More than 90 percent of our survey respondents' phones were serviced under a contract. Compared with those customers, respondents with no contracts made far fewer calls and rarely used data. Perhaps their simpler needs, and possibly lower expectations, account for the fact that no-contract respondents were more satisfied overall than those who had contracts.
No-contract service is generally most suitable for light use, but no-contract options are expanding beyond bare-bones basics. There are now more conventional cell phones that provide data services without a contract, a change from the past. And carriers that specialize in no-contract service, including Virgin Mobile and Boost Mobile, are offering more smart phones. Verizon and T-Mobile now offer most of their phones, smart and regular, with or without a contract. But some marquee smart phones, notably the iPhone from AT&T, are still sold only under contract.
Phones usually cost more when they're bought without a contract. That's because there's no subsidy from the carrier, as there usually is when you sign a contract. But with a contract, a portion of the fees you pay every month is used to "pay back" the company for that initial break. With a no-contract phone, there's no payback, and monthly fees should therefore be lower. For example, T-Mobile gives you a break on the price of the monthly plan when you buy a phone without a contract; Verizon doesn't.
The big-name carriers are offering more no-contract plans and phones—sometimes under separate brands, such as Sprint's Boost and Virgin—but smaller no-contract specialists have made their plans look more like contract plans. Carriers such as Metro PCS and Virgin Mobile offer unlimited monthly plans in addition to pay-as-you-go service. Consumer Cellular has "postpaid" billing at the end of the month, rather than the prepaid billing that's been the norm for no-contract cell service.