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By: Matthew Solaris on Thu Jun 5, 2008

Cell phone plans in the United States and Canada for the average consumer are usually based on one, two or three year contracts, tend towards monthly payment, but in many other areas of the world, pre-paid cellphone plans or pay-as-you-go mobile plans are the default. Why is it that they’re so popular elsewhere, and why is it that they’re catching on here?

One reason for the popularity of pre-paid phone cell phone plans is that age-old chestnut, usually applied to the roving bachelor, fear of commitment. Not being shackled to a restrictive cell phone contract, or paying a couple hundred dollars to extract yourself from that cellphone contract is quite large for many customers. And though there are cellphone contracted plans that offer consumers more flexibility by offering rollover features, knowing that you’re paying for the use of your cellphone and that only and being able to control it yourself is very appealing. Pay-as-you plans are also an option with considerable appeal to those who have a poor credit rating, or might have credit issues.

But how do these two pricing models, pay-as-you-go (or pre-paid) and monthly contract plans actually differ? What would you really be spending, and which ones offer the better deal? I’m going to take two plans from companies and answer that very question. Virgin Mobile is the pay-as-you-go offering from Richard Branson’s gigantic media and airplane company, and is easily the most popular of the companies serving that niche market. For a monthly contract plan, I’ve chosen Verizon Wireless, who seem to serve as the default provider across the continental United States, and also offer a pay-as-you-go cellphone plan.

Pay As You Go

Virgin Mobile Pay-As-You-Go-Rates
1 $20 per month, 200 minutes, 10 cents per minute
2 $30 per month, 400 minutes, 7.5 cents per minute
3 $50 per month, 1000 minutes, 5 cents per minute
Text messages
200 text messages for $5, 1,000 for $10, unlimited for $20

Verizon Wireless Pay-As-You-Go
(Verizon offers unlimited calling to other Verizon phones)
1 99 cents per day, 10 cents per minute, 10 cents per text
2 $1.99 per day, unlimited night-time minutes, 5 cents per minute, 5 cents per text message
3 $3.00 per day, unlimited night-time minutes, 2 cents per minute, 2 cents per text message

Monthly Contract Plans
Virgin Mobile Contracts
1 $24.99 per month, 200 minutes
2 $34.99 per month, 300 minutes
3 $49.99 per month, 400 minutes
4 $59.99 per month, 600 minutes
Text message are $5 per month for 1000 text messages, or $10 per month for unlimited


Given the above date, let’s make up some possible plans and see who fares best. The common denominator in these plans is the 200 minutes per month plan, and the 400 minutes per month plan – both plans appear with Verizon and Virgin. Let’s estimate that you use your cellphone an average of 10 days per month, as well.

200 Minutes Per Month
Virgin Mobile pay as you go: $20
Virgin Mobile contract plan: $24.99
Verizon Wireless pay as you go: $29.90 using 99-cent days, $29.90 using $1.99 days and $33.90 using $2.99 days

400 minutes per month
Virgin Mobile pay as you go: $30
Virgin Mobile contract plan: $49.99
Verizon Wireless pay as you go: $49.90 using 99-cent days, $39.90 using $1.99 days and $37.90 using $2.99 days

While plans can vary, depending on usage, I’ve tried to keep this as average as possible. But based on these numbers, it’s pretty obvious that Virgin Mobile offers the best plans in all cases. The $2.99 option offered by Verizon would only make sense and be cost-effective when you use substantially more minutes.

Whether this is a business plan that Virgin Mobile can stick by remains to be seen, but given their success in Europe, and how they’re making in-roads and creating a large customer-base here in the United States, they’ll certain be a major player for the foreseeable future.