Millions of people wildly overpay for cell phone service. If you’re with AT&T, Verizon, or T-Mobile, you’re probably one of them. This article will explain why traditional phone plans are so expensive and share the reasons low-cost alternatives are just as good.

The right price for phone service is around $25 a month for most people who use a typical amount of smartphone data. For a heavy data user, $30 to $40 is your target. For a light user, $10 to $15. These prices are per line and don’t include a device payment.

If your phone bill is dramatically higher, the articles on this website will help you switch to a lower-cost plan. The savings can be substantial: Cutting your monthly bill by $50 leads to $600/year saved!

In this post, I’ll discuss how the wireless industry is set up, how it’s marketed to you, and why traditional phone plans are so expensive. Once you understand this, you’ll see why low-cost plans are just as good as plans that cost three times more!

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How is the wireless industry set up?

AT&T, Verizon, and T-Mobile are the three largest wireless carriers in the United States. Sprint was also on that list, but they merged with T-Mobile.

These three companies operate physical infrastructure (like cell towers) nationwide. The technical names for these networks are GSMA (AT&T), CDMA (Verizon), and GSMT (T-Mobile). Each of these companies also sells phone plans – as we’ll see shortly, the most expensive plans on the market.

Then there are over a hundred other wireless carriers. These are called MVNOs – Mobile Virtual Network Operators. You’ve probably heard of some of them: Cricket, Metro, Visible, Boost, US Mobile, Mint, and Tracfone are just some of the many brands operating in the United States. MVNOs sell cheaper phone plans but do not operate physical infrastructure themselves. Instead, they lease service from AT&T, Verizon, or T-Mobile. For example, if you buy a plan from Mint, the service is provided by T-Mobile (GSMT).

Some MVNOs are completely independent businesses. Other MVNOs are owned by the Big Three. For example, AT&T owns Cricket, Verizon owns Visible and Tracfone, and T-Mobile owns Metro. AT&T, Verizon, and T-Mobile also operate in-house prepaid businesses. These are different sets of phone plans tucked away in quiet corners of their websites. Once again, these plans are cheaper than the carriers’ flagship phone plans and run on the same physical networks.

So let’s recap:

• AT&T, Verizon, and T-Mobile operate physical infrastructure as well as sell their own plans
• Some MVNOs are independent; others are owned by the Big Three
• When you buy a lower-cost plan from an MVNO, the actual service still comes from one of the three major networks (GSMA, CDMA, or GSMT)

Why are AT&T, Verizon, and T-Mobile’s phone plans so expensive?

At the beginning of this article, I said an excellent price for a phone plan is $25 a month (for an average consumer). However, the plans sold by AT&T, Verizon, and T-Mobile are around $75 a month. If you want lower-cost service, you have to look elsewhere.

The Big Three want to make as much money as possible from each customer without giving away the secret that it’s all the same service. Their strategy begins by setting a high price for their in-house plans. Some people can afford these prices. Many more people struggle to afford them but aren’t aware they have other options!

AT&T, Verizon, and T-Mobile also use tactics like phone installment plans to trap people into their high-priced service.

However, not everyone can afford these top-dollar prices. At the same time, the Big Three have unused capacity on their networks. In economic terms, this is unmet demand and excess supply. Rather than simply lowering their prices, the Big Three use prepaid plans and MVNOs to target the remainder of the market. They present these plans as budget options and hope most people won’t notice it’s the same service.

You can see this clever marketing in action just by looking in store windows: For example, the advertisements decorating the windows of an AT&T store are pumping up the latest features, touting the newest phones, and making claims about being the best network. On the other hand, the advertisements in the windows of a Cricket store (remember, AT&T owns cricket) focus on price.

Are cheaper plans inferior?

Prepaid and MVNO plans are not inferior to AT&T, Verizon, and T-Mobile’s flagship plans. The reality is phone service – talking, texting, and using data – is a commodity. 

Rationally, there’s no reason for anyone to be on these companies’ premium plans, even if money is no object. In the same way that there’s no reason for anyone to pay for name-brand medication when a generic is available.

Let’s compare traditional plans and low-cost plans across several questions:

What about coverage? Remember, low-cost phone plans operate on the same physical infrastructure as the premium plans. If you’re currently with Verizon and happy with the signal strength at your house, you can expect the same reliability if you switch to an MVNO that operates on Verizon’s network, such as US Mobile. (The reverse is also true: If AT&T isn’t great in your area, don’t expect a good result from an AT&T MVNO.)

What about features? You can buy a plan with extras like roaming, 5G, or mobile hotspot from the Big Three, and the same is true in the low-cost world.

What about customer service? You can have a positive or negative customer service experience with an MVNO, but the same is true when dealing with the Big Three. 

What about data prioritization? Data prioritization refers to the possibility of some plans slowing down when there’s heavy demand on the local tower. Some low-cost plans are at greater risk of data deprioritization. However, you might be surprised to learn that many prepaid and MVNO plans have as good or better data prioritization than some of the premium plans!

Data usage determines the price of a low-cost plan

Modern plans from AT&T, Verizon, and T-Mobile come with unlimited data. If you are a heavy data user, you can find unlimited data plans on the prepaid and MVNO sides as well. However, most low-cost plans offer a fixed amount of high-speed data, which lets you save money by picking the right-sized plan. For example:

You can determine your data usage by reviewing your most recent phone bills. Unlimited talking and texting are commonplace on all low-cost plans except ultra-light plans.

For some people, there is a fear factor when letting go of unlimited data: the fear of running out. But there is no cause for alarm:

• Many low-cost plans offer a fixed amount of high-speed data followed by unlimited low-speed data rather than a complete cutoff
• Many low-cost plans allow you to buy high-speed data top-ups if needed
• You can upgrade your plan if you discover your data allowance is inadequate

Even if you pick a low-cost plan with unlimited data, you will save money over the Big Three’s postpaid plans. However, most people will dramatically increase their savings by picking a plan with a fixed data allowance.

Bottom line

I hope this article helped you better understand how the wireless industry is set up and how the Big Three use marketing to steer you to their expensive plans. Many people are surprised to learn that MVNOs – all those “other” wireless companies – use the same major networks as the expensive plans.

With this foundation, I hope you’ll feel more empowered to break free of your overpriced phone plan!

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