Real cost of a free phone

A new guide to cellular phones and contracts - "How to Buy a Cellphone in South Africa" - promises to guide consumers through the traps and tricks of the industry.

The book by World Wide Worx MD Arthur Goldstuck and head of WWW strategy division Steven Ambrose, explains the real cost of a free phone.

The authors of the book say the phone is never free, and you may in fact pay more than the retail price for a phone as its value is never disclosed up front.

"Even before you have paid for a single extra call, the network is making its profits, and every call outside the bundle adds enormously to network profits."

Bundle confusion

The authors point out that the multitude of bundles on offer from the networks may offer extensive choice, but are also responsible for confusion and misinformation.

"You cannot compare one bundle from one network with any bundle from any other network," says Ambrose. "The result is that we often end up paying too much for a service we really don't understand, or we only partly use some of the features for which we almost certainly have paid."

The booklet calls for lowering of the interconnect fee, an amount of up to R1.27 paid by the caller for every call to a network other than the one to which they are subscribed.

This fee, which was originally below 30c, is now the single biggest contributor to the cost of calls between networks. The booklet provides readers with the addresses of the relevant authorities and urges them to put their protests in writing.

Seven big cellphone questions

The book, on sale now at most major outlets, lists the seven big cellphone questions which show why it is so complicated to buy a phone.

They are:

1. Prepaid or contract? This sounds simple, but the charges for prepaid are very different to contract - often twice the price, despite the user not getting the free phone into the deal!

   The reason for apparently lower cost of contract calls is that the cellular companies are guaranteed a steady income and they can spread the cost of the phone over a long term contracted period - neither of which they can do on pay-as-you-go.

2. Which contract? Once the pre-paid or contract choice is made, you now have to choose which contract to take out, if you choose to go that route. The various options boil down to bundled minutes and the type or level of phone that comes with the contract. That brings up the next question:

3. Which contract type? Are you likely to talk more off-peak (weekends and evenings) or on-peak (business hours)? This has a major impact on the price. If your likely use is a combination of the two, this makes the choice even more difficult.

4. Once a contract type is chosen, the decisions don't stop. You now have to decide between per second billing or per-minute billing. The typical user goes for per-minute, as it looks cheaper, but that may not be the case, as you will discover in the guide.

5. You may be offered the choice of "extras", which may not be a choice at all. Most contracts have the "option" of "mandatory" services like Caller Line ID (CLI) and itemised billing. Of course, these are not options at all, and are quoted separately to make the cost of the phone contract appear lower.

6. The added extras that really are optional are data and SMS bundles, and these complicate the choice only if they are options you are likely to use.

7. You finally have selected your contract, your phone, and your extras. Do you stop to check how this all adds up? Probably not because, in the heat of the buying moment, you just want to switch on your shiny new phone, and barely pause to think what you have just signed.

   Only later does buyer's remorse set in, as you discover that the advert for the new phone and 120 free minutes for only R99 per month has turned into R499 a month in reality.

The authors say they are not recommending specific models or contracts, as these change all the time, but seek to guide users in their choice.