Consumer Action’s new prepaid wireless survey finds clear benefits

Study locates many alternatives to 'postpaid' cell plans

Contact: Linda Sherry, 202-544-3088 or Ken McEldowney, 415-777-9648

In a new survey released today, Consumer Action (CA) looks at prepaid wireless plans offered by 12 companies and finds that prepaid wireless is a viable option to postpaid plans in terms of price and services. Rates of 10¢ per minute are common. Most of these low rates come with daily access fees, rapid expiration or other strings attached, but even so, CA believes they will represent a cost savings over postpaid for many consumers. Prices even lower than 10¢ per minute were found, but they require a significant monthly commitment. The minutes are debited from your account every time you make a call. Most companies offer two types of prepaid plans: pay-as-you-go and monthly arrangements that require you to pay in advance for a certain number of minutes which expire in 1-3 months if you don't buy more. "Don't ignore the fine print," said CA's Linda Sherry. "It's striking how each plan has its own set of distinct rules." The cell phone industry has grown advertising "postpaid" calling plans to credit-worthy customers who enter 1-2--year contracts and pay monthly service fees for a predetermined number of minutes. Now an alternative to this system-prepaid wireless-is growing in popularity. The prepaid market, once reserved for low-income buyers or those with poor credit, now includes people who want to control costs and who are attracted by the simplicity of pay-as-you-go plans with no contracts and no credit checks. Prepaid wireless plans are not without conditions, however. Many insist that you buy minutes each month to keep the service active. Most plans require additional fees for roaming or extras like text messages and multimedia services. Most prepaid plans offer a basic no-frills phone, but prepaid companies also are courting the youth and higher-end markets with camera phones and personal digital assistants with high price tags. CA found that rates vary depending on the amount of time you buy, whether the minutes are good for daytime or night/weekend calls or special promotions are in effect. The lowest per-minute rates are for the most part offered with monthly payment plans. Sherry notes that "it is almost impossible to directly compare rates because of factors including 'unlimited' night and weekend minutes, free mobile-to-mobile calls, expiration periods, rollover minutes and other aspects of the market." "For people who just want a phone for emergencies, shoot for a rate of 10¢ per minute with the longest expiration policy you can find," she recommends. "If you are really chatty, look for a plan that lets you reload minutes at a low price during the month if you run out, instead of a plan that charges you a much higher rate for additional minutes." CA's findings include: - The fewer minutes you purchase, the more you pay per minute. - Like the majority of postpaid plans, most prepaid wireless plans offer free state-to-state long distance. - Terms and prices may vary when customers access another company's wireless network (roaming). Some plans don't allow roaming, while others charge up to 93¢s; per minute. - Not all companies allow international calls. Some carriers require that users specially activate their phones to allow international calling and all calls are charged at separate international rates. Some companies include calls to Canada and Puerto Rico in U.S. calling rates. - Most prepaid wireless plans allow text messaging if the phone you buy supports it. CA found that rates for text messaging range from 5¢-10¢ to send and/or receive, although some offer free receipt of text messages. - Prepaid plans come with a variety of phones. Phones available with surveyed plans range in price from $19.99 to more than $200. - Prepaid phones and plans are available in many stores, from national discount, electronics and pharmacy chains to corner convenience markets. - Expiration dates are a key piece of information for prepaid cell phone plan customers. Depending on the plan, expiration occurs monthly, when your minutes run out, or is based on the dollar amount you purchased. Some companies allow a "grace period" within which to reactivate service before the account disappears. - You can buy more minutes ("recharge" or "reload") online or by phone. You can also get more minutes by buying a prepaid wireless phone card at retail outlets. With monthly plans, you can arrange beforehand to have your checking account or credit card automatically debited each month. Some companies require that you provide a credit or debit card if you want to take advantage of prepaid monthly plans. Consumer Action, founded in 1971, is a non-profit education and advocacy organization based in San Francisco, CA, with offices in Washington, DC, and Los Angeles, CA.


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