Cellular phones--with their ability to make and take calls from virtually anywhere--have become a staple of modern life. Cellular phones add an element of mobility, allowing users to talk, text and even browse the Internet on a whim with no wires, no physical connections and--as is increasingly common--no monthly bills. Explore several aspects of prepaid cell phone plans, including the history of prepaid phones, types of plans, and some benefits and considerations regarding their use.
History
While prepaid cell phones may seem like a byproduct of a burgeoning mobility industry, the prepaid plan dates back almost as far as post-paid (traditionally billed) services. The first recorded American patent for prepaid service was issued to a small carrier, Banana Cellular, in 1993. This plan allowed customers to pay for a predetermined amount of use in advance, though they were only allowed to connect to other Banana Cellular customers. Prepaid wireless became more akin to normal post-paid services in 1994, as Houston-based Houston Cellular Telephone Company began offering the prepaid option to customers with insufficient credit to open a post-paid account. This service, known as CallTrack, spurred proliferation of prepaid cell phone services as it repeatedly proved more profitable than more traditional post-paid services.
Function
When a customer acquires and activates a new prepaid cell phone, the new line is provisioned by the carrier in much the same way as traditional post-paid accounts. Basic information is taken from the customer, the mobile handset's electronic serial number (ESN) is recorded and a telephone number is assigned to the set. Rather than submitting the cell phone plan to monthly billing, however, an up-front charge is collected from the customer and placed on the account. Proprietary software monitors the usage of the phone, deducting charges (defined in the prepaid cell phone user agreement) from the account as the phone is used. When the account reaches a low balance, the software warns the customer. When the balance reaches zero, the software disables functionality of the cell phone. In some cases where the customer agrees in advance, the software may also attempt to automatically replenish the account using a provided credit or debit card in order to prevent service interruptions.
Features
Prepaid cell phone plans have traditionally afforded their users somewhat sparse services, allowing voice calls only and often at a significantly higher cost than billed services. The popularity of prepaid cell phones, however, has prompted carriers to offer more services in prepaid cell phone plans, and many carriers now offer text messaging (texting) and data services to prepaid customers. Many plans debit the prepaid account for each minute of voice talk time or data usage, and debit the account a separate--usually lower--charge for incoming and outgoing text messages. Some carriers also offer unlimited usage of some services for an additional prepaid fee, such as unlimited data usage or unlimited off-peak voice talk time for around $1 per prepaid day.
Advantages
Prepaid cell phones afford mobility to customers who do not qualify for traditional post-billed services due to lack of credit, low income or lack of permanent address. They are often inexpensive and easy to obtain, and many do not require credit checks or extensive information to activate. Once activated, prepaid cell phones allow users to control spending; rather than accumulating massive (and sometimes unexpected) bills, prepaid cell phones simply stop working when a customer reaches the preset spending limit. On the opposite end of the spectrum, customers who rarely use their phones--like customers who maintain a mobile phone account for emergency use only--can use prepaid accounts to avoid high recurring bills for phones that are rarely used. Finally, the nature of prepaid cell phone plans means there is no contractual obligation to keep the phone for any length of time, and prepaid customers are not subjected to the early termination fees that haunt post-paid customers.
Considerations
While there are many advantages to a prepaid cell phone plan, these plans are not suitable for all mobile phone users. Prepaid customers often face a very limited choice of phones, with most "cooler" or "trendy" phones reserved for post-paid account holders. Prepaid phones are often more expensive, too, as the profits carriers reap from post-billed accounts help subsidize the initial purchase price of the cell phone handset. Finally, prepaid cell phone plans can be considerably more expensive for heavy users, as per-minute and per-message charges are generally higher for prepaid users than for post-billed consumers.
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