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Jordan Goodman is the author of Everyone's Money Book, available at 888-201-6300. This is the third edition of the book. You can also visit his Web site at www.moneyanswers.com. He talks with us on Thursday mornings.
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May 22, 2003
"Unlimited Phone Service?"
It all started about a year ago when MCI rolled out its "Neighborhood Plan,"
and now it is sweeping the phone industry: One monthly fee for unlimited
phone service to all local and long-distance calls.
These plans have become enormously popular because people know in advance
how much they are going to pay per phone line and don’t have to curtail
their talking because of per-minute charges.
In the last month, ATT has unveiled its "One Rate USA" plan for $48.95 a
month for unlimited local and long-distance service. MCI‘s "Neighborhood" is
still $49.99 a month. Many other companies, including Sprint and Z-Tel, are
also offering competing plans.
So, should you immediately drop whatever long-distance and local plan you
have and switch to one of these unlimited plans right away? Not so fast. It
depends on how much you are spending on phone service now as to whether the all-you-can eat plans make sense for you.
First of all, realize these plans also tack on many, many surcharges,
fees and taxes, so you don’t end up paying a total of about $50 a month. This
all depends on the state involved -- in California, there are 8 additional
surcharges, taxes and fees on your unlimited phone service bill. The fees
are the same as what you pay on local and long-distance bills, but now are
all combined into one. Different companies charge different amounts for
the same category of fee, such as the Universal Service Fee and Carrier Cost
Recovery Fee.
Second, look at how much you spend on phone service to see if this plan
will actually save you money. The Federal Communications Commission says
that the average household spends $53 a month for local and long-distance -- $35 for local and $18 for long distance. So, if you are average,
these new plans won’t save you much money at all. If you spend a lot more,
you might be able to achieve significant savings. If you run a business that
could use unlimited calling, you can save a great deal. Usually, the phone
service will charge about $50 per line, so if you have several lines for
phone, fax and e-mail, each line might cost $50 -- and you’ll end up spending
more than on your existing plan.
An easy way to see which plan might be best for you is to take a look at
www.saveonphone.com, which lists all the unlimited phone service plans and
the traditional plans and helps you compare and see what is best for your
calling pattern.
The unlimited phone service plans can be a great deal in the right
circumstances, but just analyze your situation and how much you will pay
before you jump at the chance.
For More Financial Tips From Jordan Goodman
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