Under utilization. Depending on the service plan you have, the advertised equivalent per-minute rate is somewhere in the range of $0.10–$0.25 per minute. However, in order to minimize your rate, you have to use up to but not over your allotted minutes. That’s the key. If you don’t use all your allotted minutes, then your actual equivalent per-minute rate is higher. My old plan had 200 minutes per month and I averaged around 160 minutes. At the time I canceled the service my monthly bill was $42. So I had an average rate of $0.26 per minute. That doesn’t seem so bad until I realized on my low volume months (< 100 minutes of usage) I was paying an equivalent rate of over $0.40 per minute. I didn’t have any rollover minutes with my plan but even if I did, again the under utilization applies. Just because you have unused minutes doesn’t mean you will actually put them to use if your average usage doesn’t change. So it’s no great loss to the wireless provider to offer rollover minutes because most people’s calling habits will not change. Overages. Wireless providers count on the fact that a) people don’t initially know their usage habits and b) people are slow to change their plans if their usage changes. Because of a) consumers tend to underestimate how many minutes they need. As a result they’ll go over and often pay two to four times their advertised rate. This happened to me once. I simply adjusted my calling habits, and I haven’t had an overage charge since. On the other hand most people don’t consider if their change in usage is a temporary or a more permanent change. Enter fact b). People are reluctant to upgrade to the next tiered plan because psychologically it means a higher monthly bill. Add to the fact that it takes effort on their part to change the rate plan and before they know it, a monthly bill is two to three times greater than had they simply changed the plan after the first month that they saw overages. You’re better off paying for a plan with more minutes than sticking with a plan with less minutes and going over.

Text messages. If you don’t purchase the unlimited text messaging add-on package, they get you coming and going depending on your provider and service plan. It’s one of the reasons why I was reluctant to give up my old plan. I wasn’t charged for messages I received, only for those that I sent. And the numbers just don’t add up. To send 160 bytes of data, the length of a single text message, it costs $0.15 which is also what my current rate plan is for a single minute. One minute of voice contains 38,400 bytes of data assuming a 5 Kbps compression rate. If you were to convert the text message rate to a per-minute rate it would be equivalent to 38400/160 * $0.15 = $36 per minute! And that’s just one way!! Talk about price gouging if you’re the consumer. But if you’re the wireless carrier, “Holy profit margins, Batman!” It’s so easy to understand why wireless service providers don’t want open applications on their networks. It would be way too easy for some third party to undercut this cash cow. I guess it’d be too much to ask for the US wireless providers to adopt a model like Japan where unlimited SMS is an included plan feature and not some premium-a-la-carte or add-on service.

Access fees. This is specific to AT&T’s prepaid Pay As You Go with free mobile-to-mobile calls. The advertised rate is only $0.10 per minute. Plus if you call anyone else who is an AT&T customer, you don’t get charged any airtime. Sounds great except for the fact you pay an access fee of $1.00. This fee is assessed once per day and only if you use a voice feature on that day. I took my bills and calculated the costs if I were on this plan. For one month, I would’ve paid $7.80 in airtime fees but $18.00 in access fees. For a different month, the charges would’ve been $3.30 and $32.00, respectively, where the majority of my calls were to AT&T customers. (Note: That particular bill covered more than a full month of usage.) This was my biggest clue that wireless providers overcharge their customers. Let’s say I only call one person who also happens to be an AT&T customer. This means I would not be charged any airtime; only access fees would apply. Let’s say that I call this person once per day every month and each call lasts one minute. The bill would be $30 a month. Now let’s say that each call lasts a full 24 hours instead of one minute, or each day I make enough calls of varying duration that fill the full 24 hours. The bill would still be $30. So as a business you’d want to cover this worse case scenario and still be profitable. This would indicate to me that $30 is the minimum a wireless provider would need to take in per customer (assuming there are enough customers) to cover all the costs of maintaining and growing the business. The fact that the cheapest plan be it prepaid or post-paid is currently $29.99 would be circumstantial evidence in support of that conclusion. Plus since no reasonable customer would ever use a phone 24/7, the rule of under utilization applies and that as long as the phone isn’t under constant usage $30 per month will still provide a decent profit margin. Which means that all these add-on features are just pure profit. Some circumstantial evidence in support of that is the fact that if you’re willing to tack on any add-on services, a sales person is more than willing to cut you a deal on hardware and accessories. They’ll make the money back in just a few months if that.

Roaming and long distance rates used to be among this list but as most plans these days include nationwide roaming and long distance that’s no longer an issue, at least domestically. Internationally, it’s a different story. At least now you can get your phone unlocked to allow using a local SIM card for the country you’re visiting and/or you can purchase an international plan if you remember to do so ahead of time.

I can only help but wonder if history is just repeating itself. The telecommunication industry is far from a monopoly even with AT&T being the largest wireless service provider, but it certainly feels like a cartel. Other than technology, there’s very little differentiating each of the incumbent providers. One typically goes with the provider who has the best coverage (which can sometimes means only one provider i.e., a geographic monopoly) and can support the device(s) one wants to use. It’s just when I compare the US to Asia and Europe it makes me jealous the bang for the buck and even the freedom of choice people there get. I have nothing against businesses making money, but I do have a problem with collusion and writing the rules in favor of the business player at the expense of the consumer through government lobbyists. My suspicions of the wireless industry’s anti-consumer practices will be confirmed when the phone unlocking exemption to the DMCA will not be renewed. The only reason it passed the first time was the lobbyists didn’t submit their objections in time. It’s why I’m rooting for Google to win the 700 MHz spectrum auction. We need more players in this industry, and players that don’t think in the same way as these former Bells.

My current plan is a grand-fathered, out-of-contract AT&T Blue plan giving me 200 anytime minutes and unlimited nights and weekends. It costs me nothing to receive text messages (which is the way it should be) and costs me $0.10 to send them. All this for $29.99, originally. Add on the $4.99 maintenance fee plus taxes and fees, and my bill comes out to an average of $42 monthly. It turns out that I average about 160 minutes per month, and that includes nights and weekends. My texting charges are all but non-existent. So it would seem I made a good choice. Or did I? Given my average monthly usage and charges, that comes out to over $0.26/minute.

The closest AT&T contract that matches my current plan is the Nation 450. That’s more than three times the number of minutes I would end up using. Plus after taxes and fees it would be an estimated $59.24. And I wouldn’t even get unlimited nights and weekends and they’d start charging me to receive text messages. If my usage stays the same the equivalent rate would be about $0.37/minute. Talk about overpaying for service!

Looking at prepaid plans, AT&T offers two types—Pay As You Go and Pick Your Plan. PAYG is a traditional prepaid plan in the sense that you refill your account as needed by purchasing refill cards or directly depositing funds into your account. Pick Your Plan is sort of a hybrid between a contract and PAYG. At the beginning of each month you’re charged a specific amount based on the plan you picked which gives you a limited number of minutes. If you use up the funds, you have the option of adding more funds to your account or waiting until the next month for the next scheduled payment. If you don’t use any funds, they rollover.

Pay As You Go has two rate plans. The first is the flat rate plan which I call the “pocket payphone” because all calls are charged at the rate of $0.25/minute. At first this looked good since I’m a low volume customer, but at 160 minutes per month, the bill would be $40. In fact, anything over 120 minutes and this plan is no longer that attractive. If you need a phone just for emergencies or as a backup, then this plan makes the most sense. The second PAYG rate is $0.10/minute with free mobile-to-mobile calls. About a third to half my calls are to other AT&T customers so I thought this would be a good choice. However, this plan charges you a daily activation fee of $1.00 if you use any voice feature (make a call, receive a call, check voice mail, etc.). Since I use my phone on average 25 days per month, any savings I get from the low per-minute rate and M2M calls are pretty much wiped out. In fact, versus the flat rate, I’d only save $6 per month. In order for you to save a significant amount of money using this plan, everyone you call has to be an AT&T customer that way you’re only charged the daily activation fee.

Pick Your Plan has four rate plans starting at $29.99 up to $69.99. More expensive plans give you a better per minute rate ranging from $0.15/minute to $0.108/minute and add unlimited minutes. Since the point is to save money the PYP 200 at $29.99 is the only one I’d consider. It gives me up to 200 minutes every month. I can refill the account if I run out and any unused minutes will rollover. Which I can use for that occasional text message I need to send/receive. Also one of the key differences between PAYG and PYP is that PYP has nationwide roaming. Since I travel, it pretty much tips the scale in favor of PYP over PYAG.

To summarize:

• Pick an AT&T GoPhone Pay As You Go Flat Rate…

• …if you don’t like being in a contract.

• …if your usage is under 120 minutes per month.

• Pick an AT&T GoPhone Pay As You GO M2M…

  • …if you don’t like being in a contract.

  • …if you primarily call other AT&T customers.

  • …you don’t use your phone daily but use it more than 120 minutes per month.

• Pick an AT&T GoPhone Pick Your Plan…

  • …if you don’t like being in a contract.

  • …if you use your phone daily and more than 120 minutes per month.

  • …if you can’t qualify for a contract because of bad credit. (The PYP 400 and PYP 650 are more expensive and have less features than similar Nation plans.)

  • …if you need nationwide roaming.

• Pick an AT&T Nation Plan…

  • …if you don’t mind being in a contract.

  • …if you want a discount on a phone. (Technically the discount of the phone is factored into the bill so in the long run it’s not really much of a savings, unless of course you find some rebate deals that pay you back like the ones available from Amazon.)

  • …if you average more than 300 minutes per month and have good credit. If you average less than 300 minutes you may be better off with a PYP 200 or PYP 300 plan.

  • …if you need nationwide roaming.

Amazon offers a wide selection of phones for both prepaid and contract service; there are even unlocked phones. Prices are low. So low in fact, you can make money through their rebates. And there’s little risk with their 30-day return policy. I had to take advantage of that when I ordered the wrong phone, and of course Amazon’s customer service is top-notch. Here’s a sampling of their offerings for AT&T. There are no discounts for the prepaid phones but you start off with $40 of airtime. The contract phones are some of the cheapest around.

My best advice is to match your usage to a plan. When going with a postpaid contract it’s cheaper to have extra minutes than come-up short since overages are charged at $0.45/minute. When going with a prepaid plan, buy as many minutes as you foresee yourself using. That way, you’ll get more minutes for the money and the chances that they’ll expire before you use them is less.

I’ve been shopping for a new phone for the past year or so. I appreciate music and all but I’m far from a collector and connoisseur. In fact, instead of an annual bonus, 2 years ago my bosses gave out iPod Nanos which I immediately regifted. In any case, a phone where music playing was an additional feature wasn’t going to swing my decision. So when the Motorola ROKR was introduced I saw it more as a curiosity and when I realized how crippled it was with regard to its primary marketing feature, iTunes, I only foresaw failure.

An early contender for my purchase was the SE w800i which was soon unseated by its successor the w810i. A camera phone sounded more appealing. A capable point-and-shoot camera that I could have with me at all times would be great. I have no qualms of using technology that was good enough 2 to 3 years ago if it meant not having to carry multiple devices. The k750i, on which both phones are based, had already proven itself the king of 2MP camera phones.

Then the SE Cybershot k800i was introduced in Europe and so began the agonizing wait for the k790a to be brought here State-side. The k790a was 3.2MP camera phone with Cybershot optics, electronics, and processing. I’d be able to create acceptable (if not great) 8x10s rather than be limited to just 4x6s. As expected, like its predecessor, the k790a became king of the 3MP camera phones. Unfortunately the expected carrier, Cingular, never picked it up instead opting to stick with the Walkman line of SE phones, despite the incredible success the k800i had in other parts of the world. k790a is only offered via a few regional carriers (none of which are near me) or via resellers as an unlocked phone (expensive).

The k790a’s major rival was the Nokia N73 which was a full-featured smartphone rather than just a camera phone. I had considered the N73 but like all other smartphones, they fall short of a true mobile computing device because UIs are slow and clumsy albeit still usable. Plus applications are often crippled. The major drawback to the N73 was the lack of wifi. Given Cingular’s prices on data plans, I wasn’t really looking forward to pay such a premium when I’d rather go to a local coffee shop and logon for free.

So come this past New Year’s I was at the point where I was about to go buy a w810i. The price at Cingular dropped to $50–75 with a 2-year contract. I’d be able to get a phone with 80% of the k790a’s capabilities at 1/4 the cost. I held out on the purchase just to see what Apple was going to introduce at Macworld 2007. What debuted was not what I expected. It exceeded my expectations. It was a revolutionary step, not the typical evolutionary step more commonly seen in this industry.

This was not just an iPod with a phone slapped on to it (i.e. the opposite of the ROKR). Each feature was well-thought out from hardware to software and like most Apple products, very well integrated. As jaw-dropping as some of the individual feature demos were, it was the final “real-world” usage demo that floored me. Here was a smartphone with features that not only I can use but would want to use. Plus Apple being Apple prevented Cingular from being Cingular and that was to cripple the phone and bend it to Cingular’s will and brand. The lack of orange was very apparent to me and am very much happy to see it that way.

I haven’t seen anything this cool in a mobile computing device since the Palm was introduced. Things I hope to see come to fruition with regards to the iPhone is a terminal shell app. The ability to dock the device and use full-size peripherals not unlike a laptop. GPS capability whether its through cell tower triangulation or an actual GPS addon. An eBook reader app. VoIP. Purchase and then sync apps and widgets via iTunes. (Apple should rename the program iSync, Dock Central, or something since it’s evolving past just the iPod.) A full functioning browser (though I did not see Javascript or Flash during the demo) means web applications will work right out the door (i.e. all those lovely AJAXy Google apps) which sorta gets around the closed doors Apple currently has around the platform.

This is not to say the phone doesn’t have its shortcomings. No one has yet to see the camera in action. The platform is currently closed and may require the purchase of a dev license not unlike those for consoles. Dev kits are rumored to be two years away, anyway. So the chance we may see homebrew software on this platform is very unlikely if these rumors hold true. Video iChat was noticeably missing as were internet IM clients. I expect video conferencing will most likely be introduced with the 3G version of the phone in 2008.

Still, I am admittedly very likely to be an early adopter of this phone. I had thought my Apple switch would have begun with a Mac Mini or MacBook Pro. Regardless of this phone’s lineage, it’s going to leave its mark on the world much like the StarTAC and the RAZR V3 (which, if I may remind those price balkers with short memories, debuted at $500 w/contract).