Getting a Phone on Contract (How to Read & Interpret Rate Tables)

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Getting a Phone on Contract (How to Read & Interpret Rate Tables)

Postby mabagal » 14 Nov 2011, 11:51

If you have an ARC or other Taiwan residence document, will be staying in Taiwan for a few years or more, and are looking to get a new phone, then a very good option to consider is to sign a contract with a mobile phone company for a certain duration of time. This period is usually 24 months. In return for this commitment, the phone company will pay for a portion of the price of a new phone.

How exactly this works in Taiwan has caused a lot of confusion, particularly with the cryptic rate tables presented by the cell phone retailers. Often, the plan that features a "Free" phone ends up being worse than other options. In some real cases, moving up to a "more expensive" plan actually costs less in total over the life of the contract. So here is a sticky. Hopefully it answer some of the questions there are often asked. We'll do our best to update it as things change.

[UPDATE 12/15/2011] For convenience, here is a link to an Excel spreadsheet that models the most current Zhonghua Telecom plan sheet for the iPhone 4 and 4S: http://dl.dropbox.com/u/6720670/CHT_iPh ... kdown.xlsx [/END UPDATE]

The Basic Mechanics of a Taiwan Cell Phone Plan (with a subsidized phone):

1) You sign a contract for a certain monthly plan and commit for a certain period, typically 24 months. The cell phone company will subsidize the cost of a new phone in exchange.
2) At the time of signing, you pre-pay an amount that represents about 11-14 or so months of service, where the amount depends on the carrier and specific phone. Essentially, this covers the phone, but the amount is applied towards your total contract.
3) For those first 11-14 months, you will receive a monthly bill that is 0 TWD plus overages. After that, you will receive a monthly bill equal to the amount you agreed to in the contract, indefinitely until you revise or cancel the plan after end of the contract term.

In Taiwan, as in some other Asian countries, the concept of credit and credit checks is still nascent, particularly for foreigners. While one can sign into a true credit-basis contract with a Taiwanese cell phone carrier (i.e.: no initial cash outlay), this is the exception rather than the rule, particularly for foreigners. So expect to pre-pay for those 14 or so months, especially if you've only recently arrived in Taiwan.

Total Cost of Ownership and the Tricky Rate Tables:

When comparing one cell phone plan with another, the only thing that matters is total cost of ownership (TCO). What will the contract cost for the entire 24 month period? TCO, TCO, TCO!

This is a place where the carriers will attempt to lure consumers to a higher total-cost-of-ownership plan by offering a phone for "Free". This is known in marketing and psycholgy as "anchoring" and the cell phone companies execute this with exacting precision using a few simple tactics:
1) Focusing the phone displays to highlight "what you will pay for the phone with a contract"... with a small print of "what the phone costs without a contract"
2) Putting contract rate tables together using non-round numbers for pricing, arrangement of rows that make tallying harder, and other features that make them hard to navigate at a glance.
3) Not presenting the contract rate table until the customer has already stated interest in a particular phone model, thus anchoring the discussion around the "price" of the phone.
4) In places where credit contracts are more typical such as the USA, this is even more powerful because in this case, the only up-front outlay when signing the contract is the subsidized "price" of the phone. This means people who are cash-flow sensitive (and who isn't these days) will tend to focus even more on the subsidized "price" of the phone.

Of course, we're smarter than this. The math is simple.

Basically, just multiply the monthly rate for the plan by 24, add the listed subsidied price of the phone for that specific plan, and there is your TCO.

24M + S = TCO.

M = Monthly Rate for the Plan
S = Subsidized Price of Phone

Some carriers (ie: Zhonghua Telecom) will complicate this by stating that the deposit, D, will go towards an amount of plan, P where P > D. This is just another way of both obfuscating the total amount and making the deposit seem less objectionable. "Oh, that big deposit you have to pay actually buys more than you are giving us." In this case, simply take P-D and subtract that from the TCO you get from multiplying the rate plan by 24 and adding the subsidized price of the phone.

24M - (P-D) + S = TCO.

D = Deposit amount that is applied towards plan
P = Amount of plan that the deposit amount buys

Now you can pick the plan that fits your needs for voice and data usage independent of the "phone" price. Just ignore the sales person when they start talking about phone price, bring out a calculator and do the TCO calculations from the table. When they see you doing this (and they've definitely seen it before) they will likely give up on any upsell attempts and just sell you what you want.

Here's an example and some further explanation on looking at deltas between plans:

From: http://forumosa.com/taiwan/viewtopic.ph ... 2#p1286542
mabagal wrote:Taz, here's how to read and calculate that table. The only important number is total cost of ownership for the life of the 24 month contract. Ignore the price of the phone listed there. The table is designed this way so people get drawn to the 0 NT phone, which as you will see is a bad, "sucker" option in terms of what it costs you over the life of the two year contract.

Look below and notice that the jump from non-zero to "free" price of the phone (highlighted) has the largest jump in total cost of ownership. I'm pretty sure a whole lot of people fall for this trap. Well played, CHT. The other carriers have plans and tables structured in the same way.

Note also the negative delta built jumping up from the 1049 to 1349 in plans on the iPhone 4.

Their table:
Image

Interpreting the table:
Image

With formulae:
Image

Whatever you do, do not get the lowest plan. Its 500MB data cap will be gone a week or so into the month if you use your phone at all. All the other plans include unlimited data.


Capped Data Overages:
Some carriers, notably Zhonghua Telecom and Taiwan Mobile will offer a data plan that has a pricing band. The way it works is you pay a minimum amount per month for a certain amount of data (currently 699NT for up to 500MB). If you go over this, overages apply per KB until a cap (currently 800NT). This basically amounts to an 800NT unlimited data plan. If you choose a plan with this feature, simply subtract 699 and then add 800 to the monthly rate to get what you'll pay if you decide to actually use the data plan, which will indubitably amont to >500MB per month with even light use.

Some Assumptions:
These days, it is very difficult to walk into a major carriers store and find a phone or a contract plan for a phone that is not a smartphone, so this post will focus on the plans offered with smartphones. The mechanics are the same for other phones, so the same arithmetic applies.

The data show that people are leaning more and more on data plans for communication using services like WhatsApp, Skype and other instant messaging and voice-over-IP (VOIP) services and less and less on traditional cell phone voice "minutes". This trend will not reverse, so this post also assume a data plan.

Are They Really Subsidizing my Phone Much at All?
Depending on ones needs, it might make sense to buy a phone outright and buy a plan the phone company offers without a subsidy. This is easy to work out using TCO.

As an example:
A new iPhone, bought outright sells for anywhere from 25000-28000 TWD
A typical data plan is about 900 TWD per month before voice usage
A typical month-to-month voice + data service, post-paid monthly averages around 1200-1700 TWD per month

So if were to buy the phone outright and pay for 24 months of service seperately, you would pay somewhere in the range of
25000+900*24 = 46600
28000+1600*24 = 66400

Compare this to the above rate table calculation to see what the subsidy is. In short, if your are going to need a phone plan anyway and you know you will need it for 24 months or more, you may as well get a phone with it.

One approach people who prefer not to have the 24-month commitment have taken is to buy a phone outright, then sign up for a post-paid plan with basically data-only. Then pay overages for phone and text. Depending upon how much you can lean on the data as a primary mode of communication, this may be a good option.

"Grandfathering"
Historically, rates have increased over time for the same features, or so that the same amount of money buys a lesser plan. Many phone companies will honor whatever rate you locked in when originally signing your contract indefinitely. This is a good to look at when choosing whether to renew a contract or sign a new contract in order to get a phone subsidized.

The Thing That Every Phone Salesman Wants to Hear: "I am a new customer".
Sales people at the phone stores either have a quota or get a commission for each contract they sell, and the biggest commission is on signing up a new customer. If they have a hot, limited availability product, they are going to want to get as much as possible from each one, i.e.: new sign ups.

If you are going for a very popular phone, that may have a waiting list, a good tactic is to simply say "I am a new customer". Simply stating this will turn a lot of no answers into yes. It is not a guarantee, but is worth a shot.

Example, this spring my girlfriend did exactly this:
Her: Do you have a white iPhone 4?
Sales: We have iPhone 4, but only in black.
Her: You don't have in it white?
Sales: Sorry, no.
Her: I'm a new customer and I'll be signing a new contract.
Sales: Let me look.
A minute later, the sales person emerges with a white iPhone 4 and a contract sheet.

Example, last fall, my experience:
Me: I'm here to pick up the iPhone 4 I reserved.
Sales: OK, here is the contract sheet.
Me: No, I want to buy it outright.
Sales: Um, we can only sell it to you with a contract.
Me: I reserved it, can't I just buy it outright?
Sales: We can only do contracts.
Me: [realizing what was going on] Can I sign a new pre-paid plan and load it with nothing?
Sales: Let me see.
A few minutes later, the sales person comes out with the iPhone and the sheets for a pre-paid plan.

This post was recommended by Modest Mouse (17 Dec 2011, 01:25)
Rating: 4%
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Re: Getting a Phone on Contract (How to Read & Interpret Rate Tables)

Postby Dog's_Breakfast » 16 Jun 2012, 09:03

Thanks for the info, Mabagal, but your figures are based on the assumption that everyone wants a (pricey) iPhone. For those who simply want a phone for talking and text messages, it's much cheaper. Bottom-end is a 2G rate plan, and with a 2-year contract you get a free phone. Actually, whether or not it's really free depends on which phone you choose and which rate plan you subscribe to. If, like me, you go for the cheapest NT$188/month 2G plan, you are entitled to a NT$2500 discount on a phone, so if it costs NT$2500 or less than it is indeed free. If you get a phone that retails for NT$3000, then you pay NT$500, but they've also got a deal where they refund part of that every month so that after two years it is actually free.

The bottom-end 2G phones won't give you Internet access or Skype, or any other "smart" features. Of course, there are a few built-in applications - calculator, calendar, alarm clock, FM radio and (Nokia only) a built-in flashlight. Mine has an MP3 player as well, but most of them don't. No camera in the cheapest phones, but for a couple thousand more you can have one.

Here are Zhonghua Telecom's rates for 2G plans. The NT$88/month is no longer available, but it's grandfathered in for those who already have it:

Image

The full schedule of rates for Zhonghua Telecom can be found here:

http://www.emome.net/channel?chid=250

One thing not mentioned in the above rate table is that you can choose one (just one) friend who is also a subscriber to the Zhonghua Telecom network for unlimited free calls. That can be a big savings if you have a "significant other" with whom you chat often.

Typically, my phone bill runs around NT$250/month, and yes I got a free phone. I usually pick up a new free phone every two years whether I need it or not - might as well since it's free. Nice to have a spare just in case one gets broken or lost.

Aside from low cost, one other advantage of the "stupid" phones is that they are smaller in size than the "smart" ones. It's nice to have a phone that really does fit in your pocket.
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Re: Getting a Phone on Contract (How to Read & Interpret Rate Tables)

Postby trubadour » 26 Dec 2012, 16:24

http://telecom.taiwanmobile.com/emyfone/action/events/iphone5/plan.html

Can someone help find the best TCO for the iPhone 5? I'm kinda stuck 'cos it's in Chinese & I suck at math :oops:
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Re: Getting a Phone on Contract (How to Read & Interpret Rate Tables)

Postby maybin1 » 14 Sep 2013, 14:59

I've lived in Taiwan for many years and this is my opinion

Subsidized phones are nice. 2 years or 30 months contract is fine and dandy.

Me? I buy the phone outright and cater my phone needs.

28,000 nt for a iphone (900 USD)

500 nt for speaking on phone service. Anything lower and you will have to pay difference anyway. This way a 500-600 is a good plan for casual speakers on the phone.

250 nt to 400 nt for cellular coverage. yeah, it's NOT unlimited but with free wifi in many places anyway, you can get away with 2-5 MB a month.

That's 700-900 nt a month. Roughly 25-35 USD a month. No contract!! Stop, upgrade, etc whenever whatever.

It sucks to buy a 900 USD phone, but in the long run, you dont really need the 950 all you can eat plan. But you do need a phone plan that's over 300 nt (10 USD). Otherwise, you will pay a premium on all your phone calls.
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Re: Getting a Phone on Contract (How to Read & Interpret Rate Tables)

Postby obblogatory » 06 Jul 2014, 18:04

Well summarized
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