Brian Chen writes today in the NY Times about much cheaper it is to be on prepaid here in the US than go onto a post-paid plan. He lays out the numbers starkly:

The iPhone with a two-year contract on AT&T, for example, costs $200 for the handset and then upward of $90 a month for the plan; over two years, including the cost of the phone, customers pay at least $2,360. With a prepaid plan on Virgin Mobile, which is owned by Sprint, the iPhone costs $650 for the handset, and then $30 a month, including unlimited data (the type of data plan that people are happier with, according to J.D. Power). Over two years, that would cost about $1,370.

As my friend MG says over on his blog, “it’s still pretty jarring to see it laid out in such simple terms: if you’re willing to pay $450 more upfront, you’ll save about $1,000 over the next couple years”.

Moving to the US from Australia a year ago, I initially didn’t have the option for a post-paid plan: no social security number, no credit rating, no fixed address. Until recently, I didn’t realize that post-paid plans in the US were so expensive. Thinking that post-paid would have to be better value (as it is everywhere else in the world), I asked a bunch of friends what they pay per month.

And each time I asked, I was shocked, and so were they – they’re paying about twice as much for the same product, and they’re locked in for two years. 

For example, my housemate pays $155/month for his iPhone plan on AT&T, and another friend pays north of $200/month for he and his wife to have a family plan – but with his oldest daughter only 2 years old, there’s only two phones on the plan.

If you want to make the switch when you’re out of contract seriously save more than $1000, here’s a few tips and lessons learned.

T-Mobile’s $50 Unlimited plan

T-Mobile have a range of pre-paid plans, and the best bet for most people is the $50/month plan. It includes unlimited calls, text and data. They do something kinda sneaky with their marketing though – while the data is unlimited for $50/month, they market the 100MB cap/limit of 4G data and try and get you to spend an additional $10 or $20 to get more 4G data included.

The problem with 4G on GSM is that it is a mess. Different places, different handsets, different “standards”. My Galaxy Nexus isn’t compatible with T-Mobile’s idea of 4G, and if you’re planning on buying your handset online when you go pre-paid, be careful and read up on the different frequencies and standards.

If want to play it safe, I can strongly recommend the Galaxy Nexus, which you can buy unlocked and directly from Google for only $349 in HSPA+ mode (which is what T-Mobile call 4G). Also, you don’t need to buy the $15/month mobile hotspot part of the plan – tethering works just fine (since it is just data and data is unlimited).

Aside from their more limited coverage than AT&T, there’s just one drawback with T-Mobile. In another case of the “why won’t you just be a dumb fucking pipe, carrier”, T-Mobile have “forbidden” Google Wallet from working on their network. Yep, my phone, which I’ve bought outright, and they won’t let me install Google Wallet. WTF? This was the only reason I (temporarily) moved to AT&T, so hopefully they get out of the way soon.

AT&T’s Bullshit $50 Unlimited Go-Phone

While they don’t have the best network (Verizon is widely regarded to be the best), AT&T are at least GSM so if you’re travelling you’ll actually be able to use your phone outside the US of A.

Unfortunately though, AT&T screwed me last month with a “bait and switch”, where they advertised an unlimited calls, sms and data plan for $50/month, only to then turn off my data half way through the month. 

When I called customer support to see what was going on, they told me that the unlimited data is only supported on “Feature Phones”. I then asked what my options were with my Galaxy Nexus, and they told me I don’t get any data included at all – zero – and I’d have to buy data bundles – $5 for 50MB, or $25 for 1GB. While $25 for 1GB should be enough for most folks, I really resented the bait and switch, and a really really really resent carriers not just being a dumb fucking pipe. I almost feel like getting an old Nokia, buying the AT&T plan, and then hooking it up to a spare machine and streaming YouTube all day every day just to fuck them.

So, needless to say, I went straight into T-Mobile and got back on their stuff.

Note for iPhone 4 users: if you try and get a Go Phone plan from AT&T for your iPhone, they’ll tell you it won’t work. It used to work – and they just lied to you to try and up-sell you – but with iPhone 4 it really doesn’t work. In a deplorable move, Apple have made it really hard to change the APN settings (which define how your phone connects to data on a cell network) in their latest handsets – another case of fuck the customer in cahoot with the carriers. Android, on the other hand works out of the box, but as I discovered they’ll eventually cut you off if they guess you’re using a smartphone.

Virgin Doesn’t Travel

As pointed out by Brian in his times piece, Virgin have a very compelling deal at $30/month for unlimited data and pretty generous minutes (who talks actually on phones now, anyway?)

Unfortunately, though, this deal uses Sprint’s CDMA network. This network technology is actually a lot better for speeds and getting signal than GSM, but unfortunately CDMA is hardly used anywhere outside the US. So, unless you’re likely to stay completely US based, I’d steer away from it.