Will you be taking advantage of holiday specials on phones?

Taylor Martin
 from Concord, NC
Published: November 21, 2011

Over the past three or four years, owning a cell phone has become an increasingly expensive thing to do. While calling plans and text messaging have remained mostly the same price, pricing on data plans have gone up and most carriers have since implemented tiered structures that limit or throttle data usage after a certain amount. But where the real increase has occurred is in the price of the actual devices.

Just last year, $200 (and a two-year agreement, of course) would easily land you one of the best phones on the market. Sure, there were a few exceptions to the rule and some hardware could run the bill up to $250 or more. But for the most part, the most you would pay for a topnotch phone in 2010 was $200. With rapid advancements in wireless technology, the average price of a subsidized phone has increased substantially. On Verizon, most of the high-end, LTE-capable phones are $299.99 with a two-year agreement. Some phones, like the iPhone 4S on Sprint, AT&T and Verizon will have you paying $399.99 with a two-year agreement.

This is where holiday shopping really makes a difference, especially for you bargain shoppers out there. Brick and mortar stores begin offering deals that are hard to pass up in an attempt to snag those upgrade eligible holiday shoppers. And online retailers fire back with their own specials.

This year, AmazonWireless.com is running a Penny-Pincher Sale, which starts today and lasts through the 28th at 11:59 PM. Select smartphones on AT&T, Verizon and Sprint will be available for a penny (that's right, $0.01) with a new two-year agreement. We're not talking bottom-of-the-bucket phones, either. Both the HTC Rezound and DROID RAZR – which normally run $299.99 with a two-year agreement – are now just one penny, if bought from Amazon. The same goes for all the Galaxy S II models and pretty much any other smartphone (besides iPhone models) for these three providers.

It's one heck of a deal, no doubt. But is it truly worth it?

When you buy from select online retailers who seem to undercut the carrier and other authorized dealers by a nice chunk of change, there is usually something else going on in the background.

As you all know, these phones don't really cost $300 or even $400. They cost much more. With the subsidization, or contract, with the carrier, the price of the phone is considerably cut on the presumption that they will make the money they lost on discounting the phone back over the length of the contract. So how does Amazon or other online dealers undercut this? The very same way. When you buy a phone from Amazon for a penny and the normal subsidized price of the phone form the carrier is $200, you have to (electronically) "sign" another agreement. They earn money back through residual income from your bill payments. In this particular case, Amazon's agreement is as follows:

"When you purchase your device with service from AmazonWireless.com, we automatically pass along an instant discount from the carrier to you.  This discount has been provided to you based on your agreement to (a) activate a new, or extend an existing, line of service for this device with the carrier, and (b) maintain this service in good standing for a minimum of 181 consecutive days.  If you do not activate or extend a line of service in connection with this device, or if your service is canceled/disconnected before 181 consecutive days, AmazonWireless.com will charge you $250 per device, plus applicable taxes."

In case you missed that last line there, if you cancel or activate another device on the line you used to purchase the phone from Amazon within 181 days, Amazon will automatically charge you $250 (plus taxes). It's effectively the same as paying an early termination fee with the carrier to cancel mid-contract. However, if you have purchased this phone online from a dealer like Amazon or Wirefly, your ETF within six months of buying the phone could amount to nearly $600.

So are deals like these worth it? To some, absolutely. If you plan on keeping the phone you buy through Amazon for at least six months without swapping or trading the device, this is an awesome deal that I could easily recommend. Why not save $199.98 or $299.98 on the latest offerings from Verizon, AT&T and Sprint? Seems like a no-brainer to me.

For people like me, however, who cannot manage to keep a single phone for more than a month or two, deals like these are enticing, but will only end in me spending more money. Even if the breach of contract fee with Amazon is $50 less than the value of a subsidized phone would have been, it's not worth the trouble to many of us tech enthusiasts.

So tell me, readers. Will you be taking advantage of topnotch phones for $0.01 before the 29th? Or do you, like me, have the tendency to switch out phones fairly often? Have you ever purchased from an online retailer such as AmazonWireless.com and faced unexpected charges because you activated another phone on your line within 181 days?

Image via IntoMobile