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Why You Don't Understand Wireless Rate Plan Prices

Rob Pegoraro
Contributing Editor
Yahoo Tech

Last week, your liberty as a wireless customer got an upgrade. The Unlocking Consumer Choice and Wireless Competition Act went into effect, giving you the right to get your phone unlocked for use on another compatible carrier. If you have a paid-off phone, this is a fair (and overdue) step forward.

But although the wireless industry has made enormous progress — if only wired broadband had accelerated as much as the mobile kind over the last decade — and remained a welcome hub of competition, it has continued to indulge in pricing and promotions that you can’t exactly call fair, simple or even known.

Secret-menu items

Let’s start with the deals your carrier may have that you may not even know about, because they’re neither automatic nor advertised.

Verizon Wireless, for example, will let existing subscribers switch to the cheaper rates it launched this month — which translates to either getting an extra gigabyte of data or a $10 monthly discount — but only if you ask.

(VZW-using readers: You’re welcome.)

That carrier also offers a $15 or $25 discount for subscribers who have concluded two-year More Everything contracts and gone month-to-month. But that, too, is something you must request. Its sole documentation on Verizon’s site appears to be located halfway down an FAQ page.

On Verizon and elsewhere, it’s like cable TV prices that are negotiable to those in the know: “If you know to ask, you will receive,” said Recon Analytics founder Roger Entner. “If you don’t know, you pay the regular sticker price.”

By comparison, at AT&T, your bill should switch to the out-of-contract price automatically when your phone is paid off.

The carriers have their own secret handshakes for money saving, too. At T-Mobile, for instance, the individual-plans webpage would lead you to think that its cheapest data deal is $50 for 1 GB a month. The Comparison Chart link there, however, reveals a $40/500 MB option, which you can’t order online.

(Update: T-Mobile said they'd left a mention of an old plan up on their site by mistake. That comparison-chart page now shows the old plan's replacement, a $40 prepaid option that lacks a couple of useful features of the former offer.)

Sprint exercised a version of this strategy for a while when it made its Family Data Pack plans available only to retail customers, not online shoppers.  

Mystery math

For maximum confusion potential, however, you need to turn your gaze to the latest crop of plans at AT&T, Sprint and Verizon, for which you pay full price for the phone instead of getting it at a lower upfront price and higher monthly fees.

I like this shift from subsidized pricing when it separates the cost of the phone from the connection, which is what T-Mobile does. Charging you the same rate no matter where you get the phone frees you to buy it direct from a manufacturer, unlocked and free of carrier bloatware.

But the other three carriers have only gone halfway: They give you a discount on your service, which varies not by the unsubsidized price of your phone, but by how much data you buy each month.

All three offer an unsubsidized-phone service discount of either $15 or $25 per month, but the minimum data you have to get the larger rate cut varies wildly: 6 GB at Verizon, 10 GB at AT&T and 12 GB at Sprint.

Where you normally want to estimate what you’ll use in a worst-case scenario and pay for no more than that, under these rate regimes, that sort of careful budgeting can leave you feeling like a chump and leaving data on the table. For example, at Verizon, 4 GB and 6 GB cost the same, $85, while at Sprint, $95 buys either 8 GB or 12 GB. 

In multiple-device scenarios, these distortions become especially pronounced — you should often ignore the entire left end of the rate-plan table to focus on what’s usually the indulgent and expensive right end. If you’re getting four lines at Sprint, it’s cheaper to pay for 12 GB of shared data than 8 GB, and at Verizon, 6 GB of data split over four phones is cheaper than even 2 GB of shared data for them. 

At AT&T, the risk is not buying the wrong amount of data but paying more for locked phones you can’t use with cheap, prepaid service overseas. You might be able to justify buying a handcuffed device if it saves you money, but in some multiple-line scenarios, you spend more over the duration of a two-year contract if you pay cheaper upfront prices for phones that then stay bolted to AT&T here and abroad.

For more of this kind of amusing arithmetic, see the spreadsheet that accompanies the guide to wireless service that I maintain for The Wirecutter. Or work on a major wireless carrier’s billing system, in which Entner observed that the mix of old and new offerings ensures “there are more than a thousand different rate plans active.” Or start your tax return.

Can’t we do better?

Some of this complexity is understandable.

As intense as competition has become among the big four carriers, “none of them wants to start an all-out price war,” explained Jackdaw Research analyst Jan Dawson. “There’s a certain incentive for the carriers to be less than straightforward about their pricing so that it’s harder to compare directly, while highlighting the direct comparison they want you to make.”

So don’t expect the carriers to adopt T-Mobile’s flatter rate structure or the radical simplicity of the pay-only-for-what-you-use pricing at the Sprint reseller Ting. The idea of having every rate available online might be a reach, too. It may even be too much to hope that Sprint’s site adds the kind of simple rate-comparison tool available at AT&T and Verizon Wireless.

But the carriers could at least stop listing rate plans that rip off the unwary — not just compared to their rivals’ prices, but to their own. 

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.