Every month, the big U.S. cell phone carriers – Verizon, AT&T, T-Mobile and Sprint – claim a chunk of Americans’ checking accounts. Amongst these four Goliaths, there is a plethora of less-known cell phone service providers trying to build a customer base across the country. Their weapon is as simple and as powerful as David’s sling: lower prices.
Boston startup Community Phone is among the first examples of Massachusetts-based startups providing an alternative to big carriers. With plans starting at $25 per month, the company launched by James Graham and John LaGue piled up almost 200 customers across 12 states, half of them in Mass.
Since late 2017, the company has been relying on two things: Sprint towers to offer nationwide service and a $100,000 Thiel fellowship won by Graham.
Community Phone keeps costs down by not having an office or retail locations. Instead, the team of three full-time and two part-time employees meet in person with their local customers. From Sprint, the company also purchases and resell gigabytes at a profitable rate per unit.
“We want to focus on cheaper, simpler plans,” Graham, a network engineer and former AT&T customer, said.
The $25 monthly plan technically costs customers $30.30 because of the state telecommunications tax and sales tax. Still, the total is less expensive than other alternatives on the market, which linger around $40 a month. The catch is the lack of unlimited data: the plan offers only unlimited texts and talking time, as well as one gigabyte every month. That’s it, plus the option to buying additional 10% of one gigabyte at $1.
“It’s just a quarter milk, you don’t need the whole cup,” Graham said referring to the additional 10%.
Better not underestimate one gigabyte, though. One gigabyte equals to 445 pages of surfing, or 17 hours of Google Maps usage, or 51 hours of Facebook or 1 episode on Netflix, according to U.S. Mobile—another prepaid carrier that promotes low-cost plans with limited data offering.
“Unlimited plans are the problem: they’re like a health insurance plan when you’re the only person not smoking.”
“One gig goes a long way,” Graham pointed out. “Unlimited plans are the problem: they’re like a health insurance plan when you’re the only person not smoking.”
Graham explained that people purchase “orders of magnitude” more than they actually use each month. That’s what he discovered talking with big provider customers—and that’s what he decided to change.
“We just find all the people who are using their phones for utility purposes, not entertainment purposes, and they save a hell of a lot of money,” Graham said. “All we do is just wretch them down to a properly-sized plan.”
Of course, if you’re constantly watching videos while outside (without hopping on the nearest Wi-Fi), Community Phone may not be the right choice for you. But the average customers don’t snapchat: they’re in their late 40s, have been with one of the big carriers for decades and are now fed up with them.
“We got the old CEO of KFC on our network,” Graham said. “He lives in Cambridge, hates Verizon and now writes World War II history books.”
The 94-year-old Community Phone customer is not the only American who resents big carriers. One reason is, obviously, pricing.
In fact, the U.S. ranks among the highest in the world when it comes to cost of phone data plans. In a recent report, the International Telecommunication Union – the United Nations agency for information and communication technologies – found out that the average prepaid phone plan cost $54.44 in the U.S., compared to $23.26 in France and $12.58 in the U.K.
“Eighteen months from now, we believe we’ll be at about 5,000 subscribers,” Graham said. “We’d really like to figure out how, in a long way, we’ll be able to bring the price of a cellphone bill down to zero.”