Terrence provides a great, concise explanation here as to why you should consider avoiding long term, subsidized contracts!
His original post is available on Google+ here:
Just want to thank him for the time he spent researching and illustrating the current, wretched pay-as-you-go carrier options; and providing a nice spreadsheet for the major contract providers!

I have blogged about this (financially) painful, consumer topic on several occasion. Primarily because I travel within Europe a lot and I know how ripped off U.S. consumers are in this regard.
"How to get several free iPads - Simple, don't sign an AT&T contract!"

I thought a couple of years ago I would try to set up a website which provided the service (and the hidden agenda of sales perhaps) of weighing the pros and cons of pay-as-you-go providers over long term subsidized bullies. Paved with good intentions perhaps... And all that ever came of this idea was another long winded Blog entry. :-) Oh well...
"North American's will soon learn to avoid all cellular contracts!"
"In the coming weeks I will set up a new website allowing visitors to..."
How I Saved Money Buying my iPhone Off Contract

I've explained this in comments a few times but now that I actually bought my iPhone unlocked directly from Apple I figured I would write up a post about it.

Most people don't realize that you can actually save money buying a phone off contract. Just think about it for a minute. Subsidies, like discounted cell phones, are never free. There is always a hidden cost, you just have to know how to find it.

I bought my 16GB unlocked iPhone 4S for $650. This means I can use any GSM provider here or abroad. Buying this phone on contract you get the discounted price of $200. This is a discount of $450. Can you save $450 over the course of a two year contract? Absolutely!

Take a look at the chart that adds up all the various iPhone plans (courtesy Computerworld). Let's take a look at AT&T. The bottom row is probably a fair plan to compare. For $105 you get 900 call minutes. Unlimited text and 2GB of data. Add taxes and fees to this and you are looking at around $115 -$120 a month. Let's take the lower number on this.

I signed up with H20 wireless for my prepaid provider. They are an AT&T MVNO. What does that mean? That means they lease AT&T's network to provide service. You get the exact same coverage as you would under AT&T except if you happen to roam a lot. From a service perspective, there is virtually no difference between using an MVNO and the network carrier it rides on. I signed up for the $60 plan. This is all I pay. No taxes. No other fees. Just $60. This gives me unlimited voice, unlimited text and 1GB of data. This was 2GB of data up until this month when they lowered the limit. This isn't huge for me, as I can usually stay under this but if it became a problem, I would just switch to Red Pocket, another AT&T MVNO which offers 2GB of data under their $60 plan. So for the same coverage (as a former AT&T customer I tested both signal strength and download speed) and a lot less money I can get even more voice minutes and the same everything else. If AT&T doesn't work for you, every major US carrier has a few different MVNOs on their network so you can choose what works best for you.

Just do the math.

$45 * 24 months = $1080

So for a savings of $450 right now, I pay $1080 more over the life of a typical two year contract. That's a $630 difference. The math gets even worse if you don't upgrade your phone every two years.

Is this for everyone? Maybe not. Most prepaid plans don't have family plans and only a few offer data packages. But if you are like me and can afford to pay for the phone upfront, there are usually some really good options for you.

Would you consider buying your phone upfront or is the lure of a cheaper phone too much of a good deal? Would you have any other concerns going prepaid?

Edit: If I had to do it all over again I would probably go Galaxy Nexus unlocked on Tmobile prepaid. That's because Tmobile has the best prepaid plans and I'm a little underwhelmed by the iPhone.
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