Practicalmadness

GoPhone can only be billed to a credit or debit card; AT&T is taking the savings from not having to deal with the risks of extending you credit (i.e., doing their own credit checks, contracts and billing) and passing them on in the form of a month-to-month commitment that (one presumes) is terminated once your card starts bouncing.

The trick is that this is still a prepaid phone, they're just giving you lower rates in exchange for monthly, recurring recharges. To wit: that $20 plan that includes 80 minutes. If you read the fine print (and I have), you'll find that the per-minute rate for that plan is 25 cents. If you do the math (and I have), you find that 25 cents multiplied by 80 minutes is (ta-da!) $20.

This is prepaid made up to look like a monthly plan: your fee is just a recurring recharge. This means that (presumably) if you don't use all of your virtual minutes (i.e., have some cash left over in your account at the end of the month), they can carry over to the next month.

So why are the rates so low, compared to regular prepaid?

For one thing, AT&T is putting some faith in the fact that you have a usable Visa card that you're willing to put a recurring charge on. Since somebody -- either a bank or a credit card company -- had to give you that card based on either a decent credit history or your having deposited some cash, AT&T can infer that your money is good and you stand a better chance of being a reliable customer than somebody paying cash for a prepaid phone.

Meanwhile, if your credit card is declined, AT&T isn't left in the lurch -- all that you're buying with that monthly fee is a prepaid recharge. You can only use the minutes you've already paid for, and if you're not good for a charge, it's the bank's problem. Not AT&T's.

Another kicker: the GoPhone service works only on AT&T's spiff new digital network, using only all-digital phones. Digital calls are cheaper to handle and easier to meter, whereas old-school cell phone networks cost more to operate.

If you get GoPhone, you're getting contract rates for the cheapest 20% of AT&T's network in exchange for agreeing to automatic reloads on your prepaid balance. It's like if Starbucks would give you fifty-cent drinks, but only if you use your Starbucks Card, sign up for automatic reloads on the card and even then can only be served coffee after your card has cleared. And after all that, you can only have drip coffee (the cheapest thing to make). To get cappuccinos or mochas, you need a contract.

Also, GoPhone currently works only with one particular Nokia handset. I'd imagine that while this handset is not necessarily exclusive to GoPhone, the ones that will work with GoPhone are only available from AT&T. So while you're free from activation fees or a credit check, you still have to pay $90 for your phone.

This is not to say that GoPhone isn't a compelling idea. It's a compromise between prepaid wireless (crappy rates) and true month-to-month billing (contracts & credit checks) that's structured in a way that gives many potential cell phone customers a much, much better deal while protecting AT&T from getting stiffed. The prices are not bad, and if you don't travel to places where you might need to talk on a non-digital network or mind AT&T choosing a dicky-looking phone for you, you're good to go.

I am, however, not stupid. AT&T is betting that many of their potential customers are, or at least are not very observant of the fine print. This is simply discounted prepaid which AT&T is trying to pass off as some kind of contract-free month-to-month billing, which it kinda is, but Sprint PCS -- which has built a surprisingly stable business on being the only major wireless carrier not to require a contract -- offers the real deal.

The major difference is probably the credit check. If you can have a bank account, you can have a cell phone and not get jacked for the privilege.