When customers have three or four $600 smartphones on their family plans, purchasing insurance for all of them can prove costly.

Most cell phone companies offer insurance plans that often carry expensive monthly premiums and high deductibles, but many also cover the loss or theft of a phone. With independent insurers including Squaretrade taking a bite out of their business, large carriers have been forced to respond with improved plans of their own.

Last week, AT&T quietly launched a new Multi-Device Protection Pack ($30/month) that covers up to three devices (including phones, tablets, laptops) against loss, theft, damage, or out of warranty defects for as long as customers stay enrolled in the plan. The primary limitation: the device must run Windows Vista, OSX, Android or iOS or newer operating systems. Customers can add their two additional devices at any time the insurance is in effect. Asurion provides the coverage and warranty service.

Squaretrade says it offers better value than traditional cell company insurance plans.

AT&T’s $30 a month price tag will seem high when compared against competing offers from Squaretrade running as low as $5 a month per device for up to three years, but AT&T argues its insurance plan covers loss or theft, while Squaretrade does not.

Squaretrade responds that it doesn’t believe loss/theft protection is a good value for its customers.

“Research has shown that people are 10 times more likely to have their phone break due to malfunctions or accidents like drops and spills (which SquareTrade covers better than anyone else) than lose it or have it stolen,” Squaretrade argues. “And yet, loss & theft coverage can cost twice as much as accident protection. Meanwhile, there are free apps to help find your phone if you ever do misplace it.”

Customers who find themselves needing to file a claim will find significant differences between AT&T’s plan and competitors like Squaretrade.

Both charge deductibles, but AT&T’s drops the longer you don’t file a claim. Squaretrade charges a flat $75 deductible after returning your damaged device in a postage-paid box. Many Squaretrade customers report they typically receive reimbursement — not a repaired phone — for the full retail (no-contract) value of the phone, minus the deductible. Most cell company insurance plans send customers a previously refurbished phone of the same or better model.

AT&T’s declining deductible varies depending on the device. For the first six consecutive months without a claim, AT&T charges these deductibles:

• Devices connected to AT&T’s network (phones, 4G-enabled tablets, etc.): $50/125/199 depending on device model;
• Approved repair of a laptop or tablet: $89;
• Replacement of lost/stolen/non-repairable laptop or tablet: $199

After the first six months but less than one year with no claims, customers get a 25% discount on their deductible. After 12 months, the discount increases to almost 50%. There is a limit of six shared claims between all three devices within any consecutive 12-month period with a maximum replacement value of $1,500 per claim. There is a 30-day waiting period before AT&T starts coverage of non-connected devices (laptops, etc.).

AT&T also provides technical support for customers via phone or online chat to set up and back up devices and deal with basic troubleshooting.

There are some devices AT&T won’t cover:

• Galaxy Camera (EK-GC100A)
• Blackberry Playbook
• Phones on GoPhone® accounts
• Tablets with pre-paid data plans
• PlayStation® Vita
• AT&T 3G MicroCell
• Phone or device models not sold by AT&T (e.g., Dell Streak, Google Nexus One, TerreStar Genus)
• Docks (such as for the Motorola ATRIX 4G)
• Amazon Kindle

A complete list of covered devices is available from AT&T’s website and is subject to change.

[flv]http://www.phillipdampier.com/video/ATT Cell Phone Insurance – Multi-Device Insurance Protection from ATT 5-23-14.flv[/flv]

AT&T explains its new Multi-Device Protection Pack, priced at $30 a month, covering up to three devices. (1:35)

Klobuchar

After months of fruitless discussions with cell phone carriers, the U.S. Senate is moving closer towards legislation that would stop phone companies from blocking “kill switch” technology that could disable lost or stolen phones, discouraging would-be thieves.

Sen. Amy Klobuchar (D-Minn.) sent letters this week to Verizon Wireless, AT&T, Sprint and T-Mobile asking the carriers to do more to protect customers from phone theft.

Klobuchar is concerned wireless companies may be blocking cell phone manufacturers from enabling anti-theft technology customers could activate to disable missing phones and prevent unauthorized access or reactivation without the customer’s consent.

“Mobile devices aren’t just telephones anymore – increasingly people’s livelihoods depend on them,” Klobuchar said. “That’s why we need to do more to crack down on criminals who are stealing and reselling these devices, costing consumers billions every year. The wireless industry needs to step up to the plate and address these thefts, and make sure consumers have the most advanced security technology at their fingertips.”

The technology is already widely available internationally and has dramatically reduced smartphone theft by eliminating most of the resale value of the expensive devices, which are rendered useless once the phone is disabled.

Apple has contractual control over its products unlike most cell phone manufacturers.

But American carriers have so far refused permission to allow manufacturers like Samsung to introduce the feature in North America. Apple has successfully introduced a “kill switch” on many of its latest devices thanks to favorable contractual language that limits outside interference with the software Apple develops for its wireless devices. Other manufacturers are generally required to bow to carrier demands.

“I think that this is motivated by profit,” San Francisco district attorney George Gascon told CNN. Gascon reported he had seen e-mails from carriers that rebuffed Samsung’s efforts to introduce the technology in the American market.

Companies like AT&T claim that a “kill switch” feature could be exploited by hackers and make restoring service extremely difficult. But manufacturers and proponents of kill switch technology dismiss that argument, claiming the process is easily reversible once a customer enters a correct name and password. Critics believe carriers are motivated by the potential loss of millions from the sale of insurance plans, replacement phones, and the increased revenue earned from the reactivation of stolen phones.

With more than 1.6 million smartphones stolen or lost annually, carriers sell more than $800 million of replacement phones worth at least $500 each. Wireless phone companies also profit selling insurance plans priced at $7 or more monthly that offer free or discounted, typically refurbished cell phone replacements. Most customers never use the insurance plans, earning providers an extra $84 a year in revenue per customer.

Without kill switch technology and other theft prevention measures, the incentive to steal valuable smartphones continues to increase. As the price of sophisticated smartphones continues to increase, they are a prime target in street crime incidents. In San Francisco, 67% of robberies are related to mobile devices, according to the police department. Ten percent of phone owners have had a phone stolen, according to a Harris poll.

For now, the industry has only agreed to develop a voluntary database of phones reported lost or stolen. But participating carriers are largely American, allowing crooks to bypass the list by exporting phones overseas where they are quickly reactivated.

Klobuchar wants carriers to go on the record about kill switch technology, and her letter requested a formal response to three questions:

• Whether companies received offers from handset manufacturers to install “kill switch” technology;
• Have companies introduced the technology and, if not, why not;
• How companies will introduce such technology in the future.

[flv]http://www.phillipdampier.com/video/CNN Kill Switch Smartphones 11-20-13.flv[/flv]

CNN reports American cell phone companies aren’t interested in allowing customers to remotely disable their lost or stolen cell phones. (0:43)

Verizon prepaid customers can buy this basic phone from Walmart for just $15.88. But if you want to use this phone on a postpaid plan, Verizon charges up to $200 for the same phone unless you renew your contract.

As AT&T and Verizon discover an increasing amount of their revenue and profits come from their respective wireless divisions, they’re testing the waters to determine just how much more consumers are willing to pay for cell phone and wireless broadband services.

Verizon Wireless has spent the past year closing loopholes of various kinds and herding an increasing number of customers into mandatory data plans which can add up to $30 a month per phone to your monthly bill.  AT&T wants more if you plan on early upgrades for your cell phone.  A quick review:

Verizon Wireless Locks Down Prepaid Phone Models: Anyone who has shopped for a prepaid phone has probably noticed them dangling from hooks in Walmart and other stores at prices starting around $20.  Most of these prepaid phones are basic models or those deemed cutting edge a few years ago.  Take the LG 5600 — the Accolade.  It’s a phone your father would be comfortable with, covering the basics and designed primarily for making and receiving phone calls.  Verizon Wireless’ retail price for its “postpaid” customers (those who get and pay a bill every month) is $199.99 for the Accolade.  Of course, if you sign a new two-year contract, the phone is free.  But you can find the exact same phone, labeled for Verizon’s prepaid service at prices as low as $15.88.

Verizon claims the deep, deep discounts on prepaid phones are made back from the higher prices prepaid customers pay for airtime.  Some enterprising Verizon postpaid customers have sought these models out to replace or upgrade a worn out or broken phone without having to sign a new two-year contract.  Some other prepaid companies have also activated Verizon’s prepaid phones on their own network, including Page Plus.

Verizon has put the kibosh on both practices.  Customers seeking to activate a prepaid phone on a postpaid account must first use the phone in prepaid mode for a minimum of six months prior to its conversion to postpaid use.  Until very recently, some customers discovered a loophole around this requirement — registering a prepaid phone first on Verizon’s website and then activating it by dialing *228.  So long as a phone had never been activated, it often could be used on a postpaid account from the date of purchase.  But now Verizon tracks which phones are intended for postpaid and prepaid use, and that loophole has been closed.

Page Plus, which resells Verizon’s network, also had to stop activating Verizon prepaid phones almost a year ago.

As a result, those who want discounted cell phone service but keep Verizon’s robust network coverage have been forced to buy handsets at retail pricing, purchase one of several mostly refurbished phones direct from Page Plus, or activate an older phone no longer in use.

Avoiding the Data Plan: What drives an increasing number of Verizon off-contract customers towards “creative solutions” for upgrading their more than two year old phones is resistance to the expensive data plan required for most of their newest and best phones.  For these customers, renewing a contract means a plan change that includes $30 a month extra for data services or a phone downgrade to a basic model to avoid a data plan. Verizon’s remaining data-plan exempt handsets are:

• Verizon Wireless CDM8975
• LG Accolade™
• LG Cosmos™
• Pantech Jest™
• Samsung Gusto™
• Verizon Wireless Salute™
• Verizon Wireless Escapade®
• Samsung Haven™
• Samsung Intensity™
• Samsung Convoy™
• Motorola Barrage™

Would you renew a two-year service contract if you had to downgrade your next new phone to a basic model to avoid a mandatory data plan?

For large families accustomed to mid-level phones, the prospect of being stuck with a Jitterbug-like-downgrade or a $30 data plan has kept many from renewing their contracts, sticking with what they already own.

When AT&T announced the end of its flat rate smartphone plan, it said the lower pricing on smaller allowance data packages would represent “savings” for consumers reluctant to upgrade.  It’s hard to accept the same company that set prices so high for data usage in the first place has consumer interests at heart with usage-limited alternatives, especially when they no longer offer an unlimited option for customers who want one.

Verizon also plans to drop its unlimited plan in the near future.  Also on tap is a gradual shift away from so-called “mid-level” phones that consumers can purchase with a reduced rate, but still-mandatory $10 data plan.  Verizon increasingly will push customers between two stark choices — a high-powered, battery-eating smartphone that will give you a heart attack if you drop it or a very basic, stripped down phone with features commonly found on handsets five years ago.

This kind of pricing is driving some cash-strapped consumers to prepaid alternatives, such as Page Plus and Straight Talk on Verizon’s network and Wal-Mart’s new family prepaid plan on T-Mobile.  This is especially true if customers just want to talk and text.

AT&T’s Increases ‘Early Upgrade Price’ for Data-Friendly Smartphones by $125

Boy Genius Report obtained a copy of an AT&T memo to its sales force notifying them the price for “Early Upgrade Pricing,” traditionally charged customers who must have the latest and greatest, or accidentally lose or destroy their existing phone, is going up — way up, from $75 to $200:

Beginning Oct. 3rd, Early (Exception) Upgrade pricing for Smartphones will increase from the two-year price plus $75 to the two-year price plus $200.  This change does not apply to iPhone or Basic and Quick Messaging Phones.

Example: BlackBerry Torch $199.99 two-year price + $200 Early Upgrade fee = total price $399.99, a savings of $100 off the No-Commitment price of $499.99.

In return for just a $100 discount, customers sign a new two-year contract that begins with the phone’s replacement.  That contract includes the usual early termination fee of $325, which decreases by $10 per month.  AT&T watchers speculate the price change was designed to stop resale of relatively new phones on sites like eBay or Craigslist, where sellers charge near-retail prices and eat the formerly low penalty for an early upgrade.  It also makes the price of getting the very newest phones that much higher.

Courtesy: Boy Genius Report

Cell Phone Lobby Resists Requirement for Early Warnings Alerting Customers Their Data Allowance Is Almost Gone: “It Will Cause Customer Confusion and Frustration”

Liz Szalay had to dip into her 401(k) retirement account to pay the family’s $2000 Verizon Wireless bill, gone wild with data fees her 14-year old son ran up searching for and downloading songs.

“I would never have allowed my son to accrue such charges, if I had known,” Szalay, a secretary in Niles, Michigan, told Bloomberg News. “What I did to prevent this from happening in the future was have his Internet access completely blocked by Verizon, but not before they made off with a boatload of money.”

Had Szalay received a text and/or e-mail message warning her one of the phones on her account was approaching 80 percent of its monthly data allowance, or was already at risk of racking up huge fees, it would have been possible to stop the damage before it began.

Sen. Udall wants legislation to warn consumers before they run up enormous wireless bills. The industry calls such warnings "confusing and frustrating" for consumers.

Senator Tom Udall, a New Mexico Democrat, wants to make sure she gets that warning.  Udall drafted legislation that would require companies to warn customers when they have used 80 percent of their allotment.

“It’s difficult for the carriers to get up and argue against greater transparency on bills and notifications,” Christopher King, an analyst at Stifel Nicolaus & Co. in Baltimore told Bloomberg. “It’s becoming an issue on the front burner of regulators’ minds.”

The industry’s lobbyists are trying to block the legislation anyway.

The CTIA, the wireless industry lobbying group, is fiercely trying to kill Udall’s bill, claiming warnings will cause “customer confusion and frustration” and that carriers already offer customers the opportunity to check their usage by visiting carrier websites or via a text message.

The lobbyist solution requires consumers to be vigilant and check daily to make sure they don’t exceed any limits.  Udall’s idea puts the onus on phone companies to warn customers, who often have family members that have no idea what kind of cash bonanza they can provide a wireless provider just by using data features built into their phones.

Szalay’s son has a phone that doesn’t require a data plan, but incurs an enormous $1.99 in charges for every megabyte accessed online.  Verizon’s own website notes customers can consume 183 megabytes of data streaming music just five minutes a day for a month.  That’s $364 in data charges.  Five minutes downloading games — 440 megabytes or $875 in data fees.  One need not use their phone for hours a day to incur enormous fees for data usage.  Szalay’s son could have managed the $2,000 bill he caused using his phone for less than 15 minutes each day.

Verizon does not allow customers hit with these bills to retroactively sign up for a data plan to cover the costs, which are the same to Verizon whether a consumer incurs them on an unlimited $30 monthly data plan, or on a pay per use plan with a stinging penalty rate.

And the company objects to any government official telling them to warn customers before the overlimit fees kick in.

“We have several measures in place that allow our customers to monitor their usage and protect against overages — this is a proactive approach on Verizon’s part,” Verizon’s Smith told Bloomberg in an e-mailed statement.

How to Protect Yourself

Both Verizon and AT&T are masters of extracting a maximum amount of money from customers’ pockets.  Verizon is increasingly risking its high rating for customer service and quality by finding new ways to nickel and dime even long time customers to death.  AT&T already has earned a bad reputation and can’t drop much further unless it adopts Sprint’s old strategy of driving its own customers away.  Only through education and careful consideration of your family’s actual usage can you safely navigate around these shark-like wallet biters.

1.  Avoid cell phone company insurance plans unless you are concerned about theft.  With “early upgrade” plans, even at AT&T’s $200 price, it may not be worth paying an expensive monthly fee for insurance.  Also consider Squaretrade, a third party warranty/replacement provider.  They charge considerably lower prices than most (Google around for coupon codes offering up to 30 percent off).  If your phone breaks or is damaged, and you are not on a contract, you might find a suitable refurbished replacement through websites like eBay.  Just make sure the phone wasn’t designated for prepaid service to avoid activation hassles.

2.  If you want Verizon network quality, but don’t want to pay Verizon’s diamond-platinum pricing, consider doing business with one of the new prepaid providers offering month-to-month service that uses the same network as Verizon itself.  Walmart sells Straight Talk, but also consider Page Plus, which offers 1,200 minutes of call time, 1,200 texts, and 50MB of data use for $29.95 per month.  The only downside is that most prepaid providers don’t sell family plans, meaning each user pays the same price.  Walmart’s new prepaid plan changes that with the introduction of a shared family plan, with additional lines given discounted pricing.  But the discounts are not as good as postpaid plans offer, and the service relies on T-Mobile, which is not well-regarded for coverage outside of metropolitan areas.

3.  Smartphones, in addition to being expensive, often deliver horrible battery life.  Some won’t even make it through an entire business day.  Before seeking out one of these premium phones, consider whether you will actually use their features.  Is it worth the price of a $30 a month data plan if you only occasionally use the phone for wireless Internet?  Bragging rights come with a $200 up front price tag and a two year contract that will run up to $720 just for the data plan over two years.  If you drop it, lose it, or it gets stolen, the retail price for most of these phones is north of $500.

4.  Carriers design “gotcha” data pricing into their assumed revenue models.  They know even with online tools, nobody wants the hassle of checking their allowance for data every day, especially when most stopped checking their voice minutes allowance years ago.  While carriers occasionally waive gigantic bills, especially when the media gets involved, you can restrict data access on some or all of your phones if you do not have a data plan and don’t care about this feature.  You should support Senator Udall’s bill as well.  Carrier excuses that a warning message will cause confusion and frustration are laughable.  Getting a $2,000 wireless bill in the mail will cause far more of both.  That the industry objects to even this common sense approach illustrates just how rapacious wireless companies are for additional profits.

5. Educate everyone on your plan about the implications of using the phone to download music and games or watch video.  Unless you are on a flat rate plan, you may want to simply tell your family not to use their phones for these kinds of services without asking permission first.  This gives you an opportunity to check your allowance before Verizon gets a chance to reduce your bank balance.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Cell Phone Savings 10-12-10.flv[/flv]

We have four reports covering consumer news on cell phones that can save you money:  KSHB-TV in Kansas City takes a look at Walmart’s new prepaid family plan using T-Mobile’s network, WIVB-TV in Buffalo reports Sen. Kirsten Gillibrand (D-N.Y.) wants carriers to stop international roaming charges when customers end up making and receiving calls on a Canadian provider’s network from the American side of the border, WFTS-TV in Tampa provides tips on getting lower rates from your cell phone company and WTEV-TV in Jacksonville helps customers analyze cell phone bills for savings.  (6 minutes)

AT&T wants to sell its iPhone customers an overpriced insurance plan to cover damaged or lost phones.

Offered by mobile phone insurer Asurion, AT&T’s MobileProtect policy will be priced at $13.99 per month, with a steep deductible — $99 for an 8GB iPhone 3G to $199 for a 32GB iPhone 3GS.  If you lose or damage your phone, Asurion will repair or replace it with a refurbished equivalent or better iPhone model (their choice).

At those prices, iPhone insurance (and collectively most cell phone insurance plans) do not represent a good deal for consumers for several reasons:

1. The upfront cost is very high in relation to the value of the phone.  Over a typical two-year AT&T contract, Asurion will collect $335.76 to insure a $700 phone;
2. Asurion’s very high deductible reduces the company’s payout exposure by up to $200.  Assuming you break your phone in the last month of a two year contract, Asurion will have $535 of your money to work with, making their cost to replace the phone just $164.
3. Asurion does not guarantee customers will get a brand new iPhone.  Replacing a lost or broken iPhone with a refurbished model can significantly reduce Asurion’s costs and leave you with a questionable replacement;
4. The deal does not extend to current iPhone owners who have older phones that statistically would likely generate a higher percentage of claims.  In fact, customers will have to purchase coverage within 30 days of purchasing a brand new iPhone, giving Asurion the likelihood mechanical problems will be handled by Apple’s traditional warranty, reducing the insurer’s exposure to expensive claims.

There are a number of alternatives.  First, protect your phone with a suitable case or cover — scratches and impact damage are among the most common issues afflicting iPhones.  A few may afford some protection from water damage if the phone gets slightly wet, although a dunk in a pool or deep puddle is probably going to present a challenge for any case or covering.

Second, consider alternative insurance from companies like Squaretrade.  The company’s iPhone insurance costs $8 per month for 24 months, or $96 paid in full for an iPhone 3G. For a 32GB iPhone 3GS, it’s $9.99 per month, or $144 for 24 months of coverage.  Accidental damage claims have a $50 deductible.  But Squaretrade can cost even less when you take advantage of regular discount codes that provide up to 40 percent off.  Just do a Google search for Squaretrade coupons and discount codes, especially around holidays.  You have up to 90 days after purchasing your iPhone to buy Squaretrade coverage.

Squaretrade does not cover loss or theft, however.  You should check with your insurance agent for a personal property policy.  Most offer coverage for personal cell phone loss or theft for under $40 per year.  Many are sold as standalone policies that do not carry a traditional deductible commonly found on homeowner’s policies.  Better yet, making a claim under many of these types of policies generally will not impact your homeowner’s insurance policy, an important consideration when your claims history can impact your renewal rate.  Ask your insurance agent for details about what their cell phone insurance policies cover and what impact any claims might have on your other policies with the company (and their renewal rates.)  Many insurers will sell these policies on a standalone basis to customers who do no other business with the insurer, so shop around.

If your iPhone goes missing, virtually all insurers require a police report and most will either mail you a brand new iPhone or reimburse you for the purchase of an identical new phone you buy yourself at the non-subsidized price.

If none of these ideas appeal to you, consider establishing a savings account and deposit $14 a month into it, specifically to cover a portion of your costs to replace your iPhone if it is damaged or lost.  Although it won’t cover the full cost of the replacement, that $14 a month will always be your money.  If nothing goes wrong and you keep your phone in good condition over 24 months, that $335+ in accumulated savings is yours to keep.  That’s a better deal than giving it to Asurion.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/KTVI St Louis Cell Phone In Water 5-26-10.flv[/flv]

KTVI in St. Louis ran this silly segment about what you can do if your cell phone takes an involuntary dip in the pool.  (3 minutes)