Pop quiz: How many megabytes do you think it takes to stream an episode of Cobra Kai
to your phone?
How about uploading a TikTok?
Listening to a podcast?
If you’re like most people, you have no idea.
And yet, when you go to buy a cell phone, the sales rep will present a bunch of different
data plans to you, as if you know how many gigs you're going to use over the next 30
days.
That’s why most people end up going with what seems like the safest option: unlimited
data.
Sounds good, right?
I mean, I use my phone a lot, and I don’t want to count megabytes.
Sure, it’s more expensive than the capped plans, but at least I’ll know that I won’t
run out of data in the middle of a road trip or an important video conference.
Before you make that call, there’s a few things you should know about “unlimited” plans.
It's data.
Data.
First, unlimited plans are not exactly unlimited.
They usually still have a data cap and once you go over that, your speeds will slow down,
depending on how busy the network is.
Secondly, many carriers will sometimes give capped accounts higher speeds than unlimited
ones.
The reason is that when capped customers go over their limit, they can be charged extra,
so there’s incentive for the carrier to let them rip through their data as quickly
as possible.
Unlimited customers have already paid everything they’re gonna pay, so why make it easy for
them to use data?
It’s kind of like an all-you-can-eat buffet that deliberately uses small plates to keep
the diners from eating too fast.
Third, and this is the big one: you probably don’t need that much data anyway.
According to a 2018 study, the average usage by unlimited data customers was only 6.1 GB
per month.
That may seem strangely low, but it’s because you only use your mobile data when you’re
not connected to a WiFi network... and WiFi is everywhere.
At home, at work, on campus, at the gym and the coffee shop.
Sure, there’s a small number of people who might rely on mobile data, like if you do
a lot of business on the road, or don’t have broadband at home and use your phone
to stream movies.
But for most of us, “mobile data” represents a small percentage of our overall usage.
So then why are most of us subscribed to unlimited plans?
Mainly, because that’s what the service providers want us to do.
Unlimited plans are heavily promoted by the big carriers, often bundled with phone discounts
and free subscriptions to streaming platforms.
In fact, you have to dig pretty deep into their websites to find any alternatives.
And most of the big wireless companies have started making their capped data plans “pre-paid”
only, which means you have to pay for a whole year of service up front.
They really want you to choose unlimited.
And why wouldn’t they?
With the cheapest “Premium Network Access” plan offering 50GB a month, that means the
average customer is using less than a quarter of the data they’re paying for!
That would be like paying for 100 gallons of gas every month, even though you only use
20.
And you don’t get credit for the gas you didn’t use--it goes right back to the oil
company.
Now, if you happen to be one of these people who actually uses 50 to 100 gigabytes of mobile
data a month--you might want to cut down on your screen time--but, you are getting a really
good deal.
That’s way less per megabyte than the average rate, but only because all those other customers
are paying for megabytes they’re not using--essentially subsidizing your low price.
This is similar to the business model of many gyms and fitness clubs.
Most of their members barely use the services they pay for, which keeps the price low for
those who work out regularly.
So how much money can you actually save by forgoing unlimited data plans?
I think it’s time to…
RUN THE NUMBERS!
One year ago, Kevin got a new phone from one of the major wireless carriers, and the sales
rep strongly encouraged him to go with an unlimited plan.
Kevin travels a lot for work, and relies on his phone when on the road, so he figures
he’s probably a slightly above average data user.
He opts for the mid-tier option: 50GB of data without slow-down for $75 dollars a month
(plus fees and taxes).
A year later, Kevin happens to check his data usage and finds that he used on average about
7.5 GB a month--only 15% of the total he’s paying for!
At first, he thinks that can’t be right, but then he starts remembering all the places
he typically uses his phone: airports, cafes, hotels, convention centers--all with WiFi.
Not wanting to spend money on something he doesn’t use, he digs through the carrier’s
website and finds that they have an 8GB pre-paid plan for only $25 a month--if you pay for
the whole year up front.
That’s $300 now versus $900 over the course of the year--an easy decision for Kevin, who
happens to have enough cash on hand.
There is one drawback to Kevin’s plan: at only 8 GB a month, he will have to be a bit
more careful about how he uses his data.
Fortunately, there are some simple options in your phone’s settings to minimize usage
outside of WiFi, like turning off push notifications, automatic app updates and GPS when you’re
not using them.
Kevin also decides to bring a book with him when he travels so he’ll have something
else to do with his downtime than doomscrolling through Twitter.
And that brings us to another major way your cell phone is ripping you off: not by stealing
your money, but your time.
Almost every app and social platform on your phone is explicitly designed to keep you engaged
well past the point of any benefit.
Let’s be honest: just staring at the clouds is probably a better use of your time than
arguing with your cousin on Facebook or fueling your FOMO on Instagram.
If switching from unlimited to pre-paid will save you money and motivate you to cut down
on unproductive distractions, I’d call that a win win.
Over the last 20 years, cell phones have gone from a luxury to a necessity.
But unlike most other utilities, the way we’re charged for wireless service is inherently
vague.
As someone who likes to keep track of what I’m getting for what I’m paying, I hate
that.
Fortunately, you don’t have to stumble around in the dark.
Check your data usage, look into alternate companies and plans.
It may take a bit of digging and a fair share of discipline, but when it comes to your cell
phone, you--not your carrier--should be the one making the calls.
And that’s our two cents!
Data.
It's data.
Okay.
It's not the Star Trek character, it's data.
Hey guys, it's us again!
So many of you leave such really wonderful, thoughtful comments, questions, and we want
to take just a little bit of time at the end of the video to address them.
Miriam Korver, hello.
She put that, "This video is applicable to my situation pretty specifically.
I pay 850 in rent, which is over half my income."
Oof.
That's tough.
We generally recommend trying to keep your housing at under 25% of your income, but $850
is not a high rent, that's an affordable rent.
To me, this kinda drives home the point of, y'know, this viewer--and if anyone's in a
situation--doesn't necessarily just need to do better themselves.
We as a society need to better for people who are in situations like that.
There's a really great book about this whole issue called "Evicted"--it actually won a
Pulitzer Prize.
His main thought is that we need to expand these voucher programs for low-income families
that will cap how much of their income can go to their basic needs.
And he said something like 70% of the households that are going through eviction have children.
Eviction does happen in poverty but it can also create poverty.
I think this is a good one to leave on.
Daniel Grooms put, "It's important to keep asking "why?" until you actually reach the
bottom of the issue.
Why can't landlords make money off of cheaper housing?
Why won't communities allow low income housing to be built?"
Why communities won't allow this?
Y'know, a lot of us are scared.
That something we need to work on.
That's something we shouldn't just be okay with, that that's just the way things are.
Because that can change and it doesn't need to be that way.
So ask questions that you would like us to look at and maybe even answer in our next
episode.
Yes, indeed.
See you later.
Bye.
Thanks to our patrons for keeping Two Cents financially healthy.
Click the link in the description to become a Two Cents patron.
If you wanna learn more about how fitness clubs get people to pay for things they don’t
use, check out our video “The Hidden Costs of Joining a Gym.”