American consumers are fortunate to have four large-scale wireless service providers, plus a few carriers who service specialized territories or discount options, such as prepaid services. According to the big four’s second quarter 2014 financial reports, Verizon and AT&T each serve over 100 million retail wireless connections (phones, tablets, and personal Wi Fi hotspot devices). T-Mobile and Sprint each serve more than 50 million retail wireless connections.
While some consumers face high total charges in a month, the total often includes high-priced phones, multiple lines, and high data usage. At mid-year 2014, consumers paid an average per wireless connection of $44 for T-Mobile, $56 for Sprint, $66 for Verizon, and $51 for AT&T. Mobile wireless pricing has provided steadily better consumer value in recent years. Despite outstanding improvements in wireless infrastructure and applications over the 5-year period ending 2012, wireless providers average revenue per unit decreased by 1.4%.
There are real differences among wireless competitors in data speed and actual geographic coverage of 4G LTE data. Verizon has earned a reputation for the best geographic coverage of 4G LTE data, an advantage that is important to consumers who travel a lot or who use their mobile phone for work purposes. AT&T’s national coverage is also respectable. On the other hand, consumers who stay put in one community may not need superior national coverage. Those who use just voice and text don’t need the blazing fast 4G LTE service.
The monthly bill includes charges for wireless services and usually for wireless devices. For many years, the cell phone was used to bond the consumer to the carrier over the life of the phone and a two-year service contract was common. At the end of that contract, wireless carriers usually offered to take the old phone as trade-in on an attractive newer model, again under a fresh 2-year service contract.
In the battle for the all-important multi-unit, post-paid consumer service contracts, at the time of writing, Sprint offered the family share plan with unlimited talk, text and 20 GB (gigabits) of data to share for $100 per month for up to 10 lines. Sprint offered the iPhone6 on a two-year lease at $20 per month, or financed for $27.09 per month or as part of a 2-year service contract for $0 per month.
T-Mobile’s counteroffer was similar. Unlimited talk and text with 10 GB of high speed data (up to 2.5 GB for each line), was available for $100 per month for 4 lines. Limiting data to 2.5 GB per line is a wrinkle that can cause overage charges that consumers would not incur under a true sharing plan. If you sign up for the plan and bring your own phone, T-Mobile will provide a free SIM card to access their GSM network.
AT&T announced a limited time offer of an unlimited talk and text plan with 30 GB of sharable data for 2 lines at a bundle price of $160 per month. You can add up to 8 more lines at a $15 access charge for each additional AT&T NextSM phone. “AT&T NextSM” phone is the cryptic moniker AT&T uses to label a phone that you own or will finance through AT&T over a 20 or 24 month payback. AT&T is resisting the practice of subsidizing phones and encourages consumers to “bring their own phone” in return for some discounts. AT&T no longer bundles a phone in the service contract, but it offers explicitly-priced 2-year financing for phones that it sells.
Verizon’s More Everything plan offers unlimited talk and text and personal Wi Fi hotspot coverage with 10 GB of sharable data for 4 lines for $160 per month, if you buy your phone with Verizon Edge. Verizon Edge is a way to purchase a smartphone, where the full retail price is broken down into 24 monthly payments and added to your bill.
The competitors offer similar handsets and tablets, albeit at different times in the product cycle. AT&T, Sprint and Verizon each offer the iPhone6, but T-Mobile offers the iPhone5s. At one time, Verizon avoided the Apple brand, but no longer. There are just slight differences in the installment plans.
For those wanting a cell phone for an emergency and only occasional use, prepaid cards could be a low-cost option.
The movement to dissociate the phone from the wireless service contract is a good move for consumers. It may cause consumers to make phones last a little longer and it clarifies the prices and subsidies. Separate pricing probably saves consumers a little money too.
Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research