Saturday, November 7, 2009

Economics of Telco's Plans

I think that it is good for everyone to have some basics in economics. It would enable people to understand why things are done in a certain way. Recently I read about some comments on the Telco's billing price. The commenter stated that the free gifts should be done away with and that the consumers rather have shorter contract period and lesser monthly payments.

So what's wrong with this comment? The commenter forgotten a few points.
  1. The brand new hand phone they get when the contract is renewed is at a subsidized rate because you have signed a 24 months contract with the telco.
  2. If you're a low usage user, you can always go for the pre-paid card route.
  3. The reason why the monthly bills can be lower is because you have signed a long contract. The shorter the contract, the higher price any business will charge you. Why? Because they have no assurance that you will continue to purchase goods or services from them.

So how to have a shorter contract period? That is very simple. Do not get your new hand phone at a subsidized rate. You will then have the freedom to change your contract any time you want.

How to achieve lesser monthly payments? Go the pre-paid way. You have total control over how much you want to pay and you will only need to top-up the pre-paid card every 6 months (I know M1 has this rule) if you wish to keep the number. Each pre-paid card is only like $18.

Look and observe your surroundings once in a while. If even construction workers and maids can afford to have hand phones, don't you think that you may have missed out on something?

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