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A Flurry of Varying Cellphone Offers Sows Consumer Confusion

A Flurry of Varying Cellphone Offers Sows Consumer Confusion

By Brian X. Chen, The New York Times | Updated: 1 January 2015 15:55 IST

One wireless phone plan allows customers to upgrade to a new phone in less than two years. Another allows a pool of data to be shared across multiple devices. Yet another offers unlimited data, but only at slower Internet speeds. All these perks are there for the taking, yet the average wireless phone bill continues with its monthly sting.

Confused yet?

Welcome to the confounding world of wireless phone billing plans. Even executives at the wireless phone companies say their industry has created a Tower of Babel of competing plans, with highly specific requirements and offerings and even, in many cases, unique language buried in the fine print.

For cellphone customers, all this competition has meant they will occasionally receive more for their money, or they might even obtain a better deal when they switch to a different phone carrier. But with that savings opportunity has come the risk of phone bill surprises, even for knowledgeable consumers.

"I think we're propagating some confusion in the marketplace - us as an industry," Glenn Lurie, the new chief executive of AT&T Mobility, said in a recent interview. "There's been so much noise that customers are getting confused."

It all started nearly two years ago, when T-Mobile USA killed the traditional two-year contract, a move that shook the wireless industry. In the past, a phone subscriber signed a two-year contract to buy a phone for a discounted price and paid a flat monthly bill. With T-Mobile's new contract-free plan, a customer could pay the full price for a smartphone in monthly installments and the bill would be reduced once the phone was fully paid off.

The move set off a flurry of changes among the carriers. Verizon Wireless, AT&T and Sprint responded with similar contract-free plans that allowed people to pay for their own devices in exchange for lower rates.

But that was just Round 1.

"Since there are new deals every couple of weeks, even if you go with the best deal today, things might change tomorrow," said Jan Dawson, an independent telecommunications analyst. "Ultimately, all this is good for consumers, but it takes more work now than it did to figure out the best deal."

In February, AT&T and Verizon expanded the data packages for their family plans. AT&T offered 10 gigabytes of data for families to share, starting at $130 a month for a family of two.

But then there was the fine print: Brand-new customers signing up for the family plan would have to choose AT&T's contract-free plan, Next, and pay off a phone in monthly installments. Or they would have to provide their own device, like an iPhone bought from Craigslist. Or they would have to buy a new cellphone at full cost from AT&T.

Existing customers could sign up for the new family plan, but they would have to meet the same criteria once their contracts were up.

Also in February, Verizon sweetened its family plans, but it offered discounts only for certain types of customers. For example, subscribers to Verizon's Edge program - an option to pay off a phone over monthly installments - got $15 off their bill.

In August, Sprint also announced new family plans. It allowed a family of four to share 20GB of data for $160 a month. Sprint also said customers could, for a limited time, pay $100 to receive 20GB that could be shared across 10 lines - and customers would receive an extra 2 gigabytes for each of the 10 lines.

A family of four typically uses 8 gigabytes of data a month, according to research by Chetan Sharma, an independent telecom analyst.

Kristin Wallace, a spokeswoman for Sprint, said her company aimed to make it simple and affordable for customers to get what they want with services and devices.

Debra Lewis, a Verizon spokeswoman, said her company emphasized delivering value as well as the quality of the network, allowing people to "do what you want when you want and where you want."

This month, Sprint said it would, for a limited time, cut the bills of any Verizon and AT&T customers in half if they switched to Sprint. But with one big caveat: Sprint said it could not promise that customers would be billed the same rates for future device upgrades.

And last week, T-Mobile announced an offer to roll over customers' unused mobile data month after month. It was reminiscent of older phone plans but remarkable in today's market because cellphone customers often buy more data than they need to hedge against running out and paying more for going over.

Industry insiders acknowledge that, short of creating a spreadsheet to sort out the pitches, expecting consumers to navigate all of these offers is unrealistic.

"We're in a state of the industry where the carriers have sown a massive amount of confusion," Mike Sievert, the chief marketing officer for T-Mobile USA, said in a telephone interview. "Can you even decipher what's going on with the carriers anymore?"

Sievert said T-Mobile's goal with Data Stash, its new offering for rolling over unused data to the next month, was that customers would no longer have to guess how much data they would use every month.

But even T-Mobile's plans can be confusing. Its plans are advertised as including unlimited data. But what actually happens is that users pay for a bucket of high-speed data, and once it is depleted, the phone's data connection is switched over to slower speeds. And while the slower Internet data is marketed as unlimited, critics have said it is so slow that it is unusable. T-Mobile separately offers a plan with unlimited high-speed data.

"A T-Mobile user might be really disappointed in the end if they think they have an unlimited data plan, and then when they hit the ceiling of 1 or 3 gigs, it's pretty much denial of service because you cannot use your phone," said Toni Toikka, chairman of Alekstra, a research company that studies phone bills.

Criticizing his competitors' limited-time discounts, Lurie of AT&T said his company's reputation was built around being respectful and transparent to customers. "Deal of the day is not necessarily how you get there."

Nevertheless, AT&T, too, has held limited-time promotions, like offering store credit to T-Mobile customers who switched to AT&T this year.

Toikka said consumers have benefited over all from the industry moving away from two-year contracts into more flexible plans that offer cheaper bills. However, he said, they should be aware of the fine print.

AT&T, Verizon and Sprint, for example, charge significant fees when customers go over the data caps in their plans, Toikka said. A family can easily surpass its data cap just by listening to streaming music or watching a Netflix movie for a few hours a day, he said.

"Exceeding the data limits significantly could end up being costly," he said.

John M. Simpson, a consumer advocate for Consumer Watchdog, said consumers should carefully research their data use habits before picking a phone plan.

"I don't think most of the plans are doing the best job at being transparent about what they're offering. It's much more the case they're designed to obfuscate" the terms, Simpson said.

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