Are mobile Providers Ripping Us Off?

Fri 08 April 2011 | tags: Cap Plan, Comparison, Exetel, iinet, Mobile, Optus, Pennytel, Phone, Post Paid, Pre Paid, Provider, Telstra, Virgin, voip, -- (permalink)

With so many options, so many plans, it's hard to know if we are being ripped off or getting a good deal. Then bring in VoIP, and things get even trickier.

For the sake of this research, I was looking for a mobile phone plan, prepaid or post paid, that would ideally cost less than $40 a month and didn't rely on any VoIP. (Due to data connections being unreliable and sometimes VoIP applications are difficult, like calling an access number then dialing the rest of your number). I firstly crunched just the numbers, to get an idea of what Mobile Cap plans actually give you in real dollars, not cap dollars, and how that would translate into minutes of talk time or sms's. Finally, I took my actual usage logs (which my Android saves to my Gmail account for me via SMS Backup+), and crunched the numbers to work out how much that usage would cost me on each plan.

First, a bit about  my method in crunching the numbers. Most mobile providers charge in 1 or 3 ways, per second, per 30 seconds, or per minute. If you make long calls, then per minute billing won't really make much of a difference, but if you make short calls, then per minute billing could end up costing you lots. For example, if all my calls are less than 30 seconds long, and I'm on per minute billing, then I'm always paying for a minute, even though I've used less than half of that!
Using that, I figured that splitting my calls in to 3 categories would allow me to best see the cost difference between per second, per 30 second, and per minute billing. Calls less than 30 seconds, Calls more than 30 seconds but less than a minute, and calls longer than a minute. I then wrote my formulas using the split categories, using the average call length for each category and the number of calls. To verify that this wasn't skewing my data, I then took 1 month and calculated the total cost processing each call to the second, for per second, per 30 second and per minute billing. The results were almost 100% the same between the 2 methods. You are welcome to show me some mathematical proof as to why this happens, just know that if I take the average length of all calls for the month, and don't split them into categories, then the results are not close and the providers offering per second billing loose their advantage.

So, as you may have already worked out, per second billing can really save you money. Which is probably why more and more providers are moving away from per second billing towards per minute billing. You'll notice a lot of VoIP providers advertise per second billing, which is because people know that they are only paying for what they use. For example, my scenario outcome for one month on one particular per minute biller, comes out to $311, but if they offered per 30 second billing like they previously did, I'd save $32 worth of cap credit, or about $2 of real money. Not much, but as you can see, it's extra money in the providers pockets.

When I started my research, I expected to find that these Cap plans are ripping us off with the illusion of lots of money (cap credit) for very little real money. I also expected to find that per second billing would save us the most money. And I hoped to find a provider that would be better value than my current one. Well, a lot of my expectations have been crushed.

Instead, what I've found is that while the Cap plans do have a very high call rate, and high flag fall, they are actually good value.Note however, that the numbers I'm about to quote assume that you ether use all the cap credit on a call, or on sms's, and don't take into account flagfalls (which would be charged for each call).

A plan with a $0.99 per minute call rate, costs $0.06 per minute in real dollars.
The same plan with $0.28 sms rate, costs $0.02 per sms in real dollars.

When I first saw these numbers, I was shocked. So for comparison, I looked at one of the cheapest VoIP providers. $0.105 per minute, no flagfall and per second billing. And $0.05 per sms. Yes, you read that correctly, the mobile phone is cheaper! Now before you trash your VoIP, that VoIP rate is to mobile phones in Australia, calls to Landlines and of course, overseas calls will be cheaper.

One of the plans I was looking at thinking should work out cheaper, is actually a VoIP providers plan. They provider a mobile sim card, with decent call rates, and free calls to their VoIP numbers, so you can then make your normal call. But as you can see above, even with the VoIP call being made over the mobile network, it is still cheaper with this Cap plan! I had also been thinking of using a callback VoIP provider, I call an access number, it hangs up and calls me back, then I dial the number I want and it calls the other side. No cost on the mobile side (except I need to have credit to make the call, even though I'm not charged for the call). Yet this requires 2 calls via the VoIP provider, one back to my mobile, and one to whom ever I'm calling, and at $0.105 a minute, that's $0.21 a minute all up!

So when is VoIP cheaper then? It's cheaper for international, and untimed calls, for example, calls to landlines in Australia and a number of other countries.

So, at the end of the day, Mobile providers aren't ripping us off, well, not as much as I thought. Yes, per minute billing means more money to the providers, and Caps that you don't use completely are also wasting some money. But even with the months of very light usage, the Cap still works out cheaper than going with other plans.

My recommendation, go for a Cap plan that gives you enough Cap $'s that you won't go over (especially if going post-paid) but you also won't have heaps unused each month. Then, if your phone can, setup VoIP and use it for calls to fixed lines. (This could be via mobile data or WiFi depending on how good the 3G is where you live).  If you don't call mobiles much, or SMS, and get good 3G in your area, then a Data only plan with VoIP might be a better choice, as long as you are sure you don't need normal mobile voice service.

Phone Comparison

NB: Yes, I have taken into account Free calls between phones on the same carriers, however I only used calls between me and my wife as fitting into this category, as they are the only calls we can guarantee to be on the same network.

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