Does Anyone Understand Cell Phone Family Plans?

If you asked me this question a few years ago, I feel like my answer would be a clear yes. It seemed relatively simple. Split a bucket of minutes and data amongst your family and pay a price and be done. Every couple of years, each person could get a new subsidized phone.

Financially, I never considered them to be the best deals, but I could understand them.

A CNet article last week leaked information of Sprint’s new CEO telling employees that they were going to implement “disruptive” pricing cuts to grow market share. A few days later, CNet followed up with an article on Sprint’s pricing reductions.

The big takeaway from the article author and analysts seems to be that consumers aren’t likely to understand the plans. I tried to follow it and have to agree it is quite complex. Here’s a breakdown:

This seems like an official image since it is also at Apple Insider, but am trusting CNet and Apple Insider that it is official. (It may have been buried on Sprint’s website as I couldn’t find it.)

Step 1 of picking an amount of data almost seems to easy except for the color change at 16GB to 20GB. The reason for the color change only becomes clear when you get to Step 2.

Step 2 is where it gets really confusing. The concept of subsidized and non-subsidized phones come into play. It looks like if you have a subsidized phone, you pay $40 per phone. If you are use Sprint Easy Pay (the irony!) it costs $25 per phone for up to 16GB and $15 for 20-60GB. So for some reason I can understand, the way I choose to pay for my phone can be discounted depending on how much data I add. As best I can tell, it doesn’t make any sense for anyone to choose the 16GB plan, since it is only $10 per month for the 20GB, and they’ll get a $10 per phone price reduction from the 16GB plan. A “family” of one would break even in the worst case scenario.

It makes sense to subsidize phones for those who can’t afford the up-front costs. I’m lost on why that subsidy should vary based on the amount of data used, especially when it adds this kind of complexity.

In fact, it really doesn’t make sense to have a monthly charge per phone. I can understand a one-time set-up cost for each device, but a monthly pricing based on number of phones simply makes no sense. My cable company does not charge me for each television I set-up in my home (though they may charge for the cable box rental, which is different and understandable). The water company does charge me based on how many faucets or how many people I have in my home… they charge me based on the resources I use.

(By the way, Ting almost works this way. They charge $6 per phone per month and the rest is based on how much data, text, minutes you use.)

Moving on Step 3… and yes, the pricing gets a little more confusing and nonsensical. The pricing for my tablet to use this data is only $10 per device per month. In some ways that makes sense, because it isn’t using talk or text. However, the lines of talk and text are significantly blurred now. Talk can be done using the data plan via VoIP from Groove IP. I can send text via Google Hangouts from a tablet without a texting plan. (Sorry, Apple people I don’t know how it would for you.) In theory, my Nexus 7 tablet can be jury-rigged into a phone, making it just a slighter larger than normal phablet.

It’s hard for me to see why monthly pricing would vary much between the two.

Finally with Step 3, there’s the nebulous +$20 for Mobile Broadband Devices. I had to search Google to figure out what those are. I had thought the phones and tablets that we were discussing all along were “Mobile Broadband Devices.” It turns out that this term refers to mobile hotspot devices… little boxes that convert your data to wi-fi for your devices to use. They can be handy if you need an internet connection on your computer to access a full OS instead of what’s on your phone or tablet. The thing is… that most tablets and phones from the last 2-3 years can already do this with a very cheap (or even free) software program. It makes more sense to buy a tablet and use it in this way for $10 a month than to buy a Mobile Broadband Device and pay $20 a month.

If anything you’d think it would be $5 for these devices, because they don’t have a screen and are simply converting LTE to wifi. I’ll try not to harp on how monthly device pricing doesn’t make sense… oops, too late.

Now that we’ve dissected this ad nauseum, the pricing changes significantly for new customers. Various promotions mentioned in the CNet article will waive the per device monthly pricing (yay!) for new customers as long as they sign up for Sprint Easy Pay (boo!). As the article points out, this effectively gives double the data of rivals at the same price. Thus the “disruptive” pricing is bit of a myth. It’s almost like a fast-food place giving you twice as much soda for the same price… you can’t simply choose to give them half the money. It’s a very good gesture, but not too disruptive.

It’s worth noting that the article points out that Sprint’s complex plan is similar to Verizon and AT&T’s. They didn’t start the fire. However, they are trying to play catch-up to those companies. I’m not the CEO of a big multi-billion dollar company, but I’d like to humbly make a suggestion that perhaps simplicity is the way to go. It is one of the reasons why I recommend StraightTalk’s $45 everything plan as the best cell phone/plan available today.

I’m going to leave you with two thoughts:

1. If consumers can’t understand the pricing plan, are they likely to realize the benefits? My guess is no, which leads me to ask, “What’s the point of cutting the prices anyway?”
2. I have mixed feelings about having to say goodbye to Sprint’s marketing term, Framily. It was so bad it was funny.