It's a good time to be shopping for mobile service in the US.
T-Mobile's '"UnCarrier" strategy, which launched last year, has ignited a battle in the wireless market as large carriers finally start competing on prices. Even Verizon Wireless, the company with the best network reputation and the highest prices, has reacted. This week the company introduced its new "More Everything" plan, which offers subscribers more data and a few other perks for the same price. And it also tweaked its early upgrade and device financing program to make it more attractive to consumers. But how do these tweaks and changes compare with other plans offered by Verizon's largest competitors? That's the question I answer in this edition of Ask Maggie.
Apples to apples comparison
I'm shopping around for wireless service. And I'm utterly confused. I heard that Verizon Wireless announced a new offer this week. I was wondering how it stacks up against the other major wireless operators. I have four people in my family and we all have smartphones. If some or all of us bring our own phones to the service, can we get a discount like you can with AT&T or T-Mobile's service?
I know all the wireless companies keep saying they are simplifying their plans. But honestly, I feel like I need a PhD to understand what they're offering and how it compares to other offers. I've read your comparisons in the past and you always do such a good job. Can you please help me figure out what's the best option for my family?
Lost in wireless plan mayhem
Dear Lost in wireless plan mayhem,
You are so right about how confusing these plans have become. I am shocked every time I hear wireless providers market these plans as "simpler" and "easier to understand." The truth is that most of these plans are anything but easy to understand.
For instance, AT&T and Verizon offer share plans that require you to choose different buckets of data and then pay additional fees to connect devices to those plans. And depending on the type of device you're connecting, the number of devices connected, and whether those devices are on contract, you could have different charges just to connect to the service plan.
Meanwhile, T-Mobile doesn't offer contract plans anymore. And AT&T, Verizon, and T-Mobile each have early upgrade plans that allow for device financing, which also can increase the cost of your monthly bill. Sprint had an early upgrade program but then eliminated it. And then it introduced a device-finance program, as well as a new family plan that it calls the Framily plan, which offers savings with more people connected to the plan.
While service providers are indeed offering customers more choices and options than ever before, to call the offerings simple or easy to understand is just not true. And in order to figure out which is the best deal for you and your family often takes some real work.
The latest updates to Verizon's wireless plans are a good example of how these plans can get over-complicated and still leave consumers wondering if they're getting a good deal.
Before we get started, you have to understand how Verizon prices its service. All new smartphone customers must sign up for one of its "share" plans. As I mentioned above, these plans offer unlimited voice minutes, text messaging, and a certain amount of shared data. Each device connected to the plan pays a fee: $40 for smartphones, $30 for basic phones, and $10 for tablets. Then you select a data plan, which also includes the unlimited talk and text messaging.
What this means from a pricing perspective is that people are able to share all the services, but the more people you add to your plan, the more expensive the plan becomes.
This week Verizon updated these share plans and increased the amount of data that subscribers get. For example, people on the $40 plan, which had offered 500MB of data, will now get 1GB of data, while the $50 plan shifts up from offering 1GB of data per month to 2GB of data. And the $60 plan now includes 3GB instead of 2GB. Customers with these plans will see their data allotments increase automatically.
This part of the announcement is pretty easy to understand, and for existing Verizon customers, it's a good deal: Pay the same amount each month for service and get more data. Period.
Verizon's Edge plan: Where things get confusing.
In addition to simply offering more data to customers, Verizon also tried to make its device financing and early upgrade program, Edge, look more attractive. Under the original incarnation of Edge, Verizon subscribers could buy a smartphone with no contract and no down payment by making 24-monthly payments for the device. At 12 months, when the device is half paid off, these customers could upgrade to a new device, so long as they traded in the previously financed device to Verizon.
This is similar to plans offered by T-Mobile and AT&T. The big difference is that up until this point, Verizon had not offered any discount on the monthly service for customers signing up for Edge. This meant that a customer who bought an iPhone 5S, which costs $650 at full retail, for the subsidized price of $200 was paying the same monthly fee for service that someone buying the iPhone 5S on the Edge program was paying. But in addition to the monthly service fee, the Edge customer was also paying $27.08 per month for the iPhone 5S.
This means that Edge customers were paying for their device twice.
Meanwhile, AT&T and T-Mobile have each adopted plans where they've completely unbundled the cost of the service from the cost of the device. In other words, customers get a discount if they finance or bring their own device to the network. And if they finance a device, the charge is added to their monthly fee. But in the case of most AT&T customers, whether the device is financed or bought with a subsidy under contract, the monthly fee ends up being about the same. The real discount comes when you bring your own device to the network.
T-Mobile execs make Uncarrier pitch at CES 2014. James Martin/CNET
This week Verizon tweaked its Edge monthly payment plan to look a bit more like AT&T's and T-Mobile's programs. But
it didn't go all the way. Under its new Everything More plan, Edge customers can now qualify for a discount on their mobile share plans. And this is where things start to get confusing, because the discount varies based on the data package. For customers subscribed to Edge, they can get a $10 discount when adding a new smartphone for any data plan up to 8GB. This means each smartphone connected to a single plan is $30 instead of $40. If they subscribe to a plan with 10GB or more, the discount doubles to $20 for each smartphone connected to the plan. So each smartphone will cost $20 to connect to the plan rather than $40.
The discount applies only to the monthly access fee -- customers still need to pay a separate charge for data, phone calls, and text messages.
These changes could make Edge more attractive to some customers, because subscribers no longer end up paying a huge premium for the privilege of upgrading every year.
But where Verizon still differs from T-Mobile and AT&T is that it doesn't offer any such discount for a customer bringing his or her own Verizon-compatible device to the network. In other words, if you've already paid off your Verizon smartphone from a previous Verizon contract or you bring your own device to the network, you don't get a discount on your monthly service, like you would with AT&T or T-Mobile.
How does Verizon stack up to the competition?
Now let's get to your main question: What does all this mean for your bottom line? And how do Verizon's revised plans stack up to the competition?
In order to make an apples-to-apples comparison I looked at service for a family that has four smartphones and is subscribing to service with at least 2.5GB of data per user. When looking at plans from AT&T and Verizon, this means subscribing to a 10GB-of-data plan for the entire family. For Sprint's Framily Plan, which comes with 1GB of data per subscriber on the plan, this means bumping up the data usage by $10 per user, giving each person up to 3GB worth of data.
Looking at this chart, you can see that if you're truly comparing apples to apples in terms of the same type of plans with the same amount of data and the same number of subscribers with the same type of smartphone, Verizon still ends up on the higher end. But if you're keeping everyone on a contract, it's no more expensive than AT&T's service. They each cost about $260 a month for this family of four. Even if you subscribe to an early upgrade program from either Verizon or AT&T, you're still likely to pay the same amount per month. On Verizon's Edge early upgrade program, which allows subscribers to upgrade their phones after 12-months of service, the cost is $288.32 per month. AT&T's similar Next plan, which allows users to upgrade after 12-months, costs about $290 a month.
If you need to buy new phones for everyone in your family, the Sprint plan is the cheapest. On the Framily Plan with up to 3GB of data for each person in the family, you can get service for $200 a month.
The best way to save money is to get everyone on your family plan to use an existing device or buy a less expensive smartphone and sign up to either AT&T's or T-Mobile's plans, which as I explained above offer deep discounts if you already have a device to use on their networks. In fact, AT&T recently sweetened the deal for families adding more people to their plans if they bring their own device or finance one through AT&T as part of its Next program.
Sprint offers a new family plan it calls the "Framily Plan." The more customers who sign onto the plan, the bigger the savings. Sprint
Previously, AT&T charged $25 to add each smartphone if the device was off-contract. On contract, the cost is $40 a smartphone. Now the company has cut that price to $15 per device. This means a family of four will pay $160 per month for service. That's $100 cheaper than what it costs from Verizon with a contract. And because Verizon Edge customers still pay a small premium for the cost of their device on top of the service, AT&T ends up being $128 a month cheaper.
T-Mobile offers even more savings. If everyone in your family already has a smartphone they can use on this service, it's only $140 a month for the entire family.
The bottom line
Verizon's new pricing is a welcome change for existing Verizon customers, as well as for customers who either believe Verizon offers a more reliable service or who need Verizon's wide coverage footprint. For these customers, the new pricing is an improvement.
But if you're shopping around for wireless service, regardless of whether everyone in your family needs a new smartphone, you're likely to get a better deal from any of the other three national wireless operators.
Sprint is a good choice if you need to buy new phones for everyone on your plan, given the fact that, like Verizon, it doesn't offer an unbundled monthly service price for devices that are unsubsidized. So if you're going to get this service, you might as well take advantage of getting a new phone since it's already bundled into the price of your service. But if you already have devices for each family member, or you're able to get them on the cheap, T-Mobile and AT&T are still going to offer you the most savings.
The main thing to keep in mind as you shop for a new service is to make sure that whichever service provider you choose, you can get a signal where you live, work, and travel. Otherwise, all those savings are meaningless.
Updated 2/17/14 6:20 p.m. PT: This story was updated with additional pricing information regarding AT&T's Next program.
Ask Maggie is an advice column that answers readers' wireless and broadband questions. The column now appears twice a week on CNET offering readers a double dosage of Ask Maggie's advice. If you have a question, I'd love to hear from you. Please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.