill. These taxes can’t be avoided, but most are
percentage based, so if you are able to minimize your monthly cost for
service, you will also be minimizing the dollar amount of your taxes.

Some good news on the tax front: As of July 2006, the 3% federal excise
tax, previously assessed on subscribers’ wireless bills was no longer
being collected.

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Cost Recovery Fees In addition to required taxes, most carriers charge
a monthly amount for “cost recovery.” These fees are theoretically to
recoup expenses the carrier incurs to administer mandatory government
programs like number portability, universal service, and “E911,” but they
are not required fees. The government allows these fees to be listed
separately on the bill.

Monthly cost recovery fees (per line) among the major carriers are as
follows:

• Cingular Up to $1.25 • T-Mobile $0.86

• Nextel Up to $2.83 • Verizon $0.05
• Sprint $0.55 As of 08/2006 per carrier websites

Unlike the above cost items, directory assistance is optional, and you are
getting some benefit (a useful phone number) back from the operator.
However, calling 411 is relatively expensive, so we include it here
because the charges can quickly add up on your bill.

Per-call charges to 411 for the major carriers are as follows:

• Cingular $1.79 • T-Mobile $1.49

• Nextel $1.40 • Verizon $1.70
• Sprint $1.40 As of 08/2006 airtime additional

Getting a Cell Phone Number from Directory Assistance

Today, cell phone numbers are generally unavailable via directory assistance. With more
people using their cell phone as their primary phone, some would like to have their number
available to others. As a result, an industry effort is under way to make these numbers
available via a wireless 411 service. However, this will be an opt-in list; you would have to
specifically approve the inclusion of your cell phone number. No printed directory will exist.

Don’t Bother Me

It is illegal for telemarketers to call a cell phone number with an automated dialer. However, if
you want added protection, you can add your cell phone number to the National Do Not Call
Registry. There is an e-mail that occasionally goes around saying that the ban on
telemarketing will end in some other short timeframe. This is false, and can be ignored.

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 The Bottom Line
Two-year contracts have replaced those of shorter
length. For most people, the choice is a two-year
deal or a pay-as-you-go program with no contract.

As previously mentioned, since carriers tend to subsidize the phones that

are sold to new postpaid customers, they generally require a contract to
help ensure that they will recoup their investment in that customer.

Until recently, that meant a one-year contract. However, a combination

of market factors has led to the two-year contract becoming the
standard. One-year deals can still be found, but usually there are heavy
penalties associated with that shorter length — phone prices can be
significantly higher, or there might be a higher activation fee.

For most people, the choice now comes down to whether to sign a two-
year contract or to go prepaid, with no contract at all. The latter
obviously offers more flexibility, but you will pay for that flexibility in
both a higher phone cost and higher per-minute charges.

If you do go with the two-year contract, just remember to really put your
service to the test during the trial period so you can cancel if it isn’t
working out for you. Otherwise, you are stuck for quite a while.

Here are some reasons two-year contracts have become the norm:

¾ Ever decreasing per-minute pricing means it takes carriers longer

to recoup their initial investment in a new customer.
¾ Phones are getting more complex and therefore more expensive.
Since most consumers still want a cheap or free phone, this means
carriers need to spend more upfront to acquire a new customer.
¾ Industry consolidation has led to fewer national carriers, making it
easier to get all competitors to “go along” with the change.
¾ Longer contracts offset some of the increased risk of customer
defections that were a side effect of wireless number portability.

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When signing up for service, you will likely be presented with an option
to insure your phone. Whether or not to buy this insurance is a tough
decision — one made even more difficult with two-year contracts now
standard, meaning there is a much longer period during which your
phone could be lost, stolen, or damaged.

Before you commit to insurance, here are some questions you should get
answers to:

¾ How much is the monthly or annual premium?

¾ Do I have to enroll at the time I get service, or can I do it later on?
¾ Can I cancel coverage at any time?
¾ Is there a waiting period before coverage starts?
¾ What does the policy cover? (Most cover loss, theft, or accidental
damage; in some cases you can pay more for an extended
warranty.)
¾ How much is the deductible? (Usually it is $50, but on more
expensive phones it may be more.)
¾ In a claim, will I get a new phone or a refurbished one?
¾ What happens if my particular model is not available?
¾ Is there a maximum claim?
¾ Are there a maximum number of claims per year?
¾ What hurdles do I have to go through to file a claim? (You may
need to file a police report.)

Is Insurance a Good Idea? There’s no clear-cut answer to that question.

What you may want to do is take a look at the replacement cost for the
phone you are buying and compare that to what you will pay in
insurance premiums. Of course, one never knows when or if a phone will
be lost or stolen. If you have a $50 deductible and are paying $5 a month
in premiums, you’ll have paid $110 for a replacement if you lose it after a
year and $140 after 18 months.

On average, insurance probably makes most sense if you have a high-

end phone, like a PDA, and you would want to replace it with the same
thing if something happened to it. If you have an entry-level phone, or
would be okay replacing your expensive phone with an entry-level phone,
then you can probably skip the insurance. Of course, like all insurance,
it ultimately depends on your risk tolerance.

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TIP If you lose an expensive phone and don’t have insurance, one option
is to terminate your contract and sign up with a new provider. You’ll get
hit with a cancellation penalty, of course, but this might be more
palatable than paying up to $600 for a new PDA.

Insurance or not, if your cell phone is lost or stolen, contact your carrier
to suspend your service. They will turn off the phone’s ability to access
its network, preventing unauthorized calls. Once you get a replacement
phone, your carrier can activate your number again. You are responsible
for all calls and activity from your phone, so report the loss as quickly as
possible to minimize your exposure to unauthorized charges.

Most cell phones purchased new from a carrier or its authorized agents
come with a one-year manufacturer’s warranty. If the phone is defective
out of the box, or shortly thereafter, return it to the point of purchase for
a replacement. (Make sure you keep the phone box and accompanying
materials until you are sure the phone is in good working order.) If there
is a problem with the phone after the initial period, contact your carrier
for warranty service. Note that Sprint requires enrollment in its
“Equipment Service & Repair Program,” which carries a monthly charge,
to get repair service during the first year.

No matter what technology your phone uses, or how much it cost, you
may find that the signal is weak in many indoor locations. With more
people using their cell phone as their primary or only phone, this can be
more than an annoyance. One possible solution is a signal booster.
These devices capture the strongest available signal within range,
bringing it inside, to give you improved coverage. However, they are fairly
expensive; we’ve seen some recently featured at just under $300.

Another option is to purchase a Bluetooth phone with a wireless headset.

While at home, you can keep the phone in the location with the strongest
signal, and use the headset for mobility.

Over the next couple of years, a better solution is expected to come in the
form of wireless phones that will also be able to connect via the Internet,
using an available Wi-Fi connection.

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The original cellular technology, dating back to the 1980s, was based on
an analog signal. Basically, it was a radio signal, but unlike your local
FM station, cellular radio signals traveled only a short distance. This
enabled the carriers to let lots of people all use the same frequency
across a particular geographic area.

During the 1990s, new wireless licenses were auctioned off, and the
newly licensed carriers built out their systems using digital technology.
(The term PCS, or personal communication system, became popular, but
it referred to a digital system.)

These new digital systems had numerous advantages over traditional

cellular analog, including:

¾ More secure phone calls, as voice conversations are digitized

¾ More feature-rich (caller ID, text messaging, etc.)
¾ Less fading and static
¾ Generally longer phone battery life
¾ More capacity per channel

The last item is particularly important. Since digital capacity is much

more efficient than analog, the carrier can offer a lot more service for the
same amount of capital investment. This cost advantage allowed the
entry of new digital players into the game, with prices below those being
offered by the older analog carriers. To level the playing field, the older
carriers began to develop their own systems, overlaying a digital system
on top of their existing analog setup. This added even more capacity to
each market; the resulting glut is one reason why airtime prices fell
rapidly and are continuing to drop.

CDMA, TDMA, GSM: What’s with All These Different Digital Technologies?
Imagine buying a TV that picked up only NBC, and having to buy another to pick up ABC or
CBS. That is basically how digital wireless evolved in the U.S. Competing digital technologies
— CDMA, TDMA, iDEN, and GSM — are supported by various carriers, and your phone won’t
work from one system to another. Contrast this to the way things work in Europe, where a
single GSM standard evolved, albeit one incompatible with the U.S. GSM frequencies.

Progress is being made, however. The major TDMA carriers switched over to GSM, as this is a
much better technology for supporting data services. Additionally, many U.S. GSM phones now
offer multiple bands, including those that will work in much of the world (although often at very
high rates).

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CDMA Alltel, Sprint, U.S. Cellular, Verizon
GSM Cingular, T-Mobile
iDEN Nextel

Cingular (including the former AT&T Wireless) and U.S. Cellular were
formerly on the TDMA standard; they have now changed over to the
technologies listed above. Although the TDMA protocol remains available
in some markets, it is primarily for existing customers with older phones.

Nextel uses a proprietary technology called iDEN. It is basically digital

cellular combined with a two-way radio feature.

Mobile Virtual Network Operator (MVNO)

An MVNO is a cell phone company that doesn’t own any wireless spectrum, but instead buys it
from a network operator such as Sprint. Essentially, an MVNO is a marketing company that
believes it can build a profitable business targeting niche markets such as Hispanics or
teenagers. Prior to 2006, most MVNOs offered prepaid service, with TracFone and Virgin
Mobile among the notable-name providers. Recently, the market has seen the launch of several
postpaid MVNOs, including Helio, Disney Mobile, and Amp’d Mobile.

While largely forgotten these days, the original analog network will
continue to be maintained by the wireless industry at least through
2008. There are still some situations where analog is the only signal
available, although these are now primarily in remote rural locations.

If you have a CDMA or TDMA phone that has an analog mode (these
phones are often called “tri-mode”) and your carrier doesn’t have digital
service where you want to use your phone, you may be able to utilize the
analog network. Depending on your rate plan, such usage may incur
roaming charges, but having it available does provide an added layer of
coverage for anyone visiting sparsely populated regions. Analog backup is
generally not available on GSM or Nextel phones and most of the newer
CDMA phones support digital bands only.

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For those with special needs, selecting the right cell phone is far more
than finding one with a fun camera or an MP3 player — it can be the
cornerstone to independence. The right phone offers the freedom to be
mobile, yet enables communication at a moment’s notice with friends or
family should the need arise.

Progress on developing cell phones to assist with specific needs has been
a bit slow in coming. For example, we are often asked about phones for
senior citizens — basic phones that are easy to operate, with larger keys
and more legible display fonts. However, these needs run up against a
market moving toward ever-smaller phones packed with more revenue-
generating data features.

One area where progress has definitely been made, thanks to government
prodding, is in reducing electrical interference between cell phones and
hearing aids. By February 18, 2008, all wireless carriers must ensure
that 50% of their phones are hearing aid compatible.

Phones are certified for this compatibility when they meet the Federal
Communication Commission’s M3 or M4 standard for interference (M4 is
the more rigid of the two; most phones that comply are M3). A phone that
has this certification doesn’t ensure compatibility with any individual
hearing device, but it does narrow the list to those phones that are most
likely to work.

Does your eight-year-old need a cell phone? The cell phone industry,
running out of untapped markets, would like you to think so. There are
now phones specifically designed for the preteen years, as well as a new
generation of cell phones with parental controls.

The Firefly and LG Migo, both introduced in late 2005, were the first
phones specifically designed for preteens. The Firefly is available through
Cingular or as a pay-as-you-go service from major retailers. The LG Migo

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is available through Verizon. Both phones have a limited number of
buttons, making a quick speed-dial call to Mom, Dad, or 911 easier.

Introduced in 2006, the Sanyo SCP-2400 for Sprint has a full numerical
keypad, but allows parents to control what contacts are in the phone
book — and to limit incoming and outgoing voice calls to those numbers.

TIP For those with existing service with one of the above carriers, we’d
suggest adding your child(ren) to your existing plan, turning it into (or
adding another line on to) a family plan. This should be a much less
expensive option than getting your child his or her own plan.

Content With the increasing use of phones to download games,

ringtones, graphics, and other content, companies are making it easier
for parents to restrict what their children have access to. This serves not
only to limit billing surprises but also to protect children from mature
material. However, there is no rating system in effect, so the carriers are
the ones that decide what is mature, and this may vary from carrier to
carrier. Note: Not all phones have the ability to control content.

Locator Services Thanks to the global positioning system (GPS), some

cell phones are now able to transmit the exact location of the phone in
real time. This has many uses in the business world, and can be used by
emergency personnel (in some areas) to respond to 911 calls. Most new
cell phones are GPS-capable.

GPS can also let parents know where their kids are at any given time (or
at least where their phone is). Some carriers are beginning to offer this
location-based service as an optional “peace-of-mind” feature. For
example, Verizon offers Chaperone for the LG Migo phone. In addition to
letting you know where the phone is, an additional feature lets you
receive an alert when your child enters or leaves a specified zone (e.g.,
school). Sprint Family Locator service offers many of the same features,
and is available with many Sprint and Nextel phones.

Wireless AMBER Alerts

AMBER Alerts notify the public of an abducted child. You can receive these notifications, via
text message, on your cell phone through an arrangement between the wireless industry and
law enforcement agencies. There is no charge. Using Zip Codes, you can limit the alerts you
receive to those relevant for your location. To receive AMBER Alerts on your phone, click here.

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While several competing digital technologies are in use in the United
States, much of the rest of the world uses GSM exclusively. Further
complicating matters is the fact that the frequency band used by the
GSM carriers in the U.S. (e.g., Cingular and T-Mobile) is not the same as
that used in other countries.

Where Different GSM Frequencies Are Used . . . a Sample List

850 Band 900 Band 1800 Band 1900 Band
Canada Africa Australia Canada
United States Argentina Europe Caribbean
Asia (except 3G* Chile
countries) Guam
Australia Latin America
Brazil Mexico
Europe Peru
Middle East United States
South Pacific
Visit www.gsmworld.com/roaming/gsminfo for more specific country and provider information.
*3G is the next generation of wireless technology. It has been widely adapted in Japan and South
Korea, and phones sold in the U.S. will not work on the networks in these countries.

If you think you’ll need a phone outside the United States, there are
several ways you could go. Here are a few of the main ones:

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Option 1 — Get GSM service from a U.S. carrier and select a multi-
band GSM phone as your handset. Carriers now offer multiple-band
phones, including some that work on all four GSM frequencies (often
described as quad-band). Visit our international page to compare phones
that work on the dominant 900 MHz band. Before you travel, check with
your carrier to make sure international service is enabled (it is often
disabled by default for security purposes).

Example You subscribe to T-Mobile and have a phone that works in the
900 MHz band. Your phone will work where that frequency is available,
and you will be billed by T-Mobile for calls made overseas. People can call
you on your U.S. number and find you around the world, but it can be
expensive; rates can be more than $1 a minute. Check with your carrier
for packages that might offer a lower price.

Option 2 — Buy an unlocked GSM phone. GSM phones are controlled

by a “brain” called a SIM card. SIM stands for “subscriber identity
module.” If your GSM phone is unlocked, that means you can swap out
SIM cards as needed. Your phone number will change with each new SIM
card, so those calling your U.S. number will not be able to reach you.

Example You buy an unlocked GSM phone that works on the 900 MHz
band because you frequently travel to Europe. For each trip, you can
purchase a prepaid SIM card at your destination from a network
provider, or ahead of time from a U.S. roaming broker. The per-minute
cost for this approach will be less than with option 1, and your incoming
calls will often be free, but you will pay much more for the phone, as you
are not purchasing it in conjunction with the wireless service of a specific
U.S. GSM carrier.

Option 3 — Rent an unlocked GSM phone. At the end of the day, this
is the same as option 2, except that you will only have the phone for the
duration of your trip. This may be a good idea for anyone who makes
infrequent overseas trips, but who doesn’t like option 1, either because
their phone isn’t compatible (e.g., they subscribe to a CDMA technology
carrier) or because they don’t want to pay the high per-minute rates from
their GSM carrier.

Electrical current in many foreign countries is different from that used in

the U.S. When you travel abroad, make sure you have the necessary
converter and/or adapter to keep your phone charged.

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As with computers and other newer technologies, the feature set on
phones is growing all the time. For the consumer, this translates into a
desire to have a new phone frequently. However, if you’ve ever tried to
ask your carrier for a new phone, you’ve probably run into trouble
getting it for anywhere near the price you see in the ads.

This seeming paradox (new customers get better pricing than existing
ones) occurs because most carriers spend considerable amounts of
money to gain new business (see page 46). Since it takes the better part
of a year for a carrier to start making a profit on a new customer, it
would be economic suicide to give out a new phone annually.

This situation leads to a high defection (churn) rate in the industry, as

consumers with limited loyalty can (and do) switch carriers as their
contract ends in order to get a new phone. This is particularly true in a
world with number portability, which is one reason why we are seeing
more two-year contracts and more linked pricing (see box below).

While some carriers are beginning to change their thinking in this area,
with discounted upgrade programs for long-term customers, the
situation is still far from ideal.

Linked Pricing

Remember MCI’s program Friends and Family of a few years back? It was a brilliant strategy
to build loyalty, by getting MCI’s customers to recruit other members. Many of the wireless
industry pricing strategies that we have seen of late, including an increased emphasis on
family plans, the introduction of “walkie-talkie” service by some of Nextel’s competitors, and
free mobile-to-mobile calling, all have one thing in common — they require multiple
subscribers to take full advantage of them.

This linking makes it more of an effort for users to switch to another service, and so it is a
subtle way the carriers are using pricing to reduce defections.

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Once you are a customer of a certain carrier, you usually won’t be able to
take advantage of the phone deals you see online or in stores unless you
are adding a new line of service. This is true even if your contract has
expired. Even the offers on the carrier sites themselves are generally
reserved for new customers.

With that in mind, your replacement phone options boil down to these:

¾ Change Carriers Easier to do these days with number portability

(assuming you want to keep your number), but can be expensive if
you are still under contract. The good news is that there are plenty
of free or very low-cost phones available with new service; if you
haven’t upgraded your phone in the last year or two you are likely
to be surprised at the range of features you will get for very little
money.

¾ Buy a New Phone Call or visit a retail store of your carrier and
find out the price for one of their current model phones. Try
negotiating for a better deal from the one they first offer. It never
hurts to ask. Your chances of success will depend on how much
leverage you have. If you are no longer under contract, if you have
been a long-term customer, and/or if you are a high-revenue
customer you might be able to cut a deal. Note that in most cases
you’ll have to sign a new contract or extend your existing one.
Alternatively, you can buy an “unlocked” version of a GSM phone
from an independent retailer that you can then take to your GSM-
technology carrier for activation.

¾ Buy a Used Phone For those needing a low-cost replacement while

still under contract, MyRatePlan works with a third party that sells
used phones. Alternatively, you can try an auction website. But
that can be a bit tricky. You’ll need to know whether or not the
phone is locked or unlocked and what technology it uses. You
should check with your carrier before you acquire a replacement
phone from a third party to confirm it can be activated on their
network.

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Millions of phones go out of service each year, usually because their
owner upgraded to a new phone or switched carriers. Unfortunately,
many of these unwanted phones end up in landfills, creating an
environmental waste problem that is growing larger each year.
Fortunately, the wireless industry and some entrepreneurs have
responded with alternatives.

Selling Your Phone You can now ship your phone to a company that
will pay cash for it. The amount will vary, based on the model, its age,
and its original selling price. These companies refurbish these phones
and then sell them in bulk, often in other countries. In some cases, this
provides a more affordable solution to those abroad who might not
otherwise be able to afford a cell phone.

Donating Your Phone There are a number of charities that will be happy
to take your phone. Whether for victims of domestic violence, for the
elderly, for public safety, or for the disabled, the device you can no longer
use might help someone in need.

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Millions of Americans now rely on their wireless phone as their only
phone. Younger people with more mobile lifestyles are leading the charge
in this area. After all, if a teenager gets a cell phone and/or uses wireless
exclusively while in school, they might not even consider a landline when
they move out into their first apartment. But many other people are
beginning to think the same way, and there is little doubt that the
wireless-only population will grow.

To determine if you might be a good candidate for “cutting the cord”,

consider the following questions and answers.

¾ How mobile is your lifestyle? If you frequently travel or you find

that most people are reaching you on your cell phone anyway, then
you may no longer have need for a wired phone.

¾ How big is your household? Let’s say you have a spouse and two
children and currently have a phone in each of four rooms. This
can be handled by a single wired line. To replicate this with cell
phones, you would need four separate phone lines. There are
wireless family plans available to reduce the total cost, but this can
still be far more expensive than a single landline number.

¾ Do you talk a lot? Most landlines are priced at a flat “all-you-can-

talk” rate. At today’s prices, moderate users of wireless will find
their bills competitive with landline bills. However, as the amount
of talking you do increases, the cost advantage tilts toward the
landline. Additionally, since airtime is counted whether you make
or receive the call, you might find that talking exclusively on your
cell phone results in using more minutes than you might expect.

¾ Are you okay with occasional dropped calls and/or bad reception?
Every time you pick up a landline, there is about a 100% chance
that you will hear a dial tone. Wireless technology is not that
reliable; signals can be influenced by network congestion, weather,
and topography.

¾ Are you likely to need 911 services? If you call 911 from your
landline, emergency services can locate you even if you can’t
speak. The same is not yet true in all areas with wireless. If access
to 911 is essential to you, we recommend maintaining some level of
landline service.

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 ¾ How do you get your Internet access? Cable modem service comes
through cable TV lines. However, DSL and dial-up modem access
will usually require you to maintain a landline.

In addition, you may want to consider the impact of the following:

Data use Burglar alarm monitoring, satellite TV, faxing, and a digital
video recorder may all need a landline. In some cases, work-arounds are
possible, but these should be investigated before you cancel your service.

Number portability You can now take your home phone number with
you when you go wireless if the wireless carrier you choose covers the
same local area as your landline carrier. Note that wireline-to-wireless
porting requests may take several days to complete.

Telemarketing Historically, most telemarketing calls have been to

landline phones. As people go totally wireless, and start providing those
phone numbers when making purchases, it is inevitable that
telemarketing calls to cell phones will increase. Number portability adds
to this possibility, as it will be less clear to telemarketers over time which
numbers are landline and which are wireless.

Battery life Cell phones, particularly those with the newest features,
often require recharging after just a few hours of use.

Contracts Unlike your home phone, wireless plans usually require a

one- or two-year contract, with cancellation penalties of $150 or more.

White pages There is no centralized directory for finding a cell phone

number today. As a result, people may not be able to find you if you are
completely wireless. (Of course, this may not be a bad thing.)

All-you-can-talk plans If you decide to go totally wireless, but only need

your phone locally, consider an all-you-can-talk plan, offered by carriers
like SunCom, Cricket, and MetroPCS in certain areas. These plans offer
unlimited wireless service in a small local area.

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In the past, when someone switched wireless providers, they were
required to change their phone number. The arrival of wireless number
portability in late 2003 enabled customers to take their phone numbers
with them if they changed carriers.

Important Things to Keep in Mind about Portability

¾ Most important Sign up with your new carrier before you cancel
your old service. If you cancel your existing service first, the
number might not be transferable. Once the process is complete,
service to your old phone should be automatically disconnected.

¾ You can port your number to another carrier even if you are under
contract. However, you must still honor the terms of your contract,
which in this case probably means a contract termination penalty.

¾ You can port your number even if you still owe your current carrier
money. However, this does not release you from that obligation.

¾ While your number is portable, your phone usually isn’t; in most

cases, you’ll need to get a new one (see page 10).

¾ You can port your number between wireline and wireless numbers.
Keep in mind that while wireless ports can take as little as a
couple hours, wireline-to-wireless moves may take several days.

¾ Portability is local. This means, for example, that if you have a

Boston number on your cell phone but move to Miami, you
generally won’t be able to port it directly with a Miami carrier.

¾ Prepaid numbers are portable (see page 17), as are fax numbers;
800 numbers and pager numbers are not portable.

¾ To be eligible to port a number, you must be the primary account

holder. So, for example, if your service is in your company’s name,
you will not be able to transfer that number.

¾ During the porting process, your ability to call 911 may be

impacted. As you move from one carrier to another, it is possible
that 911 calls may be relayed incorrectly.

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Throughout this guide, we’ve highlighted a number of issues that affect
what you will pay for your cell phone and your plan. In this section, we
offer a bit of background on the economic factors of the wireless industry
to help explain why plans and phones are priced the way they are and
how wireless companies make money.

It costs a cell phone company about $350 to acquire a new customer.

This amount varies depending on where the customer signs up (carrier
store, independent retailer, or online), but when the commissions, phone
subsidies, and marketing are added in, $350 is a reasonable ballpark
figure. So, basically the carrier is $350 in the hole when you start your
service and they need to make that up before you become profitable to
them.

Thus, the carrier wants you to commit to spending as much as possible

each month so they can recoup that $350 as quickly as possible. One
way they do this is by making rate plans progressively more attractive as
you agree to a higher monthly commitment. So, while a carrier might
offer just 250 minutes for $29.99 a month, it might offer 600 minutes for
$39.99 a month, with a free phone and unlimited nights and weekends.

The other carrier goal is to try to make you stick with them at least long
enough for them to get that $350 back. This is partially the reason for
requiring a contract.

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Most of a carrier’s costs are fixed, except for the initial outlay they spent
to acquire your business; they don’t have to put up any new cell towers
or hire extra staff just because they signed you up. Therefore, the
customer who uses 1,000 minutes a month really doesn’t cost them
much more than the customer who uses only 200 minutes. So the more
you spend each month, the faster you will be profitable for the carrier.

As you can see in the above chart, the $59.99 customer becomes
profitable three or four months sooner than the $39.99 one, while the
$29.99 customer may take longer than a year to reach the point of
profitability. Since the price for voice airtime has been falling in recent
years, the ability to gain additional customer revenues through new data
services is going to prove critical to industry profitability in the years
ahead.

How You Can Benefit Because of the importance of revenue, you will
often find that the best deals on phone prices come when you commit to
a rate plan of $39.99 or more per month. This is particularly true when
buying online from an independent retailer. Carriers tend to pay less
commission — and thus phones are subsidized less (and thus more
costly for you) — on lower-priced plans.

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Ignoring acquisition costs, let’s take a look at how the carrier makes
money on you each month. Let’s say you have a $39.99 rate plan that
includes 600 minutes, with additional minutes costing 40 cents each.

As you can see, up to 600 minutes, you are paying the carrier $39.99, so
their profit decreases a bit with each minute of airtime you use. As
discussed above, this is not a great immediate cost for the carrier, but
use of the network does affect capital spending they will be forced to
make over time, so ideally they’d like to take your $39.99 and have you
not use the phone at all.

However, in reality the carrier would like you to talk more than your
allotted minutes on your $39.99 plan. This overage rapidly increases
your bill — and thus raises profits. Overage used to be a huge
moneymaker for the wireless industry, but this has become less true as
competition has forced the carriers to bundle more and more minutes
into lower-priced plans.

How You Can Benefit. On the long-running TV game show The Price Is
Right, a contestant’s objective is to get as close to the right price of a
particular product with his or her guess without actually exceeding the
price. That is exactly your goal in selecting a plan — to get as close to the
actual number of minutes you need without exceeding that number.

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Allan Keiter is the founder and president of
MyRatePlan. After earning an MBA from Columbia
University in 1991, Mr. Keiter embarked on an eight-
year path working on the pricing and revenue
management strategies and tactics for several large
service companies, including United Parcel Service,
Continental Airlines, and BellSouth Cellular (now
Cingular).

During this period, Mr. Keiter was constantly amazed at the layers of
complexity that often accompanied the pricing rules for these industries.
Sometimes, the exceptions and fine print in advertisements were
lengthier than the ad copy itself. With the advent of the Internet, a tool
became available to cut through the fine print and make consumers
comfortable that the service being purchased was indeed what they
needed. This led to the formation of MyRatePlan in early 1999.

Under Mr. Keiter’s leadership, MyRatePlan has been and remains a

profitable Internet company, posting significant growth from year to year.
The company’s niche as a comprehensive resource for unbiased
information has been noted in a variety of publications, including The
Wall Street Journal and Money magazine, and on NBC’s Today show.

Mr. Keiter’s career began with a B.S. degree in accounting, followed by

five years of financial accounting and analytical work for Citicorp,
Salomon Brothers, and a start-up investment management firm. During
this time, he passed the CPA exam in his home state of Pennsylvania.

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