Mobile Phones: Contract Mobile Phones
Introduction
Of the two main ways of owning a mobile phone, pay-as-you-go (prepay) and contract; the fixed term contract is probably the most attractive for both technophiles and heavy mobile phne users.
Contract Mobile Phones refers to a mobile telephone usage system the user signs-up for a fixed-term contract with the network provider. The handset itself is often given away free (or at the very least at a heavily discounted price) but the the user signs-up with the network provider for a fixed term at a fixed monthly line rental fee (the cost of calls are then levied on top of this and are charged monthly).
History of Contract Mobile Phones
The mobile phone contract system grew out of the early analogue networks where handsets were expensive and mobile network operators wanted to recoup the money they had spent on developing their networks. As such it was decided that the best economic model was to lock customers into 12–18 month contract where they paid a monthly fee to access the network and then paid each month for every call made (a system modelled on that of landline operators). This also allowed network operators to conduct credit checks on prospective customers to ensure that they could pay. Using this system the cost of the mobile phone could be discounted whilst the network operators were guaranteed a profit due to the lock-in of the contract. Also, as mobile phone technology moved on the model depended on the customer upgrading to the latest mobile telephone, again provided at a discount as long as the customer agreed to a new fixed-term contract with the network operator.
As a model, this was an excellent one for the mobile phone operators as it guaranteed them a constant profit. This model was only challenged during the late 1990s by the spread of Pay as you Go (PAYG) mobile phones which allowed the mobile phone to be bought up-front and the customer could then simply buy top-up credits to access airtime on the network. For those on a tight budget or who were only occasional mobile telephone then the pay-as-you-go (PAYG) option is by far the most economically sensible. Indeed, PAYG (prepay) mobile phones have been so popular since their introduction that they now dominate the mobile phone market.
Which is not to say that contract mobile phone providers have entirely given-up their corner. Indeed, if anything, the rise of prepay mobile phones has forced the contract operators to become far more clever in their marketing. Because of their guaranteed fixed-term incomes contract mobile phone operators can afford to offer the very latest mobile phones either free or at very heavily discounted prices to their customers. Thus only contract customers can afford the latest phones, without paying the full market price for them. Mobile operators also lock their phones to their particular network so that the phone cannot subsequently be sold second-hand and used on another pay-as-you-go network. Mobile phone contracts also offer inducements such as inclusive monthly talk and text minutes which can cut down the cost of calls. In addition the cost of a call through a contract is less that that for a PAYG mobile. Almost all contracts also provide international roaming as standard (which many PAYG operators do not, for technical reasons).
Other inducements include the ability to upgrade a mobile phone to a more recent model part-way through a contract and the additional of additional functionality such as emailing, modem compatibility and internet surfing.
The latest developments in contract mobile phones are systems such as that offered by the UK's British Telecommunications PLC where a bluetooth-compatible mobile phone is offered as part of a broadband internet package. In normal use the handset is a mobile phone, but in the house the phone can link to the broadband router via bluetooth allowing calls from within the house to be made at boradband/landline costs; which obviously cuts the overall cost of mobile ownership.
If you are a heavy mobile phone use then with the inclusive minutes and texts packages on offer in contract mobile phones this form of mobile ownership may be the most cost effective for you. Otherwise, unless you want the very latest handset the pay-as-you-go option is probably the most economic for you.