The CHEAP way to pay for a Nexus One — think TCO
5 January 2010 by lukehutch
DON’T GET THE GOOGLE NEXUS ONE PHONE ON CONTRACT (even if you already have a contract with T-Mobile), YOU’LL LOSE A LOT OF MONEY. Here is all the math to prove it:
KEY POINTS:
- T-Mobile is messing with everybody’s minds by telling them they can have the phone now for $180 on a 2-year contract — you think you’ll save money in the long run as well as up front that way. There’s no free lunch. In the long run you may end up paying hundreds more if you buy the phone on contract.
- You can get out of paying for your current G1 contract by switching to the Even More Plus 500 non-contract plan (*not* the Even More 500 contract plan, it’s different). Conversion is $35. The only contractual obligation remaining is the early termination fee if you ditch T-Mobile entirely (see below).
- Even More Plus 500 is a no-contract plan and will save you a lot of money over most other plans, and certainly you will save over a hundred dollars compared to the Even More 500 with the exact same plan features if you purchase the Nexus One.
- You can save “even more” if you get Google Voice and use GV for all your SMS, and then request they take SMS off your account ($10/mo), converting your plan to the (undocumented) Even More Plus 500 Talk+Web (rather than the default Even More Plus 500 Talk+Text+Web) plan.
TOTAL COST OF OWNERSHIP (TCO) ANALYSIS:
- The N1 is $180 on 2-yr contract or $530 off-contract. You’ll end up paying (with taxes etc.) about $88/mo for the 79.99 2-year contract (Even More 500). So 180+88*24 = $2292.
- If you get the phone off-contract and pay T-Mobile for the Even More PLUS 500 plan ($60/mo) that has the *same features* as Even More 500 but is non-contract (after a $35 conversion fee), it’s about $67/mo after taxes etc., or 530+67*24+35 = 2173, saving $119. (You can see how they picked the $530 and $180 price points though, they’re close in TCO.)
- However if you get the Even More Plus 500 non-contract plan and then ask them to cancel the text messaging bundle (-$10/mo) and then you use Google Voice for all SMS, you only pay about $56/mo after taxes, or 530+56*24+35=$1909, saving $383. (You do pay 20c for each SMS to/from your non-GoogleVoice number, if you ever get any — so change your cell number and get everyone to use your GV number).
- There is a (530-180)+119 = $469 difference between the *perceived* additional cost to the consumer of buying the phone outright (it’s $350 more) and the actual additional savings to the consumer of buying the phone outright (you save $119 in TCO) without even using the Google Voice trick to further reduce costs. This gives you a measure of how deceptive the phone price marketing really is, because the *only* reason someone would sign up for the contract version is so that they (supposedly) save money. That’s a $19.50 difference in perceived cost per month of your plan, amortized across the 24 months.
Basically they’re taking people for a ride by making them think they’re going to get a good deal by avoiding the apparently large up-front cost of the phone and signing up for a 2-year contract. The Even More Plus 500 Talk+Text+Web plan gives you *exactly* the same features as the Even More 500 Talk+Text+Web 2-year contract. However the Even More 500 contract won’t let you change features like canceling SMS — and you’re stuck with a huge early Nexus One early termination fee of $350. Add that to your expected cost if you ever think you’ll leave T-Mobile in the next two years.
So if you’re on a T-Mobile contract, e.g. you bought a G1 phone a year ago, get Google Voice, pay the $35 fee to convert to Even More Plus 500, cancel the SMS bundle, buy the phone outright and start using Google Voice for all SMS. You’ll save hundreds of dollars in the long run. But even without Google Voice, you’ll save a third of the price of the phone by going off contract. (I know you can’t easily sign up for Google Voice right now, but wait a little while, anywhere from weeks to a few months, and you will be able to when GV+Gizmo opens for public consumption.)
Note that if you switch to Even More Plus: (1) T-Mobile will never let you switch back to a contract again, without canceling and signing up anew; (2) you still have to pay early termination fees for old contracts (for the G1 etc.) if you do cancel your account; and (3) you are not eligible for equipment upgrades — but you would only get a partial discount on a new phone after 22 months anyway, and you’d have to renew a 2-year contract again at that point. After the above analysis though — why would you care about any of these restrictions?
Off-contract is the way of the future. Take back control from your carrier.
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My Android stuff (original multi-touch hack, etc.) – http://lukehutch.wordpress.com/android-stuff
Posted in Android | Tagged Android, NexusOne | 14 Comments
14 Responses
Are you sure you get $10 off when requesting to have the texting part of the plan removed? I noticed that if you try to get a talk only plan ($30/month) on the T-Mobile site and select a smartphone, they automatically add a $25/month web plan. So the cost would be $55/month. So, if what you’re saying is true then it’s either:
talk+text+web – text = $50/month OR
talk+mandatory web plan = $55/monthI would find it surprising if you could get the same plan at two different prices just by how you went about putting it together.
Yes, I’m basing this on the prices quoted here: $30 for talk, $40 for talk+text, $60 for talk+text+web. All before taxes of course. I got the $60 plan and asked them to take off texting, they said it would cost me $50. (It’s just an unlisted combination of options.)
$10 for unlimited SMS when you have unlimited data? Highway robbery.
Please note that T-Mobile sometimes offers generous corporate discounts (e.g. 14% off everything, if you are a AAA member). Last I checked, these type of discounts didn’t get extended to some of the more recently offered rate plans, such as the new Even More Plus plans.
Depending on which existing rate plan you are on, which plan your thinking of changing to, and which discounts are available to you, the overall math can get a lot more complicated.
Markus: a really good point. I was on a 15% discount plan through MIT, and had to give that up to get on Even More Plus. I still save $5/mo or so though over my old plan. The other nice thing is that the $35 conversion fee is refunded to your account within 1-2 billing cycles if you were previously on a corporate discount plan, to somehow compensate for the loss of the discount.
i think you are missing a huge point in you post. if you buy the nexus through google and sing up for the tmobile plan you only get 500 minutes. and you still have to pay for the text and data. the total is 79.99 with a two year contract.
500 minutes is a joke. how much more is it going to cost you when you go over. i could use 500 minutes in a couple of days.
but if you just buy the phone outright for the same price you can get unlimted minutes, text and data, with no contract. and you still save $130 over two years on just the phone alone, and you dont worry about overage minutes.
lets see…save $ and talk without worries…ill pay the $530.
the problem with people is that they want something they think is cheap now, but dont realize what it is really costing them….see the housing market.
You are right, 500 minutes is not much. I can barely squeeze into 500 minutes myself, I used to go over 600 all the time. (Note that you also get unlimited Tmo-to-Tmo and nights and weekends though.)
However you’re missing one key point: Google Voice + Gizmo5. It’s happening, and it’s happening really really soon. Definitely within the 2-year timeframe we’re talking about, probably within the next 4-6 months tops. At that point the 500-minute limit becomes immaterial. Some people may take the leap and go to data-only plans: $20 or $25/mo *total*. (I probably won’t because I don’t get good data speeds everywhere in and around Boston.) With a non-contract plan you are at liberty to do anything you want with your plan (like stop paying for voice), at any time, without risking plan renewal or termination fees.
Note that even if you go for the completely unlimited Even More Plus Unlimited, the same price at $80/mo as you point out, you can *still* cancel the SMS option, use GV for SMS, and save yourself about $11*24 = $264 over 2 years. Then you’re paying $350-$264 = $86 more than the 2-year contract rate, so as long as you expect more than $3.60/mo average on overage fees, you’d save money by canceling SMS. If you don’t cancel SMS, you of course get unlimited everything off contract for $350 more total, or you would pay $14.60 more per month than being on contract with the amortized cost of the phone factored over 24 months.
Why pay the $35 fee to convert to Even More Plus 500? Just stay on your G1 contract and put the SIM in a Nexus One you buy outright. For my current plan (although not available anymore) MyFaves 300 and T-Mobile G1 Unlimited Web + 400 Messages I pay ~$60/month after taxes with the 14% UC Berkeley affiliation discount.
An excellent point. I’ll update the post to include this suggestion.
I’m just so sick and tired of my contract in general. I’ve got ~12 months left on mine and a little less on my wife’s. I bought the N1 for the full price and plan to stop getting phones for the reduced price. It’s a usually ~$200-300 price difference which is only about $10/month anyway. I much prefer to not be locked down to any company even though I plan to stick with TMO (I’ve been with them for 8-9 years and like them a lot). It feels good when you don’t have a contract. I didn’t for the longest time and loved it.
Couple of things.
#1-You are completely right, this is why I bought it at $530.
#2-If you live anywhere near in the Midwest Check out iWireless (http://iwireless.com/plans.asp) $50 will get you unlimited talk and web, $10 more will get you unlimited text (which is not needed as noted above), pretty nice. I am pretty sure that they roam on T-Mobile outside of their area, so you could conceivably get a plan and never actually be in the area. I know of people in the bay area that use their iPhones on it and hardly ever come near Iowa.
#3-Your link http://lukehutch.google.com/android-stuff is not right, I thought it might be code.google.com, but that didn’t work either.
#4-Take back your devices and wireless plans! They should be competing for our business, we should not be shopping around for the best deals.
#5-Great post and great work Luke.
Great points, + fixed my url to http://lukehutch.wordpress.com/android-stuff. Google on the brain. Thanks.
if you drop the sms option it will only save you $5 a month. it is 49.99 for the plan, and for data to work with the nexus it will be 25. i have no problem paying 5 for unlimited sms. and that would only be 120 over 2 years. and if you get incoming texts to your number you end up paying for them. and people do love to text phone numbers regardless of gv or not.
i am looking forward to some day when i can drop voice and have data only and still be able to make unlimited calls. if it happens my bill will be just for data, but untill then i will be paying the 79.99.
I don’t get this $5 off comment. Unless the data price goes from $20 of the bill to $25 of the bill if you drop SMS. The cost breakdown on the T-Mobile site is clear, as I linked to above in one of the responses. I certainly saved $10/mo myself when I called TMo and asked them to make this change.
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Tuesday, January 5, 2010
The CHEAP way to pay for a Nexus One — think TCO « Luke Hutchison
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