The Value Guide to Understanding Phone Plans
Phone plans are confusing. There are so many options out there that it can be completely overwhelming to the point that you do not even understand what you are looking at anymore. There are long-term contracts, phone deals that require specific types of data plans, all kinds of cellular generations to keep track of, and different carriers with diverse coverage maps. It all gets to be too much for the average person without any background on how phone plans work.
We are here to help you try and figure out the difficult parts of signing up for a phone plan. We will explore the history of phone plans, talk about what exactly a phone plan is, and delve into what to look for in a good phone plan. By the end, we will help you track down a good phone plan without insane monthly fees.
What Is a Mobile Plan: The History of Phone Plans and Data
A cell phone plan is an agreement between two parties (you and a cellular data company), wherein you pay for access to that company’s cellular network in order to make calls, text, and access the internet on your phone or other mobile devices. The telecommunications company builds cellular towers that transmit radio frequencies, allowing us to talk and text with each other.
It allows for mobile access to the internet without the need for Wi-Fi or a connection from an internet service provider. Without a phone plan, you would be unable to communicate with others using your phone or access anything that requires an internet connection. You would still be able to use your device if you were to connect to a Wi-Fi network, but a cell network allows you to access the internet from anywhere covered by that provider’s towers.
A major carrier is known as a Mobile Network Operator or MNO. They are required to have a radio spectrum license given to them by the Federal Communications Commission and then must build and maintain their infrastructure to provide cellular service to consumers. This usually involves cellular towers.
Mobile phones have actually been around for quite some time. While the terms mobile phone and cell phone are often used interchangeably, they are technically not the same. Cell phones have to connect to a ground-based cellular tower, while a mobile phone can communicate via satellites as well.
Some of the first networks began in 1946, with large phones that had to be attached to cars. These early networks could only support a few callers at a time. The first major cellular network test was by AT&T in 1978, and it was called the Advanced Mobile Phone System or AMPS. This was tested in Chicago and was soon followed by the first commercial cellular system, which involved car phones in 1983.
The GSM
In 1987, the GSM was created, also known as the Global System for Mobile Communications. This was a standard that helped to make cellular providers support a global cell network, meaning users driving around did not lose their connection while traveling. This was important for making cell phone use easier and more user-friendly.
In 1991, the second cellular generation began, known as 2G. This was the first commercial cellular generation and the beginning of phone plans as we know them. Text messaging came along around the same time, bringing about the modern cell phone generation.
Who Are the Primary Cellular Providers and What Is Their History?
Verizon, AT&T, and T-Mobile are the primary carriers in the United States. Sprint used to be until its purchase by T-Mobile, which is also a major player in international markets in its own right. These three main providers are responsible for building the networks that we use across the country but are not the sole providers of cellular phone plans.
AT&T and Verizon have both been around since 1983. Sprint, meanwhile, was originally founded in 1899 as Brown Telephone Company and went through five name changes before becoming Sprint in 1987, until it was eventually bought and absorbed by T-Mobile in 2020. T-Mobile as it is now known was introduced in 1993 but was composed of a number of other European cellular network providers who had been around for longer.
The history of phone plans goes back to the creation of the big three cellular companies. These telephone companies have been around for many years, and they have shaped cell phone plans into what they are today. The foundation of cell phone plans is tied intrinsically to the foundation of these phone companies.
How the Major Cellular Providers Shaped Phone Plans
One of the most important things to know about these cell providers is how they came to be. In 1875 the Bell Telephone Company, named after the inventor of the telephone and one of the company’s founders, Alexander Graham Bell, was founded, and so was AT&T. It would become the largest telephone company in the United States, so large in fact that it came to hold a monopoly on the market by 1913.
The monopoly came to create a huge number of subsidiary companies and their monopoly would come to be nicknamed the Bell System. Their stranglehold on the United States phone market would continue until 1983 when United States regulators finally broke up this monopoly. They were forced to give up their subsidiaries, which they did by breaking them into seven divergent companies, which were known as the Regional Bell Operating Companies.
Now we come to the important part of all of this. Verizon and AT&T both formed because of this monopoly breakup, with the subsidiary companies created as part of the Bell System buying up other companies to become what they are today. In an interesting twist of fate, AT&T was actually purchased by its own subsidiary, which would then rebrand itself as the original AT&T and pretend that it had always been even though its own history was drastically different.
This old monopoly shapes our current phone system and is why consumers only have a few companies to choose from. The history of mergers turned a free market into what is nearly another monopoly from the same company that held one originally. In fact, AT&T is made up of four out of the seven original subsidiaries that became independent after the dissolution of the Bell System, while Verizon owns the other three.
T-Mobile and Sprint as Competitors
T-Mobile is no different from Verizon and AT&T, in that it is just a history of complicated mergers of companies absorbing others and then other companies absorbing them. We will avoid all the details but touch on the most important points, namely the impact that the T-Mobile and Sprint merger had on cell phone plans.
T-Mobile has its history in two companies, one based in the United States, and the other, its namesake, in Europe. T-Mobile US was founded in 1994 as VoiceStream Wireless PCS. It was a successful telecommunications company that operated primarily in the American Southwest.
Deutsche Telekom, on the other hand, was the founder of the original T-Mobile. They are a German telecommunications company and are the largest telecommunications company in Europe based on revenue. T-Mobile US is considered one of its subsidiaries, and in many ways acts as its own company with its own history.
The VoiceStream Wireless Purchase
VoiceStream Wireless was eventually purchased by T-Mobile and turned into another of its subsidiaries, officially called T-Mobile US but generally just called T-Mobile, which, when used by us, refers to the broader company as a whole. AT&T attempted to purchase T-Mobile US in 2011.
A lawsuit was filed by the United States Department of Justice to stop the acquisition on the grounds that it would create a monopoly for the company once again. AT&T decided to remove their deal from the table, though T-Mobile was still paid a decent sum as a part of AT&T pulling out of the deal.
In 2020, T-Mobile US, after having acquired Metro PCS, merged with Sprint, a major telecommunications company that expanded T-Mobile’s capacities and made it the third-largest carrier in the United States. Sprint itself had been one of the largest telecommunications companies operating in the United States to not come out of the old Bell System monopoly.
T-Mobile has made major strides in providing a wide-ranging 5G network with the best coverage in the United States. A surprising amount of growth in the United States has made this carrier a serious contender to AT&T and Verizon.
MVNO: Mobile Virtual Network Operators
MVNOs are very important to how we look at phone plans. They allow consumers to shop for cell phone plans away from the grasp of the major networks. Short for the mobile virtual network operator, an MVNO is a company that purchases cellular data from a company with existing infrastructure. They then sell their allotment of data to consumers.
MVNOs run all their phone plans through existing networks. They are able to provide cheaper access to cellular data since they do not maintain any infrastructure. MVNO agreements can trace their origin to the 1990s in Europe when the market began to see new regulations — among other changes — that allowed them to flourish.
You might be familiar with many of these companies. We are one of them, among others like Mint Mobile, Google Fi, Cricket, and others. Interestingly, some MVNOs are owned partially or fully by major networks, like Visible, Cricket, and Metro, which are owned by Verizon, AT&T, and T-Mobile respectively.
Mobile Virtual Network Operators generally offer more affordable and flexible phone plans. We will be looking at every aspect of a phone plan in just a moment. Let’s dive into exactly what makes a phone plan and what you should look for.
What Makes a Phone Plan and How Do They Work?
When we purchase a phone plan, we are purchasing access to a carrier’s network. We pay a monthly fee and they provide us with an allotment of data. Cell networks have a certain amount of bandwidth they can handle, and to limit that bandwidth, providers offer plans at different prices with different data allotments.
Every call or text you make, or everything you do that connects to the internet, takes up data. Because calls and texts operate on a different frequency, they typically are offered for free with most data plans as they do not cause as much congestion on the network. Our internet-based activities are what cause the real problem for carriers, especially with the amount of media we stream. When we see a slowdown, it is likely because too many users are operating on the same network at the same time and bandwidth capacity has reached its peak.
Or has it? The truth is, most cell providers have plenty of bandwidth; if they didn’t, they would be unable to sell data packages to Mobile Virtual Network Operators. They don’t want to give every user unlimited data because then they would definitely experience bandwidth issues, causing slowdown or loss of connectivity. Some unlimited plans may even throttle your data if you go over a certain amount, causing a slowdown despite any bandwidth issues.
Going into the world of phone plans knowing the trouble with data is an important step to make sure you are not paying for more than you need or getting abused by harsh data plans. Now that we know the vital background of how a phone plan operates, we can dive deeper into just what makes a phone plan work for you.
What To Look for in a Phone Plan
We have to look at multiple factors regarding phone plans. That means investigating not just what the plan offers, but investigating the carrier itself. There are a few main things to consider when looking for a phone plan:
- Plan affordability
- Network coverage
- Network reliability
- Network speed
- Plan flexibility
- Phone options
What is most important to you is entirely dependent on what you value the most. Not everyone is worried about the most affordable plan; some people just want the cheapest, and others the one with the best data options. It’s safe to say that most people are interested in plans that offer good speeds and affordability. We’ll go into exactly what makes a phone plan great and what to look for, as well as the various perks the different carriers can offer.
Plan Affordability
Most people want to save money. That seems reasonable, right? We have a lot of monthly payments, and cutting down exactly how much we must pay each month is a big deal. There are a wide variety of phone plans out there, and finding the most affordable one can vary greatly.
On average, the monthly price an American paid for their phone bill in 2020 was $127.37. The cheapest monthly plans from the main carriers are as follows:
- Verizon - $80/Month
- AT&T - $65/Month
- T-Mobile - $60/Month
This assumes a few things. First, a single line means one person and one device. Second, these numbers assume an unlimited data plan. There are many people who do not need unlimited data, skewing these numbers somewhat.
Many plans get cheaper the more people you add to them. Family plans allow you to add multiple lines, with each additional line often being cheaper. That means you have other people sharing your plan with you, or you can add additional devices so they can also connect to cellular networks, even giving them their own unique phone numbers if you would like.
If you are looking for affordability, a family plan is the best way to increase your savings. It’s not the only option available to save money. A single line can be fairly inexpensive if your data requirements are small.
While the big carriers offer many benefits, they are not the most affordable options out there. This is where MVNOs step in. They can provide cheap phone plans with unlimited talk, unlimited text, and the ability to choose a flexible plan based on the amount of high-speed data you usually use.
Family Plans and Unlimited Plans
Most of us rarely use enough data to warrant an unlimited plan, at least if we are operating by ourselves. Unless your phone is your primary streaming device or the only place you play online games, chances are that your data usage is fairly low.
Keep in mind that music streaming will not use up much of your data (at least not nearly as much as playing videos at HD quality will). This means that you can limit your cost by checking how much data you use and purchasing an appropriate phone plan.
Family plans are a different matter. If you have multiple people on the same plan, having one with unlimited data is more reasonable, and the more people you add, the more data you will need. An unlimited family plan means not having to monitor how much data everyone is using and worrying about incurring extra costs.
Just be sure to pay attention to if the plan will throttle your data upon going over a certain data cap, because if that is the case, then having too many people on a family plan could end up slowing everyone’s speeds down.
Credit Checks and Prepaid Plans
Another consideration is credit checks. Major carriers may require a credit check before you can sign up for a plan. Most MVNOs do not require this, giving more people access to a mobile network. This is valuable if you have bad credit and think you may not be approved for the purchase of a plan or iPhone, but also if you have no credit card and therefore have no real credit score.
Prepaid plans, those plans that cut you off completely if you go over your data allotment, are another cost-saving option. They save you a lot since you are not paying for any excess data. They also cut out many of the hidden and recurring fees that can crop up from a contractual plan, and that the major carriers tend to include.
They also allow you to avoid long-term contracts. People have been dreading and cursing the contracts that mobile carriers force you into for a long time now. With MVNOs becoming more prevalent, long-term contracts are a thing of the past, and something you should avoid if you want to spend less money and keep your phone plan costs down to a minimum. This desire to avoid long-term contracts is true for most aspects of your life, so why not your phone plans as well?
One final advantage to a major carrier is the option for post-paid accounts. It is rare to see an independent carrier that will offer this feature. A post-paid account allows you to pay for your service at the end of the month, allowing more time to get your finances in order. Of course, not being stuck in a contract means that you can change to a cheaper plan if need be.
Network Coverage
Finding the right network can mean choosing one based on speed or reliability, but for some, it can just mean finding a network that even has a signal where they live. There are many dead zones for cellular coverage, even in major cities covered by huge networks. Some users may just want a network that keeps them reliably covered.
Data maps may show that there is coverage in your area, but they will not account for dead zones, and unfortunately, many carriers have them. If you are not familiar with a dead zone, it is just an area where your network coverage does not extend. It can be an entire neighborhood or even just a single building. There is no way to guarantee a network will not have dead zones in your area, but online forums might be able to help you determine which network seems to have the worst connections in your city.
MNOs or MVNOs should both have the same coverage as they run on the same networks. The trick is to make sure which network your MVNO carrier runs on as it can be hard to tell at a glance. If they use a network that you know has great coverage in your area, then you will receive the same.
One advantage to having a phone plan with a major carrier could be quicker access to their network. If a major carrier puts up new cell towers, you will perhaps receive access to that bandwidth faster than someone on an MVNO. You are on their network and have already bought data to access that network, so it should not impact your coverage, but as a rule, being on an MNO means you get all the newest features first.
Network Reliability
Now, if you want the most reliable network, then an MNO can often be the way to go. Although the network is the same between MNOs and MVNOs, there is one downside to being on an MVNO, and that is that your data will be throttled more when you have reached your limit and during peak hours if there are too many users on the spectrum.
Because their data is an allotment purchased from the owners of the cell towers, MNVOs are at their whim. If the company that operates the cell tower they run on wants to throttle their data specifically, they will. This can sometimes mean that data from a third-party carrier is lesser even though it is exactly the same.
That being said, you can expect the same speed on an MVNO carrier as you would with a phone plan from the carrier that the MVNO buys its data from. That does not change just because you are getting the data from someone else. This is important because it gives you more options when choosing your data plan.
International Plans
Another important thing to keep in mind is international travel. Major carriers are more likely to offer plans that are better for international travel. AT&T has major networks in Mexico, and Verizon purchased telecom networks in Canada. Look into your carrier if you plan to travel and see which has better options for these international options as well as data roaming.
Just remember that you might need an international plan to truly take advantage of those cell towers. While MVNOs probably cannot compete with the major networks in terms of international plans, they can offer reasonably priced SIM cards that offer pure data, which means you will be able to get connected to the internet on your phone without the need for Wi-Fi.
If you only plan to be traveling for a set amount of time and otherwise do not travel very often, then it is likely more economical to purchase a data plan from a local carrier to your travel destination. Purchase a SIM card from a local store and swap it out for easy access to local networks. MVNOs are just as common across other parts of the world, and even got their start in Europe, so you can find plenty of non-contract plans out there when traveling.
Network Speed
Speed is a major selling point for a phone plan, especially with 5G coverage still in its infancy. Most plans will still be offering 4G LTE as their primary data. To get the fastest speeds, you will want to find a phone plan that offers you 5G connectivity. The downside to fast 5G access is that your options might be limited in terms of coverage.
5G offers the fastest connectivity with the lowest latency for browsing, video streaming, or whatever you plan to do. Ultra-fast speeds are incredibly important for many mobile users. 5G provides those speeds, unlike other network generations.
Verizon and AT&T do not have great nationwide coverage yet for new customers on their 5G networks. Though they are continuing to expand, they are far behind what T-Mobile offers for 5G. If you are prioritizing speed, make sure that you can actually access a fast network where you live.
Look for Discounted Offerings
This often means increased prices. Be aware when you are shopping for plans that if you don’t care about 5G speeds, you’re on the lookout for 4G LTE offerings so you’re not spending more than you need. Most companies are pushing 5G over other plans, so you might have to dig for them in that case.
It should also be noted that, while 5G presents the potential for vastly increased speeds, it is not really there yet. Current speeds are more likely to be comparable to what 4G is supposed to offer, but even 4G rarely hits the speeds that it is truly capable of because of a lack of ideal conditions for the average user. Test speeds are always achieved in an ideal environment as opposed to a real-world one, so you may not always even get the 5G speed you are hoping for.
With 5G becoming more prevalent, we can expect to see coverage and speeds increase. Plans with 5G, unlimited mobile hotspot data, and other add-ons will also become more affordable as it becomes the main standard. If speed is the most important consideration for you but 5G networks are not yet available in your area, wait a bit and it will be there soon.
Plan Flexibility
Finding a flexible new plan is incredibly important for all of us. We are all looking for phone plans that fit our needs, and sometimes that can be difficult. Only you can know exactly which phone service plan will work for you, but we will explore some of the options out there.
First and foremost is data flexibility; major carriers will offer limited data plans to you, but typically want to get you to buy unlimited plans. This means unlimited talk, text, and data, so you can never go over and have to pay extra. The caveat here is often that, if you do happen to exceed a data limit the company has set on their unlimited data plan, your speeds will be throttled still. Be sure to look out for this when exploring unlimited plans.
Unlimited plans tend to be more expensive, so if you know that you do not require much data, then you can explore other options. MVNO carriers are great for this, as they have a wide variety of data plans available. Each of their plans is designed to meet your specific needs. Review your data usage with any current cell carrier and see how much you use on average to be able to find a flexible plan and save money.
Since major carriers usually require contracts, they are not flexible in that regard. If it turns out they are not working for you, there is a likely chance that you are stuck until you finish out your contract. Mobile Virtual Network Operators are extremely flexible since you can switch plans as needed with a monthly plan.
Android and iOS Phone Options
When it comes to the best phone plans, a lot of people pick their plans based on who has the best deals on a new phone. A choice of compatible devices is a major factor in determining who you choose as your carrier. While there are many factors to consider when buying a new phone, they can certainly be easier to get from a major carrier.
Major carriers will usually have access to the latest phones sooner than independent carriers. They typically also offer a more diverse array of phone options. 3rd party carriers will have the standard options you come to expect and hear the most about, but they can lack more interesting phones that you want to try out.
The three major carriers also have better trade-in options to get rid of your old phone, and typically have better deals on getting new phones, though they come with long contracts attached. If you want that latest Apple or Samsung phone, or a more niche Android phone, then a major carrier may be the route you need to take. Don’t assume you need to buy a phone through a carrier at all, because you can always purchase your phone from a retail store like Best Buy or buy it used from another person.
Phone Affordability
A major advantage to an MNO is the affordability of the phones. While they come with contracts attached, that means that you also are paying your phone off monthly instead of purchasing the whole thing at once. This can be very important if you are on a budget but need a phone. A lot of independent carriers also offer this now, but the plan prices will likely be lower with an MNO, and will just have a much longer contract length to make up for this.
You can always bring your own phone to most carriers. MVNOs will always let you bring your own phone along with you, but major carriers now allow this as well. If you are not interested in a new phone, but just want to be able to keep yours, this is an important consideration.
Also, keep in mind the hidden fees. Major carriers usually have an activation fee when buying a new phone — even if it is a free upgrade — that can be anywhere within the $30 to $40 range. It is a small price to pay, but it is nevertheless an added cost that you might want to avoid in our budget-conscious lives.
The Next Steps to Choosing the Best Plan: Where Do We Go From Here?
Choosing the right phone plan takes a lot of thought. There are so many options available that it gets overwhelming just trying to figure out what plans offer you value based on your needs. Even worse, there are often extra requirements when signing up for a phone plan or purchasing a new device, like requiring lengthy contracts, or specific monthly data plans just to get extra savings on the phone you want.
Make a plan of what you need from a cellular network carrier. Look at how much data you use, look at how often you travel, and how reliably you want your network to follow you. Take into account the number of lines you need, and the amount of money you want to save. Examine your lifestyle and how you use your phone, whether it is just for calls or texts, or if it is the main device that you use for everything from streaming videos to a vital tool for work.
When you know all of these things, you will be ready to choose the data plan you need from Red Pocket Mobile. Don’t let your phone plan choose you, but make your phone plan work for you. With a little bit of planning, you will know exactly which phone plan is right for you, and with our guide, you’ll know exactly what to look for.
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Flashback Friday: The First Public Cell Phone Network | Telegeography
History of mobile phones | What was the first mobile phone? | USwitch
US wireless carrier market share 2011-2022 | Statista
History of AT&T: Timeline and Facts | TheStreet
Verizon Communications Company History Timeline | Zippia
The history of T-Mobile — a timeline of the 'Un-carrier' | Kansas City Business Journal
The History of SPRINT (long distance, local, and wireless) | Telephone World
What Are Cellphone Plans? | Lifewire
What Is the Average Cell Phone Bill Per Month? | MoneyLion
Cell Phone Plans: 2-Year Contract vs. Payment Plan vs. Pay As You Go | Time
