Buenos Aires, by Noelia Diaco. Photo is not visible, used only for sharing on social networks.

Prepaid plan options with the iPhone 5

February 20, 2013
I recently got an iPhone 5 after four years as an Android user. In the process I also switched from a Verizon contract which subsidized the phone, to an up-front retail phone with a pre-paid T-Mobile plan, and I'll save a lot of money over the long run that way.

I did a bunch of research to find the right plan, so if you're trying to do something similar, you might find this useful.

I'm not a fan of two-year contracts to start with, and while I have no problem with Verizon per se, their policy of not allowing early upgrades without paying the contract cancelation penalty — around $180 in my case, for the remaining six months on the contract — gave me less incentive to stick with them, since I'd have to pay that anyway.

The NYT had a story in December about T-Mobile's upcoming iPhone 5 pricing: They weren't going to subsidize the phone, but their monthly fee was lower, so for some use cases, it made more sense to pay $650 up front for the device. I read about Walmart offering a similar plan. GigaOm had an article about "off-contract" options; demand for this up-front payment structure is clearly growing. Around the same time, a colleague at work realized that he rarely makes phone calls, and switched to using an iPod Touch with a $50/m mobile wifi hotspot. I realized I don't make a lot of phone calls either, and when I do, I can easily use Skype.

The plan I went with was T-Mobile's $30/month pre-paid plan, with unlimited data ("first 5 GB up to 4G speeds," then 3G), unlimited SMS, and only 100 minutes of talking per month. That balance is pretty much exactly what I need, and the price is awesome.

You can see the cost comparison, spread over two years, on the spreadsheet here. Here's a summary:
  • Starting a new Verizon monthly plan, with a data cap and a subsidized iPhone 5, would cost around $2828 over 2 years.
  • Walmart's plan, with a bullshit terms of service and unlimited data only in name (it's actually throttled over a low cap), would cost $1890.
  • Buying a retail CDMA iPhone and using it with a Verizon family plan would cost $1710.
  • Retail GSM iPhone, T-Mobile's $30/month plan, $1530.
For my low-talk needs, it was a no-brainer. T-Mobile has good coverage in the Bay Area. Since it's pre-paid, if I don't like T-Mobile, I can switch to AT&T or one of the GSM virtual operators. (Note if you're doing your own research: The CDMA/Verizon model iPhone is also GSM compatible, but it's not clear if it works with 4G on GSM, or just 3G; I got conflicting information about this.) Alternatively, if I need to use my phone as a wifi hotspot, or I need to make more calls, I can upgrade to a $50/m or $60/m plan for a month and then go back.

Getting it hooked up was a little tricky: The $30/m plan is only available online, but you can't get "nanoSIMs" online, only the larger "microSIMs". After first thinking I had been lied to at the T-Mobile store (which told me to go home and buy the plan online), I realized how the game works: Sign up with a microSIM, take it to the store, and they'll slice it down to a nano. (It's just extra plastic around the same chip. You could probably cut it at home but it's less risky to let them do it.) They don't advertise that you can do this, but they don't exactly hide it, either.

I'd like to see this kind of pricing model become more popular. But psychologically, people are scared off by the initial price tag and don't think long-term, so I doubt Verizon's side business of phone loans will go away any time soon.

- Ben


  1. How has the service on T-Mobile prepaid been? Are you getting LTE speed?

    1. It's been kind of crappy actually... in downtown SF it's good, but near Twin Peaks for example, there's barely service at all. Not sure how it compares to LTE. Overall I'm still happy with the $30/month plan I'm on, though, so it's an acceptable tradeoff so far (though that plan might not be available to new customers anymore).

  2. Did you use your Verizon iphone for tmobile


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