Dollar Scholar Asks: How Do Cheap Cell Phone Plans Work?

This is an excerpt from Dollar Scholar, the Money newsletter where news editor Julia Glum teaches you the modern money lessons you NEED to know. Don’t miss the next issue! Sign up at money.com/subscribe and join our community of 160,000+ Scholars.


Let me tell you the tragic tale of my first cell phone.

I was in ninth grade, and my phone was a blue Sony Ericsson that my mom had gotten me for emergencies only. I wasn’t allowed to give out the number to friends and I couldn’t text message on it, but I treasured it all the same… until one day at lunch, when I zipped it into a pocket of my backpack alongside a Capri Sun I intended to drink later.

(Do you see where this is going?)

Hours later, I opened my bag to find the Capri Sun had punctured, leaving a standing pool of juice in which my precious phone was floating, dead. It had drowned.

Even as a teenager who wasn’t paying her own bills, I was cognizant of the high costs of owning a cell phone. Now that I’m older and write about money for a living, I’m hyperaware. So I got curious recently when I heard about alternative cell phone providers like Visible and Mint Mobile that boast lower prices.

How do cheap cell phone plans work?

I hopped on a Google Meet with Visible’s Jeremy Bolton to get the lay of the land. (The Ryan Reynolds-owned Mint Mobile is probably the most well-known player in this space, but it wouldn’t return my emails.)

Bolton explained that, as an industry, wireless service is dominated by “the Big Three” carriers: AT&T, Verizon and T-Mobile. Companies like Mint Mobile are what’s called mobile virtual network operators, or MVNOs. MVNOs lease access to the Big Three’s networks and offer packages that customers like me can buy.

Visible uses Verizon’s network. Mint Mobile and Google Fi mostly use T-Mobile’s, though Google Fi also uses U.S. Cellular’s.

Because they don’t have to pay for the same infrastructure that the Big Three do, these providers are able to offer cheaper plans. Visible, which calls itself not an MVNO but an “all-digital wireless carrier,” is 100% online. Bolton says it benefits a lot from not having to, say, keep the lights on in a bunch of strip mall stores.

“When you operate exclusively digitally, you’re able to have a more efficient business model, and you pass those savings on to your customer,” he says.

Let’s run the numbers. One line on AT&T’s unlimited starter plan is $65 per month. Visible’s plan, which comes with unlimited talk, text and data, is $40 (or less).

“There are no decisions to make. We have one single plan, and everything’s in it, so you don’t have to worry about minutes or watching your usage or anything like that,” Bolton says, adding that taxes and fees are included.

MVNO offerings are often prepaid, meaning I pay the bill up front at the beginning of the month instead of being charged at the end. Bolton compared it to Spotify or Netflix, where “you pay, and then you can consume their services for 30 days, and at the end of that 30 days you can say, ‘Do I want to do this again?’” It’s more like a subscription service than a traditional phone contract.

This structure means I get what I pay for — I won’t encounter expensive overage fees, says Eden Iscil, public policy associate at the National Consumers League. It also means there’s flexibility to change between plans depending on my needs.

Iscil says that in a lot of ways, these services are super modern.

Visible has a feature called Party Pay, for example, that functions like a family plan to provide discounts but doesn’t require me to be related to the other users. Visible doesn’t cap how many people can be in a party. In fact, there’s a Reddit-based party with more than 10,000 members, none of whom are responsible for each other’s bills.

MVNOs are also generally compatible with different types of phones. As long as my device is unlocked, meaning not tied to a carrier, all I need to do is get a SIM card (or eSIM card). MVNOs also sell phones themselves with traditional installment payment plans and/or buy now, pay later programs like Affirm.

What’s the catch? Well, because of the way they’re structured, “their service is at the leisure of the Big Three,” Iscil says. “Often, if you have a plan through an MVNO, you might get deprioritized if they are experiencing high traffic.”

Getting deprioritized = getting slower data speeds.

Because of this, MVNOs might not be great for people in rural areas who don’t have reliable Wi-Fi coverage or broadband access. It could get really frustrating really fast if I’m relying on a hotspot for work or school and I have a MVNO that deprioritizes me during times of congestion, slowing my speeds and keeping me from completing my tasks.

The bottom line

Alternative phone providers work by leasing network capabilities from larger companies — usually the Big Three of AT&T, Verizon and T-Mobile. This generally means cheaper prices and flexible plans. But I have to be internet savvy and willing to conduct business digitally… there’s no, like, phone store I can stop into on the way home from work if my iPhone suddenly goes on the fritz.

Perhaps the most serious con is deprioritization. Because these smaller companies are essentially borrowing the bigger firms’ infrastructure, they’re the first to go when networks are overwhelmed with traffic. I can save money, but I might have slower data sometimes.

Iscil recommends reading the fine print before signing up for an MVNO.

“It definitely is authentic — it’s not like some scam or fraud,” they say. “You will get cell service, but it’s really very user-specific if it is the right plan for [you].”


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