Smartphones: Unlimited Data Plans Often Mean Unnecessarily High Monthly Bills

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When Verizon announced it would be selling the iPhone, a certain breed of consumers were overjoyed with the prospect that they’d soon be able buy an iPhone without an AT&T contract, and without the restrictions of an AT&T limited-data plan. Verizon iPhone customers should be able to pay a flat $30 all-you-can-eat fee for data. But, in the same way that diners often get more bang for the buck ordering a la carte rather opting for a restaurant’s buffet, all but the biggest smartphone data hogs tend to overpay with the unlimited plan.

A Consumer Reports investigation showed that the vast majority of AT&T’s iPhone users wound up saving money when the wireless provider replaced its unlimited option with a choice of limited data plans:

They save money, because very few subscribers even use anything like the 2GB-per-month limit of the $25 monthly plan. For most, the 200MB limit offered by the $15-per-month plan is plenty of data.

Presumably, Verizon iPhone customers will use about the same amount of data as AT&T iPhone customers—and therefore, they’d be overpaying by selecting the pricier unlimited plan over a cheaper, but limited plan.

So why are consumers so jazzed about plans they almost never need? By now, most cell phone users have encountered some form of “bill shock”: the most unpleasant moment when a bill arrives requesting an amount $50, $100, or sometimes even thousands of dollars higher than one’s typical monthly charges. For obvious reasons, consumers hate bill shock—so much so that they’re likely to opt for a pricier monthly plan if it means they can avoid more shock waves in the future. The hefty fees and carefully crafted structure of wireless plans are actually designed to push cell phone users into pricier plan brackets, by most account, the strategy works for wireless providers.

The attraction of an unlimited plan is that it allows the consumer to run off his brain and never think about it again. No thinking twice about downloads or using this or that app. No need to track data usage. No worries about surprise fees—well, hopefully no surprise fees anyway.

The problem is that the consumer pays for to enjoy a relatively worry-free smartphone experience. The bigger problem, of course, is that it’s always a bad idea for a consumer to turn off his brain and stop thinking about whether any purchase is actually worth the money or not—especially when the purchase we’re talking about is one you pay for every month, easilyadding up to thousands of dollars over the course of a couple years.

Cell Phones: You’re Probably Paying Too Much for a Plan You Don’t Need