04
Nov
Android-Money

Android’s massive worldwide popularity has, in large part, the availability of cheap, low-end handsets to thank. We all know this. In developing markets in Southeast Asia and Eastern Europe, Android powers almost all of the smartphones that are being purchased by growing numbers of prepaid subscribers.

Cheap Android phones are, for that reason alone, a great thing. They’re empowering consumers in developing economies, giving them access to the full web wherever they go - something that has generally been the privilege only of the wealthy and of Western nations in the past decade.

But there’s a dark side to cheap Android phones here in the good ‘ol US of A. Unwary consumers are being taken advantage of and, frankly, screwed into 2-year long deals with junk phones that may not even live to see half of that contractual obligation fulfilled. To illustrate this point, let's take a look at a few devices over on T-Mobile.

cheaphonegraphic

Data based on pricing by Wirefly.com

To me, this pricing structure makes no sense. The myTouch by LG is $70 more than the Galaxy S 4G, a device that is definitely a "beefier" piece of hardware. While the myTouch does boast a bit more internal storage and runs a newer version of Android, it's clearly being marketed as a low to mid-range device, not a flagship handset. When the GS4G was released (about 9 months ago), it was T-Mobile's biggest and baddest handset, sporting a 4" SAMOLED display and 4G. Now, the device is nearing (or has reached) the end of its production cycle.

What's wrong with it? Nothing - it's just old, and T-Mobile now has the Galaxy S II to fill the niche that the GS4G once did. Things get even more ridiculous when you compare what these phones sell for right now, sans-contract:

  • Galaxy S 4G: $410
  • myTouch by LG: $280
  • Exhibit II 4G: $310

MSRP is reflective of the device's intended price point and quality. High-end devices are usually between the $450 and $700 mark, while mid-range and low-end handsets usually land anywhere from $200 to $350. While the Galaxy S 4G's MSRP has obviously decreased since its release, it's still significantly pricier than either the myTouch or the Exhibit II.

And yet, on contract, it's cheaper than both. How does this make sense? Well, T-Mobile is obviously looking to clear out stock (as is Wirefly), but I don't think this somehow justifies the prices of these low-end phones. Manufacturers and carriers clearly make a killing off these budget Android devices compared to much pricier, more powerful cousins. And no matter which of these phones you buy, you'll end up with the same data and minute pricing.

Granted, if you go into a T-Mobile store and look at the Galaxy S 4G (if they still stock it), it'll probably be priced higher than either of these phones on a 2-year agreement. But as any frugal shopper knows, carrier stores are a rip-off.

This leads me to one, inescapable conclusion: budget Android phones are absolutely screwing consumers on major carriers. There's just no reason to buy one. An older, high-end handset just makes way more sense if you're trying to pinch pennies on your next smartphone. Why buy some new piece of crap when you could buy something that's older but probably more powerful, better built, and with a larger display?

If you're purchasing off-contract on a regional carrier like MetroPCS or Virgin, low-end phones make sense. But they don't make sense any way you slice it on a major US carrier - there's no discount for remaining off contract anymore, so there's really no powerful economic incentive. But freedom to switch carriers, you say, contractual servitude! And what if I want to switch carriers before my contract is over? ETFs! It's time for some math.

  • T-Mobile, off contract, with myTouch by LG, switch carriers at 1 year: $1120 (12 months service at $70/mo + $280 phone + $0 ETF)
  • T-Mobile, on contract, with Galaxy S 4G, switch carriers at 1 year: $1050 (12 months service at $70/mo + $10 phone + $200 ETF)

The difference? You'll actually save money by going on contract and suffering the ETF. And you get to use a better phone that will probably last longer, resell at a higher price, and doesn't carry the stigma of a low-end smartphone. How does this even make sense? It doesn't. Budget smartphones are being used to take advantage of consumers' desire to save money, and if anything, they'll probably end up costing you more in the end - when they break halfway through your contract.

David Ruddock
David's phone is an HTC One. He is an avid writer, and enjoys playing devil's advocate in editorials, imparting a legal perspective on tech news, and reviewing the latest phones and gadgets. He also doesn't usually write such boring sentences.

  • Michael

    Well written Article! it drives me nuts sometimes when friends tell me they got a NEW phone! and it turns out to be at the very end of its life. They bought it because they "got a good deal"

    • Freak4Dell

      Um...the article pretty much encourages the very thing that drives you nuts. People should buy older high-end phones rather than new low-end ones.

  • chris125

    Some don't care about specs and if it will be supported. If the phones work that's all they care about. Only tech junkies who feel they need the latest care. I know people happy with LG ally or other low end devices on Verizon.

    • David Ruddock

      You're completely missing the point. Someone buying an LG Ally on Verizon could get an old DROID 2 for the same price (free) on a 2-year upgrade.

      The D2 is a way better phone, it's faster, and the build quality is vastly superior. There's no reason anyone should buy an LG Ally on contract with Verizon. Do you get what I'm saying?

      • New_Guy

        Aside from the fact the LG Ally was a bonafide piece of garbage...David is right.
        My wife had an Ally and had to return all four of them (if you get what I'm saying). We traded her final attempt for the D2 and has not had a problem in over a year.

    • http://Russeru.blogspot.com Russeru

      Chris makes a good point. I got an Ally for $50 when I upgraded my phone about a year ago, and I'm perfectly happy with it. (nobody should buy one anymore obviously; there are better phones for just as much now)
      The problem with phones is that the difference in specs really doesn't matter to the average consumer. What would I have gained by spending an extra $150 to $200 on a "better" phone? A slightly bigger display and a faster processor, both of which I don't really care about. My phone does everything I want it to.
      I'm not buying this whole "you're paying the same money for data, therefore you should buy the most expensive phone possible". By that logic, everyone should by the best, most expensive computer on the market since they're paying the same for their internet connection either way.
      The fact remains that I saved $200, and some people simply do not need to have a high-end phone.

      • chris

        Agree whether you have a low end phone or not the fact is still the same that you are saving 100+ which you can use towards the plan. Most non tech geeks do not care about specs they care about texting and browsing the web and most never used a high end phone so wouldnt know the difference. Just because someone on these sites would not buy it clearly someone buys them. Not to mention i had an ally and it ran much smoother than a stock droid.

      • David Ruddock

        I assume you didn't read my comment, or more than a few sentences of this article. You don't have to spend money to buy a high end phone. That's the point I'm trying to make. You can buy a DROID 2 for $0, or an LG Ally. The D2 is obviously a better phone. It costs the same amount. Am I getting this across yet?

        • http://sketaful.se Sketaful

          It amazes me how many times people never get the message.

          I have English as a second language and I still get the message. Is people just to lazy to read more than the heading?

          Perhaps you should redirect them to twitter? There they can live happily alongside the short 145 letters postings... :P

  • http://www.adamkomar.com Adam Komar

    Statements like, "budget Android phones are absolutely screwing consumers on major carriers" make it look like you're blaming the phone itself or the operating system for the rip-off when it should be made clear that it's the carrier that ripping people off.

    • David Ruddock

      Uh, I don't think that's true at all - the title talks about the major carriers, and low-end android phones ARE cheaply built and prone to failure. I don't see any blame towards Android, and the statement you're quoting doesn't mean the same thing when it's taken out of the context of the article like that. I'm not going to entertain such a logical fallacy of an argument.

  • MedioGringo

    Just buy used. You can pick up a decent phone for about 200 bucks on Craigslist. I bought a used Samsung Focus just for the hell of it to try out WP7. Cost me 160 bucks. Or wait for a sale and get a new high end phone for 100 bucks or less.

    • Simon J.

      Indeed. It's only cheaper to buy on-contract if you feel the need to spend $70+ per month on service. T-Mobile has a monthly plan that includes 30 MB of data for $30. That's an admittedly tiny amount of data, but if you spend most of your time in places that have WiFi available (e.g. work, home) then it's not a big deal.

      • http://sketaful.se Sketaful

        What pricing do you have on carriers in US?
        In sweden I got the Galaxy S2 1 week after it was released. Got it on a 2-years plan with the carrier of my choice and it costs me $50/month which includes 3000 minutes of calling, 5000 sms (or it might be the opposite 5k min, 3k sms) and 3gig of data per month.

        Oh. And it didn't cost me anything extra at the start. The oposite in fact since I got my phone in June but payed the first bill on it in Aug. :)

        • Tee

          I guess it's different here in the Nordic. The market is different here.

          In the US, the major carriers do what ever they can to attract the customers. In the US people are told they need a smartphone and those ones who don't know might 'want' an older and not-so-good phone thinking it's a good one.

  • Bryan

    I'd like to point out that t-mobile offers cheaper pricing if you are off contract. The $70 500 minute plan is actually $60 on contract. Although the month-to-month plans are no longer listed on the website, they are still available over the phone or through retail. Plans are generally $10 cheaper.

    This would make it cheaper to take the LG off contract, given your example.

  • gossipinja

    One issue to keep in mind, older phones (even better ones) will most likely be left out of updates. Newer, low end phone are often more apt to get support and OTA's

    It would be unimportant to rooters, but others who keep their phone stock, should note the manufacturers track record for support. Some are good, many are not.
    Asus seems to be the best, as they just announced a transformer update, even though ICS is only a short time away.

    • David Ruddock

      Budget phones very rarely get OTAs, and when they do, they're usually later than those for higher-end handsets. That, and the updates rarely resolve issues related to the fact that many budget phones just sort of suck.

      • js

        Agree, like my Sprint Hero. Even CM ROMs didn't help that.

  • gg101

    If you can afford a 2 year smartphone plan in the US, you should be able to afford $200 for a phone. A 2 year contract can cost upwards of $2000 over its life. You need to consider the phone along with the contract as the phone is your sole means of using your cell service. When considering the total cost over 2 years, suddenly saving 5-10% isn't so drastic as wow free phone. A phone like the GS2 is certainly more than 10% better than whatever low end crap is being offered by carriers and your experience over the 2 years will be much better.

    • David Ruddock

      I agree, the comparative cost of the phone is tiny. People hunt for a deal on a $50 phone but still pay the same $80/mo for service that they would on a $250 phone.

      However, I don't think there's anything wrong with searching for a deal, money is money. I'm just pointing out that it often leads people into poor purchasing decisions where they could have gotten something a lot better for the same price if they were better informed.

      • Christian

        I feel like these major carriers have colluded a bit making it tough for competition to emerge that would not use deceptive techniques to get the money from ignorant consumers. I'm amazed how many people don't understand this concept!

        I predict as times get tougher and people aren't as willing to throw there money away, things will slowly change.

  • Robotman

    Hey, I was taken by the "deal" I got on G2. Don't get me wrong, it's a good phone, but I seriously doubt it will last until May 2013. It wasn't a "low end" phone, but it was at the end of it's life cycle. Gingerbread somewhat taxes the hardware.

    I'm generally a good consumer. Articles like this would have really helped me. It was my first smartphone purchase, and wasn't really knowledgeable enough about pricing, etc. Live and learn. Live and learn, my friends.

    Thanks for the article.

    • RJG

      I have a Desire Z/G2, and it's great. I suspect that it's Gingerbread with HTC Sense that's probably taxing your hardware. I use Cyanogenmod 7.1 and it's great (actually seems faster than Froyo version was), but then I guess the average consumer isn't going to flash CM.

      I got it almost exactly a year ago when it was first released in Canada and am planning on keeping it until the new Qualcomm Snapdragon phones are released second half of next year.

  • Gary

    Since when has any MyTouch been made by LG? The all have been made by HTC.

    • cooperaaaron

      I read somewhere that HTC does not make the MyTouch phones anymore and LG now makes the MyTouch and MyTouch Q, look on TMobile's website...

  • here

    The problem is with the absurd pricing structure in the US. I don't know if there is some obscure law that forces carriers to do this, but really, you get the same subsidy no matter what data or voice plan you take. Ridiculou.

    In Europe, you can get any phone for free. The diminutive, low-end, Galaxy Y is about 10 british pounds per month; the massive Galaxy Note is 40 pounds per month. Both are "free" on contract or, if you choose a contract with less minutes or data, both will increase their price until they it their real prices (99 for the Y, 580 for the Note).

    It's so much more flexible. In the US, if you're going to sign a contract, just pay the 200 bucks (it's pocket change for Americans anyway) and get the best phone around. Going "mid-end" and saving 100 dollars makes no sense whatsoever.

    Still, most of the world is a prepaid market and that's where the real battle is fought. Android has no competition there, now that Symbian has collapsed. And even in the US, the market for prepaid Androids is growing fast - for 200 dollars you can get the Samsung Exhibit II or the ZTE Warp.

    Now THAT makes sense. 200 dollars, no contract, and a great Android smartphone.

  • Franz

    This does not only apply to carrier sold phones. Here in the EU you can get a Nexus S for 199€, while the Wildfire S costs 189. Still a lot of people buy the Wildfire S because it is newer and more popular (well known).
    So there is no reason for low end phones to even EXIST. Everybody with half a brain should realize this.

    • jay

      You just answered everything with "everybody with half a brain"
      Unfortunately there are ppl with less than half a brain when it comes to certain things

  • http://www.theandroidsite.com Ben Marvin

    Great article. It absolutely pisses me off when people spend $50-100 on a "new" phone like say the LG Optimus. Sure, I'm sure it will be fine for most people, but when you can get new, better devices like the Thunderbolt from Amazon for free on contract, it's just silly. I guess the old saying is true "a fool and his money are soon parted". But the part that really upsets me is when people ask "why doesn't my old ass phone support Adobe Flash?" or "When will I get a software update for this 2 year old phone?"

  • Raphael

    What is funny is if you check Amazon, bestbuy, wirefly or even walmart, you an get high end phones on sale shortly after release

  • taylordd

    I'm pretty glad that my way is to research products religiously (frequently for months even before they come out) as it ends up being that the product I end up getting is (near)exactly what I want.

  • jay

    Its the "their junk and you're getting screwed" part that would mislead noobs. I got my kid an lg optimus T for free from target on 2 year contract otherwise 30 at tmo anyways I'm surprised how well it works. The point is consumers will be consumers. Need to do your homework, can't just run out and let the sales ppl sell you whatever, the companies trying to make the most so since when has it been otherwise

  • Vi

    You also haven't taken into account that when you buy a high end older phone, it has usually been tested and fixed! Manufactures are selling alpha $500.00 Devices and placing the burden of testing the phone for suitable use on consumers!

  • Coco hime

    Great article! Sadly though, it seems like a lot of people are missing the point. It's comparing a older but better phone with a cheaper but newer phone that is equal price(or the better phone is cheaper). People are all saying like, "Well I'm going to save $200 and get this new budget phone for free instead of a high end one." but that's not what this article is trying to compare. It's talking about slightly aged high end phones that are also free but are tons better still than the new budget phones. And usually by slightly aged it means like 2-3 months because Amazon, Wirefly, ect usually has high end phones for like $0-50 pretty soon after they come out.

    Try to think of it like this, would you rather have a 2011 Ford Focus or 2009 BMW M3 if they both cost the same price?

    • Mike

      LOL...contest time... PayPal dollar for who can answer what movie this is from:

      "Go ahead and clap. Mediocrity deserves applause. Why don't we go find a Ford Focus and clap around it!"

    • Freak4Dell

      I'd buy 2 M3s if I could get them for the price of a Focus.

  • kabel

    Nice wire-up i must say. I agree with almost everything you wrote.

    What else i must say is, the way you setup the story is not "working" for me. You assume that most of the people buy their phones online (you maybe right), because retail stores are "rip-offs" ... After several online purchase fiascoes at well known and established websites (like newegg, amazon ...), i never buy stuff online. In my case, the galaxy s 4g will be always more expensive than less expensive alternatives.

    Since i do not shop online, (and if i'm desperate to save 70-150 $ depending how bad are the retail stores) then i am out of options ...

  • jairolas

    This blog sucks, it should be closed!