Virgin Mobile offers no-contract iPhone plan for US customers

Virgin Mobile USA, which operates as a sort of sub-brand of Sprint in the United States, today announced plans to begin selling the iPhone on June 29 with pre-paid, no-contract voice and data service starting at $30 per month.

The no-strings-attached connectivity comes at a higher hardware price: iPhone 4S at 16GB is $649, and the iPhone 4 at 8GB is $549. Plans include "Unlimited" texting and data (well, unlimited up to 2.5GB).

Doing the math, the device plus two years of service (not that you're required to do two years) adds up to $1,269 plus tax.

As the AP notes, that's about $800 less than you'd pay for the same phone and the same connectivity for the same duration under a Sprint contract.

Here's the rub: The population most likely to find contract-free phones appealing? People on lower incomes, or with poor credit. That's the same population least likely to want to pay *more* for the hardware.

As Jacqui Cheng at Ars points out, Virgin Mobile USA is the second carrier in the nation to announce a no-contract iPhone offering:

Cricket was the first to announce its plans in May, offering the 8GB iPhone 4 for $400 and the 16GB iPhone 4S for $500. Those up-front prices are lower than Virgin Mobile's by a good $149 each, but Cricket's monthly plans are higher—the company offers a $55 monthly plan with unlimited calls, texts, and data, with the same caveat that data speeds will be throttled after 2.3GB.


    1. The 2.5 GB figure isn’t a cap.  After 2.5 GB (or 3.5 GB in some cases) they will throttle your speed to 256kbps, but they don’t block your phone’s data connection and you can continue using your phone for the rest of the month at the reduced speed.

  1. I’m currently paying ~$40 for the same usage at Boost, soon will switch to republic wireless for $20.
    Both of these use cheaper (better?) android phones.

  2. “Here’s the rub: The population most likely to find contract-free phones appealing? People on lower incomes, or with poor credit. That’s the same population least likely to want to pay *more* for the hardware.”

    Generally speaking you’re correct. However, I would say that a significant portion of lower-income consumers also have less-than-stellar credit ratings. (Probably not a majority, but certainly a sizable minority.) I’m included in that portion of lower-income folks. As such, I would have to pay a pretty hefty deposit (which I may or may not ever get back) in order to get a contract with a carrier. With some networks (like AT&T) that deposit can be upwards of $1000. So, for me, even with the higher hardware price, the up-front costs are *still less* than if I went the subsidized contract route.

    To be fair, my experience is far from universal, and even if I could cite another example I understand that the plural of anecdote is not data. Still, for at least some customers, this is a pretty good deal regardless of the higher phone cost.

  3. “Here’s the rub: The population most likely to find contract-free phones appealing? People on lower incomes, or with poor credit.”
    Sorry, I don’t quite follow this, why wouldn’t those with good credit be less likely to find a contract-free phone at a lower rate?

    Seems that it’s perfect for those with a bit of extra cash in their bank account and the ability to think ahead…

    (Not implying that those with lower incomes or poor credit don’t think ahead. Just that some people will never want to pay more upfront because it’s a big, scary number.)

    1. “Seems that it’s perfect for those with a bit of extra cash in their bank account.”

      This is always the rub, and perfectly encapsulates the Sam Vimes Boots Theory of Economic Injustice:

      A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. […]

      But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

      There are plenty of things that pay for themselves if you have the money to pay for them. Owning a home. Better insulation. Solar panels. Better quality clothing or gadgets. Energy-efficient cars. But all of these things are available only to the folks with the capital.

  4. I assume the phone is still sold locked to Virgin Mobile’s network? And are iPhones now universal or network neutral or whatever (CDMA & GSM)?

  5. Firstly, I think we can all agree that this “unlimited” thing is utter crap. The Committee of Advertising Practice here in the UK has investigated already and basically decided (see section 2) that it’s fine as long as the limitations are explained and that a “legitimate user” won’t be charged anything extra. Now, I personally understand the word “unlimited” to mean “lacking any limitations”, but whatever. I think it’s commonly understood at least that anything that says “unlimited” needs further investigation.

    Regarding this offer in particular – I own an iPhone that I bought outright, unlocked, straight from Apple, simply because it’s cheaper for me to use an MVNO (I use Giffgaff – actually unlimited texts and data for £10 a month as long as you don’t use tethering or whatever. I use about 3.5GB a month) and buy the handset than pay ~£100 for the phone and £35 a month for two years, for less minutes, texts and data. Does Apple not let you buy the phone straight from them in the US?

    1.  Virgin Mobile’s plan doesn’t charge anything when you exceed the 2.5GB limit, they throttle your speed to 256kbps.  The 2.5GB limit is clearly written right underneath the table showing their various plans and a “more info” link explains exactly how it works.

      To satisfy your personal understanding of “lacking any limitations” would require the phone be able to download an infinite amount of data instantaneously.  Anything else would be limited.  As the laws of physics prevent that from ever happening, you probably need to rethink your definition of “unlimited” in relation to cell phone plans.

  6. I’ve used Virgin for years.  Poor, or not, it’s nice to not have to deal with contracts with one of the horrible cell companies.  I pay exactly $29.13 a month for the “unlimited” service.  The minutes are limited but I don’t do a lot of long calls on my phone, I do more browsing and texting.   $549/$649 is a pretty outrageous price to pay for a phone though, especially when the new one’s coming out soon.  Once again I’ll probably just bump up to a little better phone until the iphone becomes less an overpriced item for conspicuous consumption than a useful gadget.  If it was closer to the regular price I would totally pull the trigger, but I would hate myself for spending over $500 on a phone…

    1.  Isn’t $549/$649 the regular price of an iPhone? Just because it’s advertised as $200 or whatever doesn’t mean that you are really only paying $200…the balance is just tacked onto your monthly payments for two years.

  7. Serious question (although I know it’s a basic one that I should probably know the answer to): Why is the hardware more expensive without a contract?

    I would imagine that the service providers would say you’re subsidizing the phone over the course of your contract if you sign on for two years. But then why doesn’t the “subsidy” ever end and your plan get cheaper? Have the cell providers ever spoken to that point?

    1. Because they’re in the business of making as much money from you as they possibly can, so they’re not going to charge you less without you asking. If you think of it in terms of them lending you the $500 or whatever it is to buy the phone and then charging you interest on that loan over the 2 year contract, the reasoning makes a decent amount of sense. Once your 24 months are up you can usually “downgrade” to something cheaper but not significantly worse, because at that point they’d rather have some money than no money.

      So it does go down, you just have to ask. For example, my girlfriend phoned her company to cancel and they reduced her monthly fee to £3 from £15 and actually increased the amount of data she was allowed.

      I bought my iPhone straight from Apple for about £500, and use a contractless MVNO (Giffgaff). Because nobody lent me any money to buy the phone, I save a bundle over the whole 2 years.

      1.  i’m not aware of US carriers negotiating on monthly service out of contract, but the existence of these prepaid plans in the US might force ATT and company to start negotiating.

        1. Really? I find that really strange – we have all sorts of products available, 12-, 24- and 36-month contracts, monthly rolling deals (like a contract but you give a month’s notice that you want it to end any time you like), pay-as-you-go-plus deals like Giffgaff and Tesco mobile… honestly I’ve not looked around in over a year so there could be even more out there now.

          Perhaps our market is just more competitive (or rather, less anti-competitive)? The big providers normally offer a very wide range of products for people without contracts and leave you to swap around purely to keep your business.

          1.  I should add that all these products are available without a phone if you like – so you can buy an unlocked phone from the hardware company (eg Apple) or, hell, the supermarket, and stick whatever SIM card with whatever deal you like in it. That’s the major thing I find weird about this deal – why is it unique to iPhones, and why would anyone pay Apple’s list price for an iPhone from Virgin when they could get an unlocked one from Apple and use whoever they liked?

          2.  You are correct. The US cellphone market is an anti-competitive oligopoly where both the consumer and the cell-phone manufacturer are at the mercy of the telcos, who call almost all the shots. There are small cracks in the system here and there (I use a pay as you go plan with a smartphone I bought outright) that you can exploit if you are clever and willing to compromise on this or that aspect of the phone or the service, but it’s very different from Europe, which in this case looks like a bastion of free-market principles.

          3. In the US, you have 2 major Cell standards (CDMA and GSM) so your phone has to be compatible with the company. also, not every company uses the same frequencies so you have to make sure your phone operates on the correct bands. Also, people have long been spoiled in the US that cell phones are ‘cheap’ and service is higher – buying a phone outright is a large capital outlay in many people’s eyes, when you know you’re going to have that same $75-125 bill every month.

            Also, until fairly recently, phones were locked to a particular carrier, and couldn’t be switched. Some still operate this way. VirginMobile in fact doesn’t allow you to use a phone that’s not been set up for their network. They (like most CDMA carriers) don’t use SIM cards, so the EISN of the phone is what tells them if you’re kosher or not on their network. Changing or spoofing that EISN is illegal.

            Historically, the prepaid MVNO’s and such here have offered ‘cheaper’ phones and lower priced plans as they were considered the low-cost option, if you wanted a really nice phone you were paying the higher prices. Customers are just now getting the better phone option.

    2. Actually, I’m on a plan with TMo now which explicitly states the first 20 months are a device subsidy period.  The plan drops in price after that point.

    3. Every 24 months, you have the ability to resign your contract and get a new subsidized phone.  It’s advantageous to do this because, as you said, you will pay the subsidized monthly price regardless.  If you don’t want a new phone, you can always just sell the subsidized one on eBay and keep your old phone.

    4. I would imagine that the service providers would say you’re subsidizing the phone over the course of your contract if you sign on for two years. But then why doesn’t the “subsidy” ever end and your plan get cheaper?

      That would encourage people to keep their phones for more than two years instead of buying a new one and agreeing to a new two-year contract.

    5. Depends what company you’re with. The cell companies’ preferred model is that once your subsidized period is over, you get a new phone, which is also subsidized. Some companies, like T-Mobile, will offer you a cheaper monthly rate if you buy your phone for cash.

  8.  because cell phone service in the USA is a scam… yes, they subsidize the handset purchase in exchange for lock-in for so many months. once you are out of contract they are still collecting the “premiums” for the subsidy.

  9. The extra cost of the phone would be paid back in a year, because of the savings compared to using AT&T, and then I’d be saving hundreds of bucks each year thereafter. On average I change handsets every three years, so this would end up saving me over  $1000. I’d be happy, although Virgin’s coverage is shameful in New Hampshire and Maine. 

  10. I’ve VM, more cheapness than poorness. Learn to use the Llama app and with the wide availability of wifi, you’ll never even approach 2.3 gb data usage.

    Optimus V running Ice Cream Sandwich 

  11. At Virgin Mobile’s blazing data speeds iPhone users will be able to burn through their 2.5gb data cap in a meter 2 and a half days of constant downloading. And,of course; once theywill notice their connection is a whole, whoppin, 0.01mb/s slower.

  12. Hmmm… I have a Sprint iPhone 4S with the $69.99 truly unlimited plan.  So a pay-as-you-go version of this would save me about $480 after two years?  Not too bad, but not that great.

    This will be great for the larger market. And it kind of opens the door towards Apple selling cheaper iPhone models as “go” phones.  I like it.

    But in general all cell providers in the U.S. can ram it up their ass.

  13. LG 220c phone with voice dialing: $10
    Home built desktop computer: $300
    Experiencing the 3 dimensional world without my eyes glued to the tiny screen of an internet-crack-phone: priceless!

  14. I had the most horrable, ugly experience I have ever had with Virgin Mobile. Worthless, off shore, non-english tech service among other things. That being said, If they gave away iPhones for free I would not touch it.

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