SIM-only plans are generally cheaper than traditional mobile phone plans that include a handset for a few reasons:
1. No Subsidized Handset Cost: When you choose a SIM-only plan, you are not purchasing a new phone from the carrier. Instead, you bring your own device (BYOD) or buy a phone separately. This eliminates the cost of the handset subsidy that carriers typically include in their bundled plans. Carriers usually offset the cost of offering discounted or "free" handsets by charging higher monthly fees. With SIM-only plans, you pay only for the services provided, resulting in lower monthly fees.
2. No Long-term Contracts: SIM-only plans typically operate on a month-to-month basis, offering greater flexibility compared to traditional mobile phone plans that often require long-term contracts. By not committing to a lengthy contract, you have the ability to switch plans, carriers, or upgrade your phone whenever necessary. This lack of long-term commitment allows carriers to offer SIM-only plans at a lower cost since they do not need to factor in the potential loss of revenue from customers breaking contracts early.
3. No Additional Device Financing: With SIM-only plans, you are responsible for purchasing your phone upfront or choosing a separate financing option, such as installment plans or credit cards. On traditional mobile phone plans, the cost of the smartphone is often spread out over the contract term, leading to higher monthly fees. By separating the cost of the phone from the service plan, SIM-only plans become more cost-effective, giving customers the flexibility to choose a phone based on their budget or preference.
4. Less Overheads: Carriers that provide SIM-only plans have lower overhead costs compared to those that offer bundled plans. These overhead costs include inventory management, repairs, warranty services, and customer support for the devices. By eliminating these additional expenses, carriers can pass on the savings to customers through lower monthly fees on SIM-only plans.
5. No Carrier Lock-in: With SIM-only plans, you have the freedom to switch between carriers as there are no contractual obligations. This gives customers more options to choose from and encourages competition among providers. Increased competition typically results in lower prices as carriers strive to attract and retain customers through competitive pricing and better service offerings.
In conclusion, SIM-only plans are cheaper because they exclude the cost of subsidized handsets, long-term contracts, device financing, overheads related to device management, and provide greater freedom to switch between carriers. This cost-saving approach benefits customers who already own a compatible device or prefer to purchase one separately.