Contract vs month-to-month broadband plans

Deciding between a long-term broadband plan and a no lock-in contract can be tough, so we've broken down the pros and cons of each.

While Internet speeds, monthly data caps and price tend to serve as the primary points of comparison when shopping for a new broadband plan, they're not the only factors worth considering. Contract length can have just as much impact on the value of a plan, especially if you're renting or you're living in a household with fluctuating Internet needs. Do you go for the long-term commitment and save a few bucks a month off your bill? Or do you swallow the upfront costs of a no-lock-in contract for the freedom of cancelling your service at any time?

To help you decide which type of contract is best for you, we've weighed up the pros and cons of both below.

Month-to-month contracts

Pros

  • No cancellation fees. No matter what the reason, if you need to terminate your month-to-month broadband service, you can do so at any time without penalty. You won't have to wade through a sea of confusing forms to cancel your service, and you won't be out of pocket, either.
  • The freedom to recontract at any time. If your Internet service isn't living up to your expectations, a month-to-month contract gives you the ability to sign up for a new plan at any time, either with the same provider or with a different one completely. This is especially useful if you want to put a plan through its paces in a real-world scenario before committing for the long haul.
  • Accommodating to life's unforeseen inconveniences. When life takes a detour into the chaotic, a locked-in broadband contract isn't something you want to be worrying about. Whether you have to move suddenly due to a natural disaster or unexpected financial burdens have left you short of cash, not having to pay out a two-year contract can make a bad situation slightly more bearable.

Cons

  • Steeper upfront costs. Most month-to-month contracts include some form of one-off payment to offset the fact you can cancel the service at any time without penalty. Depending on the provider, this fee can consist of activation charges, mandatory equipment costs like a new compatible modem and a "casual" surcharge, with the total cost potentially in the many hundreds of dollars.
  • Higher monthly payments. Some providers also charge a higher monthly rate for their month-to-month plans to make the longer commitment more attractive. In these cases, a fixed-term contract can be a considerably better deal if you don't plan on cancelling your service any time soon.

Fixed-term contracts

Pros

  • Fewer upfront costs. The activation fees and modem charges common on month-to-month contracts are typically waived on longer contracts, meaning your first bill is more likely to match the monthly rate you signed up for.
  • More extras. To encourage loyalty, many providers throw in extras on their long-term plans. These goodies can range from free routers to complimentary subscriptions for streaming services like Fetch or Foxtel Now.
  • Cheaper monthly rates. As extra incentive to stick around for the long haul, some providers price their contracted plans lower than comparable month-to-month plans, trading savings for loyalty.
  • Exclusive plans. In some cases, certain higher-value plans and entertainment bundles are only available on 24-month contracts. To take advantage of these offers, your only option is to commit for the full two years.

Cons

  • Steep early termination charges. Ending any contracted service before its full term is up means paying out a hefty penalty – one that is often in the many hundreds of dollars. If you've got a phone or entertainment service bundled up with your broadband, the charge gets even steeper.
  • Inflexible when it comes to life's unforeseeable mishaps. On a long-term contract, you'll have no easy out if you suddenly need to cancel your service because you're moving house, struggling financially or for any other reason you might encounter.

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Matt Sayer

Matt is a writer covering the latest tech, telco and video game news at finder.com.au. In his downtime from helping Aussies make informed decisions on their broadband, mobile phone, and streaming video plans, he likes exploring rich video game worlds and kicking back with a good book.

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