A price war may looming in the cell phone business, which means some customers may be getting a smaller number on their monthly wireless bills.
But if you’re considering switching wireless providers to cut costs, be prepared to pay in other ways — in both time and money — when switching alliances. If you are in the midst of multi-year contract, you will pay $175 to $200 to leave your cell phone carrier and about $35 to start with a new company and you will probably pay a month of overlapping phone bills from both companies when you switch. Add to that, you will likely need a new phone.
“It’s unfortunate that it takes that much effort to switch,” said Art Neill, attorney with the Utility Consumers' Action Network, (UCAN) a nonprofit consumer advocacy group in San Diego.
There’s more incentive to switch, however, since cell phone providers started aggressively wooing their rivals’ customers. Last week, Verizon Wireless and AT&T Inc.’s announcement that they would offer $99.99-a-month plans for unlimited calls. T-Mobile USA soon matched that plan but also included text messaging in its price. And industry analysts expect Sprint Nextel Corp., to follow with an even lower $60 flat-rate calling plan, setting off an industry price war. Sprint has yet to unveil such a plan.
As many as 80 percent of Americans own cell phones today, so growth for wireless companies depends on taking customers from rivals, said Scott Ellison , a wireless analyst at market research firm IDC.
The latest flat-rate plans will appeal to a small number of customers, in particular, the biggest talkers, industry watchers say. The plans also do not necessarily mean customer bills will be more simple, since customers may want extra features like international roaming, e-mail service or long-distance plans that would have to be added onto the bill, Ellison said.
If your contract is up, it is a good time to look at your alternatives — whether it’s with a competitor or negotiating for better service or more features from your existing provider, said UCAN's Neill. He said it takes about $300 for a cell phone company to acquire a new customer but costs only a fraction of that amount to keep an existing one.
“It’s important that you stand your ground when they call you at the end of your contract and start offering teasers to keep you as a customer,” said Neill. “Remember, this is just about the only time you have the bargaining power, so you want to push for all the features and services you can get before being signed up for two years again.”
Before you jump to a new cell phone company, be sure it is really right for you. Talk to friends and neighbors about whether the phone service works where you need it. Ask to try out a phone for 14 to 30 days. Most cell phone companies will allow those trials without any obligations.
People can also find a guide to picking a carrier at UCAN's Web site and compare side-by-side plans at wirelessguide.org. Customer satisfaction ratings can also be found at J.D. Powers & Associates’ Web site.
If you are still in the midst of a contract, and you still want to switch, be prepared for some sticker shock.
You’ll pay a hefty contract termination fee. Contracts typically last one or two years from the day your phone is activated, but some consumers find they’re in for a much longer period of time because their wireless company automatically renews their contract when they call to make an adjustment to their service.
"Consumers have complained of being locked into new contracts for simply inquiring about a new battery, ordering a new phone or adding text-messaging onto the service," said UCAN's Neill.
One in seven consumers surveyed by Consumer Reports last year said they were seriously considering switching cell phone carriers, but the termination fee discouraged them from doing so. Such mandatory service contracts are one of the top concerns for cell phone users, the survey reported. The contracts have been the center of several lawsuits against the cell phone industry by consumer activist groups.
In some circumstances, people can argue their way out of a contract, such as if they are moving to an area where there is no coverage by that company, said Neill. His group, UCAN, offers an online guide to canceling their phone contract.
Or, for $15 to $20, people can go to celltraderusa.com or cellswapper.com and sell their existing contract to other people who want short-term contracts with no activation fees. The new users take over the account with permission of the cell phone carrier.
You’ll pay a $35 activation fee to sign up with your new service provider. If you have bad credit, you may pay a big deposit of $100 or more to sign onto a plan.
You will probably cover two bills during the month if charges overlap between the carrier you’re joining and the one you’re leaving. “It’s not easy to figure out when you can port from one company to the other and not double up your payments,” said Neill. You may want to call to verify your contract and billing dates, he said. Most companies will not prorate in the last billing cycle.
You’ll also probably need to get a new phone. Even if you love your cell phone, chances are it won’t work with your new wireless provider. Sprint and Verizon use the same technology standards for their phones, as does AT&T and T-Mobile. But most often, wireless companies will “lock” the phones, so they do not work on other carrier’s networks regardless of the standards used.