US Cellular Carrier Individual Plans – Q1, 2010

With this article we start quarterly series of reports on the plans offered by the US and Canadian carriers to general public. We will look into individual and family offerings so every 3 months you will be able to read our analysis of the offers and costs involved, including real costs you pay at the end of the month before local and federal taxes. As large parts of these articles are dedicated to explanations of what we did, why we did it and how we did it, we will be doing a lot of copy/pasting. We will highlight the updates to make them easier to find.

Introduction

The cellular plan landscape is a moving target, with competition, government regulation and technology advances having considerable effect on what is being offered and for how much. When in 2001 a small local carrier MetroPCS started offering service in a very few select markets, not too many people cared. In 9 years not only MetroPCS became a force to reckon with as it expended to a lot of the largest US markets, but its business model of charging a fixed price for unlimited number of minutes without tying customers to a contract revolutionized the industry and put the big national carriers on defensive.

The government is playing its role too. The taxes and charges it levies on cellular carriers are ultimately paid by us, the consumers. Here we see an interesting way of passing these expenses along many carriers selected: for example, the Federal Universal Service Fund (FUSF or USF) was designed to bring modern infrastructure to rural areas, social projects like schools and hospitals, services for low income consumers. A very noble goal indeed and the federal government decided the wireless carriers are some of the entities who have to pay it. Well, if you are an AT&T, Sprint or Verizon customer you are paying a 14.1% surcharge on top of your monthly plan fee to reimburse your cellular service provider. T-Mobile customers pay 2.5%, we can only assume that the company chooses to pay the rest out of its pocket, a very wise move on the part of its management - as you will be able to see below, this is one of the leading reasons why T-Mobile is the value leader among the national carriers. The above mentioned MetroPCS however includes all of the federal, state and local fees and taxes into the plans costs and thus makes customer understanding of the total service cost as transparent as possible.

Last, but not least, the technology. A few years ago when Verizon map of 3G coverage was no different from AT&T map of 3G coverage because there were no 3G networks in the US period, the usage of data was so miniscule (and expensive) there was not much to talk about. The landscape changed drastically in a short time – not only every national US carrier now boasts of a 3G network, some forays into the 4G networks are already made by Sprint. The data flows are growing by leaps and bounds and so are the amounts made by the service providers on it. In fact, December of 2009 – January of 2010 are the first time in history when US carriers stopped caring about the voice traffic costs all together, when a competitive war started by T-Mobile in October of 2009 with introduction of Even More Plus plans, dropped the cost of each minute significantly, making the Unlimited plans, so rare in the recent past, not just more common, but mainstream. At the same time, with a few tricks up their sleeve, carriers did not reduce the cash flow or revenue, but on contrary, increased it in many cases, thanks to data. We are not going to go into details here, but it is important to understand how the price of the plan you have went down and the amount of the bill you pay went up, so please read a great article published by Olga Kharif in Business Week on January 20, 2010.

A rather rapid depreciation of voice traffic is expressed not only in the much wider number of unlimited plans available at lower cost from all carriers now – even the low end plans with the lowest amount of minutes almost universally include unlimited mobile-to-mobile calls within the network and unlimited Nights & Weekends minutes. In fact, these previously extra cost features became so ubiquitous in the last couple of months, we did not even bother with noting them in our compatibility tables below. On contrary, we had to note when a plan does not include these features or limits Nights & Weekends by a number of minutes. Not yet it is the case with text messaging, but there are plenty of Talk & Text plans with unlimited texting to choose from. As mentioned before, data is where the US carriers are now trying to make a killing and we’ll see how exactly each one of them does it.

The carriers for this series were selected by size – we took the four National networks and added MetroPCS, the fifth largest carrier in the US, as it has a different business model and while not National, is present in many of the largest local markets in the US. As a local point of reference for all the carriers, we chose New York, NY, ZIP Code 10001 – each of the five carriers we are looking at is present there and the greater New York City area the largest wireless market in the country. We apologize for readers living in the markets where other carriers are present for not including them into this study, but you can easily use the same methodology to compare your local offerings against the competition. Please, also note that there could be some regional differences in services, fees and taxes that we may have not accounted for.

Carriers

A few words about service providers that you need to keep in mind when you read the article:

AT&T Wireless – overall the most expensive plans in every category due to surcharges the company collects. On top of 14.1% USF charge, Regulatory Cost Recovery Fee of $1.25 per line per month is charged as well as some “Other” charge between 2.5% and 8.069% of the plan cost. For the sake of this study we took the average and are adding 5.28% to the plan cost. Plans require 24 months contracts. A feature that sets carrier apart is Rollover minutes, allowing customers to keep the minutes they did not use in the previous months and use them as a cushion in case they go over the minute allocation. AT&T has three things going for it with this attitude and calling plans: marketing budget, Luke Wilson and iPhone.

MetroPCS – carrier’s plans include all government fees and taxes, so there is no BS whatsoever and for that we applaud it. Overall the value is unbeatable; no wonder millions of people are leaving national carriers to go with the new kid on the block. There are however some serious drawbacks you have to keep in mind before rushing to MetroPCS store: there is no contract, but it also means there is no phone subsidies and you’ll have to have a high cost of entry unless you are fine with the most basic phones. The company runs CDMA network, so outside equipment is not available and would not be connected to the network, thus the choice of handsets is limited, although the company invested a lot of time and effort into expending its handset offerings and is even bringing BlackBerry into the product mix. There is no international roaming either, nor can you use your phone in other countries with a local SIM card. No longer MetroPCS offers any family plans, deals like 4 lines for $100 are a thing of the recent past.

Sprint – network merger with NEXTEL does pay some dividends, there are Push-To-Talk offerings from other networks, but none of them as accepted or widely available as Sprint’s. In fact, considering how bad Sprint was doing in the last few years, we would not be surprised if NEXTEL customers are what have kept Sprint out of a much bigger trouble. All Sprint plans come with Direct Connect and for many people to have it is not a choice, it is a professional or business requirement. All Sprint plans come with 24 months contract.

T-Mobile USA – the smallest and most flexible US national carrier is the undisputed value leader among the Big Four. In October of 2009 it changed the structure of its plans completely, trying to compete more with MetroPCS rather than with its bigger rivals and by doing so it sparked the rate war that went on through January of 2010. Offers now include plenty of No Contract plans at a very reasonable cost, but, as with MetroPCS, keep in mind that when you choose one of these plans you will have to pay the full cost of your phone and will not be eligible for subsidized equipment upgrade. At the same time T-Mobile runs a GSM network and finding an inexpensive unlocked phone is not a problem. Finding expensive phone you like is even less of a problem; your choices are almost unlimited as long as you do not require 3G speeds: T-Mobile USA today is the only major network in the world that runs 3G on 1700 MHz frequency and the number of handsets with 1700 MHz support is limited, but slowly growing. In addition, with unlocked GSM handset you can roam almost anywhere in the world without a need to do anything or get to your destination and purchase a prepaid local SIM card to use in your own phone. Also, keep in mind that even if you are an existing T-Mobile customer, switching to the new no contract plan will cost you $35 per line activation fee.

Verizon Wireless – the second largest and the second most expensive US carrier has a very large network, including the largest 3G coverage in the US, just turn on your TV. Any channel, any time you will be reminded of it. The plans are flexible contract wise – you can choose to buy a phone without a subsidy and pay month-to-month or sign a 12 months, or a 24 months contract, with the amount of subsidy higher for the longer one. For example, the popular Motorola Droid will cost you $199.99 when you sign up for 24 months, $269.99 for 12 months and $559.99 when you choose not to be under a contract. Because Verizon runs CDMA network you handset choice is limited to what network has to offer.

How to Read the Compatibility Tables

We tried to make the Tables as simple as possible. First, we took all the plans offered by all of the five carriers included into the study and split them into groups according to cost per month. We thought the most important point in real life is how much the consumer is paying at the end and not the number advertised on TV, so we calculated the real cost of each plan: to the amount of the plan we added all the fees and surcharges you are paying to your wireless provider that are not in fact local, state or federal taxes. With the family plans it is important to remember that many of these surcharges are charged per line. At the end, no matter how carrier calls them, this is money out of our pockets and the only thing that matters. Of course, the actual taxes would bring the cost of each plan higher still (the only way to avoid these is not to use a mobile phone at all and if this is your choice stop wasting your time and reading this immediately), but they are different from state to state, so you’ll have to calculate them on your own or call you provider for information.

The plans are split into $10 segments to make it easier to understand. Once we went to $120 per month plans we stopped – there is a very limited number of people who want to pay AT&T or Verizon $219.99 for 6,000 minutes a month just because they can call Canada, there are other and cheaper ways of doing it. We can also report that gone the way of the Dodo are plans under $29.99, therefore we are starting with the plans $40 or lower.

In the first column you see the name of the carrier and the plan. The second column gives you the nominal cost of the plan advertized by the service provider, the actual out of the pocket cost of the plan before taxes and without any additional features and options, and, finally, the length of the contract you are supposed to sign. The number of minutes included in the calling plan and the cost of each minute over the limit is located in column Three. Columns Four and Five will tell you how many Text Messages and how much Data is included into the plan and at last, column Six will inform you what is unusual about this particular plan, whether it is the limited number of minutes for Nights & Weekends or some additional service not provided by anybody else.

As mentioned before, unless stated otherwise all plans include unlimited Nights & Weekends (N&W) and unlimited Mobile-to-Mobile calling within the network.

We make our observations based on objective data, not your personal needs. If you run 10 employees with NEXTEL phones you will not need MetroPCS no matter what it has to offer and if your whole family and most of your friends are on AT&T, changing only yourself to Verizon may cost both you and them considerably, even if Verizon is $10 a month cheaper, so read carefully, but apply our recommendations considering your own needs and situation.

Hope this made it simple, so let’s start.

Plans $40 or less

Very few offers on the market left under $40, frankly not much to choose from. AT&T and Verizon offer the 200 minutes plans that are so bad, there is no sense to get them unless your whole family is on this network and you have no one else to call to. These plans are for seniors only - you have to be over 65 (and likely suffering from dementia) to sign up.

Sprint offers the same meager 200 minutes as above mentioned competitors, but at least it is also throwing in unlimited Night & Weekends (N&W) and Unlimited Direct Connect Push-To-Talk service. The price difference between these three is measured by a couple of dollars.

The lowest priced offer in this segment comes from T-Mobile – for about $35 you are getting not 200, but 500 minutes and no contract.

MetroPCS offers a $40 plan, which is the most expensive on the surface, but when we take into consideration that all of the taxes are already included, it becomes a value leader. Now consider that the $40 plan includes unlimited airtime, unlimited text messaging and unlimited “internet” access to selected sites and this offer is hard to beat.

Plans $41 to $50

One of the most competitive segments of the market, every carrier is present here, MetroPCS and T-Mobile with as many as three different plans each!

AT&T is the most expensive, asking to fork over almost $49 for 450 minutes of talk time. Only 5,000 of N&W minutes are included, but this is the cheapest plan with Rollover minutes.

Verizon offers 450 minutes of talk time and nothing to write home about.

Sprint again tries to match the competition offering the same 450 minutes as the big boys, adding unlimited Direct Connect service to sweeten the deal. Price wise it slides neatly between AT&T and Verizon.

MetroPCS has the bulk of its new plans within this price range; they even managed to have two different plans for the same $50. The $45 plan includes almost everything and other plans just add some additional features to it. The most attractive offer is $50 Smartphone plan, which is by far the cheapest plan in the land to include unlimited talk, text and data, but, as with all MetroPCS plans, remember that the choice of smartphones is very limited (at the time of this writing one Samsung Windows Mobile 6.1 handset qualifies as a real smartphone), making MetroPCS a questionable value for frequent travelers, business people, etc.

T-Mobile also offers 3 different plans in this price category. The standard 24 months contract Even More 500 plan costs a few dollars less than competition and gives 500 minutes vs. 450 minutes from everybody else. For the same amount of money you can get not only 500 minutes of talk time, but unlimited text messaging should you decide to go with Even More Plus 500 Talk + Text plan. Yes, the same amount of minutes and unlimited text plan without a contract will cost you the same money as talk only plan with a contract. What does it tell us? It tells us that the company does not want to subsidize equipment anymore, it would love to push everybody out of the contract plans, but it understands that US consumer, used to getting a phone for nothing or close to it, may not appreciate it and go to competition to get his free phone. The third T-Mobile option for the same money is 1,000 Talk minutes without a contract.

Plans $51 to $60

If your budget for wireless phone is $60, there few choices you have. AT&T and Verizon are not even present in this price range. MetroPCS has its most expensive plan at $60 that sheds unlimited data and corporate email access in favor of unlimited international calling to select countries and numbers. Sprint adds to its 450 minutes plan unlimited messaging for extra $11.50 a month and T-Mobile flourishes with another three plans, including the first unlimited talk plan among national carriers.

Plans $61 to $70

With MetroPCS not even offering anything over $60, the choice of who to pay your hard earned $70 is again split between three providers, as AT&T has nothing to offer here as well. Sprint, who hangs in the $70 price range by the skin of its teeth, offers 900 minutes of talk time plus Direct Connect. Considering that T-Mobile offers an unlimited talk contract plan for $8 less, it is nothing to brag about unless Push-To-Talk is required.

Verizon jumps into the game at this price level with three plans of its own. For the same $69 you can choose between a plan with more minutes and no text, less minutes and unlimited text, and, for the first time, a plan with lower number of minutes, but no extra cost calls to Canada and free roaming while in Canada. Both 900 minutes plan and the Canadian plan include 5 favorite numbers with unlimited calling, the practice all other carriers seem to have left behind.

Plans $71 to $80

AT&T comes back to the game with a couple of plans. Amazingly, the gap between its offerings at these main levels of pricing almost reaches $24. AT&T answers Verizon’s challenge with its own 900 minutes and Canadian plans, but it does not offer 5 favorite numbers and the number of N&W minutes on the Canadian plan is limited by 1,000. On the upside, both plans include Rollover. At the end, despite being in different price segments here, AT&T is less than $3.50 more expensive. Sprint is MIA here. T-Mobile offers a no contract plan with 1000 minutes and (the least expensive among national carriers) unlimited text and data. Verizon, barely squeezing under the $80 ceiling, sells its unlimited talk. Interestingly enough, unlike T-Mobile Verizon does not think that making you spend money to buy equipment at full cost deserves a monthly plan discount, apparently, not being under a contract is a reward by itself.

Plans $81 to $90

Again, not every participant is present here, this time Verizon is taking another break. AT&T weighs in with its first unlimited talk offer, $84.80, 24 months contract. For $82.25 Sprint gives us a not so compelling choice between few minutes and very few minutes, but with unlimited text and data. T-Mobile for less than a dollar more ($83.20) is willing to part with unlimited talk, text and internet as long as you pay full price for your phone, no contract necessary. With this top-of-the line proposal, T-Mobile is done, it has nothing else to give and we are bidding good bye to it.

Plans $91 to $100

The magical 3 digits are here, but there are very few providers left to battle it out: AT&T, with weak 900 minutes of talk time, but with Canada calling and roaming included and a couple of Verizon plans – similar Canadian offer and a domestic 900 minutes/unlimited text plan (similar Sprint plan with Direct Connect is $10 less). AT&T fights Verizon’s 5 Favorite numbers with a Rollover.

Plans $101 to $110

Ones and zeroes at this level of the game. Two carriers offering one plan each: Sprint will sell you 900 minutes with unlimited text and data, while Verizon will try to attract you with unlimited talk and text.

Plans $111 to $120

And again, only two proposals on the market in this price segment. Sprint finally reaches everything unlimited state of Nirvana. Verizon for this money will give you whopping 1,350 minutes of calling in the US and Canada.

We will leave the remaining AT&T and Verizon plans alone – all of them include Canada and are very expensive. The value of all these offers is highly questionable and the target audience relatively small; why both Verizon and AT&T have as many as six expensive plans each is a mystery, but maybe we do not know much.

Conclusion

There could be great many factors that will define the carrier of choice for each person, from equipment availability to the reception in customer’s house, but leaving all the particulars aside, today T-Mobile offers by far the best value on the market. If you are not afraid of buying your equipment from a third party, you will have a phone you like and a very compelling voice, text and data plans. The main weakness of the network is the weird 3G frequency, limiting the choices available and the cost of entry with unsubsidized phones.

MetroPCS is a great value overall, but the limited handset availability and size of its network limits is appeal. For now, that is.

Sprint is less expensive than Verizon and offers more with free Direct Connect included into all of its plans. Its 4G network is growing when competition is only starting to work on it.

Verizon and AT&T are really competing with each other. It looks like nobody else on the market exists for marketing departments of both carriers and, considering the size of these two, it is not surprising. Nonetheless we do see that price policies of MetroPCS, Leap Wireless and T-Mobile have an effect on what these two behemoths do.

In the meantime, we will be observing the new developments, analyze them and bring you quarterly updates, hoping our work will help you to choose the carrier and plan fitting your needs the most.

As for the overall market, we feel that the price war is far from over and before the end of the year we may see more price reductions from everybody, specifically on data. This will in turn have an interesting effect on your home internet provider, just like reductions in cellular voice traffic cost made a huge impact on your home phone company. Don’t you just love to live in a technology era?

* Including all the fees and surcharges added by the carriers to the monthly bill. Calculations are made at maximum amounts where possible.
** MetroWEB access only. Includes access to a limited number of websites
*** Various terms of contract available, including Month-to-Month. The cost of equipment is adjusted accordingly
**** Includes international texting
***** Select countries and numbers. See www.metropcs.com for details

Michael Savuskan ([email protected])
Published — 26 January 2010

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