(Part 3 of 3)
In the previous two parts of this blog, we described the basics of reducing your wireless expenses as it relates to your cell phone plans and usage. Now, let’s take a look at the equipment costs, accessories and those nasty early termination fees associated with your wireless account. And, let’s see how much it will cost me to save money.
Equipment – phones aren’t always cheap…
When you purchase a new phone and a new line of service from a wireless carrier, you usually receive the equipment at a discount. The carrier will subsidize the cost of the equipment by $150-300 (or more). And, the carriers will not always discount related phones by the same amount. For example, one Blackberry that lists for $549.99 may be discounted to $219.99, or $330 off. Another Blackberry that lists for $499.99 may be had for $79.99, or $420 off. The difference in price may be attributed to one carrier matching another carrier on price, or the more popular phones will be at a lower cost than the non-popular ones (basic supply and demand). The features of one phone over another will also factor into the cost.
When purchasing a new line of service, you don’t always have to ‘allow’ the carrier to subsidize the cost. Carriers subsidize the cost to sell more phones, and thus ensure that you stay an active user for the full two years of your contract. If you break the contract, then you are subject to the dreaded early termination fee (ETF) of up to $200. You can (almost) always purchase the phone at full MSRP, and then you don’t have to sign up for that two-year service agreement (i.e. contract). You are then free to cancel the phone’s contract at any time, without having to pay that ETF. However, if the phone’s discount (off MSRP) is greater than the early termination fee (as shown in the examples above), it is still cheaper to take the larger equipment discount and pay the ETF later (if necessary). Also, many carriers are now prorating the ETF’s, but only for new lines of service that have been activated since the new policy has been implemented.
Many carriers will offer specialized or discounted voice and data rate plans only if you sign up for a two-year agreement, so the above option may not be an option. Carriers are doing all they can to make sure that you stick around for those two years (or longer).
Early termination fees
Since the carrier has subsidized your equipment in exchange for a two-year contract, if you decide to cancel the line of service (break your contract), you could be subject to ETF’s of up to $200 per phone. It is also important to remember that a contract is tied to a phone number, and not a piece of equipment.
There are a few ways to avoid paying ETF’s – and here is one way. Suppose you have two phones – one is not under contract, and the other one is under contract. The phone that is under contract is for a recently terminated employee, and you want to cancel their line of service, but you will incur an ETF. You could simply give this phone to the employee that has the phone that is not under contract, and then cancel their line of service, and avoid any ETF’s. But, then this employee would have to change their cell phone number. Many times, that is too much of a hassle.
Another solution is to see if you can change the rate plan on the phone (that is under contract) to one with a lower monthly cost, and then stick the phone in a drawer until you need another phone. You may also put it on a seasonal (stand-by) plan – but see the previous blog for the caveats on this action. But if you take the amount of the ETF and divide it by the lowest monthly cost for a rate plan that is available, it might be cheaper to just cancel the phone and pay the ETF – especially if you won’t be hiring anyone new for a while. Also, be sure to check with your carrier to make sure that if you change rate plans to a lower one, your current contract won’t be extended.
Insurance – not always such a good idea
Most carriers offer equipment insurance for your new phone within the first 30 days of purchase. For a fee, ranging from $3 to $7, you can have complete replacement coverage for your cell phone – with ‘replacement’ being the key word. Some insurance plans will replace your phone only for out-of-warranty issues, and some plans will offer ‘total protection’ for your phone. If you drop your Blackberry in the bathtub (yes, I did that once), or drop it onto a concrete floor (ditto), they will give you a replacement Blackberry for a nominal fee, depending upon the insurance plan. You either ship your phone to the insurance company or deliver it in person to a local repair center, and then you will receive a ‘reconditioned’ replacement phone. This replacement phone is usually one that has been reconditioned by the manufacturer, or in most cases, ‘repaired’ by the local repair center. You are not getting a new phone, but instead one that may or may not have been fixed after the last person turned theirs in for repair or replacement.
Since a new phone can cost upwards of $500 (especially for PDA-type phones), is it worth it to have insurance? Let’s assume that your company has 500 phones. At an average of $7 per phone per month for total replacement insurance, you will be paying $3,500 per month (plus taxes!) for insurance. If all of the phones in you inventory have an average MSRP of $400, then you would have to break/lose nine phones per month to break even. It is really a judgment call on your part based upon the history that your company has with employees breaking or losing their phones. And, you may also purchase replacement phones from third parties or web sites (such as eBay) at a lower cost than full MSRP.
Standardize on equipment and accessories (cheaper is good enough)
A company should standardize on just a few phone models. The fewer the total number of different models that you have, the cheaper it will be to support those phones and you will also be able to standardize on accessories. There are dozens of different chargers (both car and home/office) for the dozens of different phone manufacturers. If you can standardize on the type of charging plug needed for all of your phones, then your accessory costs will be minimized as one charger will work for several different phone models. The two main standards today are mini-USB and the newer micro-USB chargers.
When possible, try to purchase non-OEM (original equipment manufacturer) accessories, and never buy accessories directly from the carrier. You can save 50-75% (or more) by purchasing non-OEM accessories versus OEM ones. There are dozens of Internet-based stores that will provide such a discount. And, while they may not last as long as an OEM version, the cost to provide replacements is low enough where frequent breakage won’t matter. The same charger that is $29.99 from a carrier can be found for less than $10 online (even for OEM ones). The ‘trick’ is to find a good non-OEM brand that is durable and will last a long time. And yes, there is a difference in a cheap $5 charger and a $10 one. You do get what you pay for…
Upgrades (discounted equipment for renewing contracts)
Most people aren’t aware that if the have a phone that is not under contract, they are eligible for an ‘upgraded’ phone at a reduced cost, if they renew their contract. An upgrade is simply a new phone at a reduced price, similar to the discount received when you first purchased the phone as a new line of activation. If you have a phone that is not under contract and you are happy with your carrier’s service, and you aren’t going to switch carriers or deactivate the phone in the near future, then it is definitely worth it to upgrade your phone. When you upgrade your phone, you will have to renew your contract for two years (or one year in some cases). If you have a discount agreement with Nextel, you can upgrade your phone every 12 months (and the contract period is only 12 months as well).
After you upgrade to a new phone, you may then place the old phone in your inventory and use it when someone else breaks or loses their phone. When you replace a broken/lost phone with one that you already have, make sure that when you switch the service to the new phone, the customer care rep doesn’t extend your contract (they shouldn’t, but you need to remind them). So, if you aren’t leaving your carrier anytime soon, it makes sense to get a new phone as often as you can. It also provides a nice moral boost to the phone’s user (hey, I have a new phone!), and it also helps to build an inventory for those cases when you need an extra phone. Otherwise, you will have to purchase a new replacement phone at full MSRP.
How does your wireless rep make money?
It is important to understand how your wireless rep makes money. Given the fact that most companies don’t scrutinize their wireless account each month, you need to be sure that you what is happening with the phones on your account. Most reps make money on new activations (new lines of service), upgrades, extending contracts, and some even get a percentage of accessory sales. If you have a dishonest rep, they might be prone to extending contracts, adding unnecessary rate plans, or selling you that $30 belt clip or $40 battery when a cheaper one is available (from someone else). You should then be sure that when you make a change to a phone or a plan, that you aren’t allowing the rep to extend your contract if it isn’t warranted.
Finally…
In the end, your company could be wasting (or saving) thousands of dollars per month on your wireless expenses. There are literally hundreds of different scenarios to review on a cell phone invoice, and there are thousands of different rate plans (both active and legacy) across all of the carriers.
It is easier and usually more productive to hire a company to analyze your invoices for you. But, beware of companies that only look at your cellular usage, and ignore all of the other items such as data, fraud, text messaging, double-billing, etc. Be careful of companies that promise instant savings for a fee – they might fix your problem for now, but your monthly recurring invoices need monthly monitoring. And watch out for companies that use a cookie-cutter approach to analyzing your bill. Every account is different, and a good analysis really involves a human touch. There are web sites that offer a 60-second analysis on a single invoice, but a good analysis is done over three or four month’s worth of data for comparison reasons.
What is it going to cost me to save money?
Most telecom expense management companies charge a percentage of the annual savings for their fee in helping you optimize your wireless account. A typical fee might be 20% of the annual savings. Be careful that you validate the savings over at least a three month period. Don’t pay based upon their first savings “estimate”. You want to make sure that the changes that they suggest really will reduce your expenses by how much they are claiming. This confirmation can take 2-3 additional billing cycles. Be sure that your return on investment is less than two months. If you will save $100,000 a year, most companies will want to charge you at least $20,000. And, expect to pay on average $3-5 per month for invoice monitoring.
How my company, WideVision, helps companies reduce their wireless expenses… (yes, there is a commercial stuck in here)
Widevision is a wireless expense management company, and yes, we help companies manage their wireless expenses and devices. But, we don’t charge the industry average of 20% for the initial savings and then a monthly fee on top of that. Our consultation fees are based upon a yearly contract where we will perform the initial analysis on your account (where the majority of the savings occur), work with the carrier to implement the changes, and then continue to monitor your account for the remainder of the year. Overall, our cost for an entire YEAR of account services is typically around 10-15% of your annual savings. WideVision also provides replacement and help desk services – all included in our monthly consultation fee. We work with our clients to build a long-lasting beneficial relationship, and we aren’t in business to make a quick buck.
So, if your company utilizes wireless devices and you don’t have a professional telecom expense management company on retainer, you are probably wasting money – and you just don’t realize it. Widevision can help you find ways to cut costs without sacrificing the services you need. And it won’t cost you an arm and a leg. Spend $1, and save $10.
Tony Darnell is the CEO of WideVision, a wireless expense management company based in Suwanee, GA. WideVision specializes in reducing wireless expenses for companies with 50 to 5,000 wireless devices.
Filed under: accounting, cellular, finance, Uncategorized, Wireless | Tagged: account management, accounting, AT&T, Barack Obama, Blackberry, business, cell phone, cellular, expenses, finance, George Bush, GPS, increase profits, information technology, mobility, Neal Boortz, Nextel, rate plan analysis, reduce expenses, Sprint, T-Mobile, telecom expense management, tony darnell, Verizon, Wireless | Leave a comment »