Unlocked (Pre-Paid) iPhone: Is It Right for You?

If you follow Apple or mobile industry news developments, you’re probably aware that Apple recently began marketing and selling an unlocked version of their insanely popular iPhone 4.  Just months after consumers gained the freedom to choose Verizon as an alternative to AT&T, the previously exclusive carrier of the Apple iPhone, the company’s latest move has made the phone available for users of any GSM carrier.  While this means that T-Mobile is the only major new network for the iPhone, many people neglect to realize that the unlocked devices also work on smaller and more local GSM-operating mobile carriers with options varying by region.  Perhaps more importantly, though, the availability and sale of unlocked iPhone 4 handsets also means that users can use any GSM carrier without having to necessarily accept a long-term contract that one would typically have to opt into in order to purchase and use the iPhone.

Admittedly, the unlocked iPhone 4 devices start at $649, making it significantly higher in price than the $199 entry-level point that we see with AT&T and Verizon for the 16gb unit.  However, the real savings can be found in the fact that light mobile users can purchase the iPhone 4 and, depending on carriers, pay significantly less in order to use low-allowance or pre-paid mobile packages.  Being a real light mobile user myself, I have personally pondered the unlocked iPhone 4 as my usage would likely be very inexpensive.  However, I soon came to the realization that pre-paid iPhones aren’t as great of a deal as many would think they would be.

First and foremost, we have to realize that pre-paid mobile contracts are always priced at rates higher than you would get from a regular old contract subscription.  Sure, if you only use a few minutes of mobile airtime each month the average prepaid rate of $0.10 to $0.25 per minute isn’t going to be a horrible deal for you.  But if you use anywhere near a “high” number of minutes, you could very well end up paying more on a pre-paid plan than you would on a standard mobile contract.  But of course this is the same for any pre-paid mobile handset.

What really makes the iPhone unique, though, is its incredible use of data.  YouTube videos, mobile web, email, games, instant messaging, FaceTime; all of these wonderful iPhone features tend to eat up quite a bit of data.  And if you know anything about mobile data, you surely understand that even when you subscribe to contracted mobile data service you pay quite a bit for mobile usage.  Needless to say, the same data on a pre-paid plan is going to be even more expensive because of the fact that you’re not on a contract with your carrier.

Sure, you could just use the iPhone as a pre-paid device and not use mobile data service, but doing this would be flat-out silly.  After all, I’d argue that the iPhone has more of a focus on data than it does voice.

Of course there are also month-to-month (also known as no-contract) mobile plans that allow for users to receive the same types of allowances given traditionally to users with one and two-year contracts as well.  With plans like these, users shell out the money for their handsets in full, without taking any subsidies from the carriers to lower the cost of the device itself.  In the case of the iPhone 4, you would be paying about $450 more to go this route.  However, whereas mobile contracts for the iPhone typically start at around $70 per month with two-year contracts from either AT&T or Verizon.  For $50 with AT&T on the “GoPhone” month-to-month system, one can get unlimited airtime, text messaging, and mobile web.  The catch?  The plan excludes smartphones.  In AT&T’s own words;

$50/Monthly Unlimited Talk, Text & Web requires an eligible phone. Smartphone users must purchase a data package to use data services on this plan.

What does that mean?  As far as I can tell, AT&T doesn’t even seem to support the iPhone as a pre-paid device.  And really, seeing as how a data plan would bring the cost of the monthly service up to the same amount one would pay under contract, I really can’t blame them.

Now, the only reason that I can even think of to go the pre-paid route with an iPhone would be to eliminate the obligation of a traditional long-term contract.  But when you think about it, the cancellation fee for a contract is surely less than the $450 more that you pay for a pre-paid iPhone.

Any way I look at it, I simply cannot fathom a scenario where the unlocked GSM iPhone would make any sense for consumers unless you were going with a local mobile carrier.