How third-party retailers can complicate your smartphone purchase

In this edition of Ask Maggie, CNET's Marguerite Reardon tries to decipher wireless operators' complicated terms, which can get even murkier when a third-party retailer is involved.

Wireless operators, such as T-Mobile, talk a good game about making their device sales and service plans easier to understand. But often figuring out which devices can be used on which networks and how much you have to pay for those devices is anything but simple.

The situation seems to get even more complicated when you factor in third-party retailers that are also reselling devices for wireless operators. In this edition of Ask Maggie, I help two readers figure out how to navigate buying and activating devices from a third-party reseller. And I explain and rant a little bit about the ridiculous phone locking policies that wireless operators impose on almost all the devices sold through them and their partners.

If a deal looks too good to be true, it is.

Dear Maggie,
I am planning to switch from Verizon Wireless to T-Mobile. I would really like to get the new Nokia Lumia 521. I noticed that I can get the device for only a penny from Wal-Mart. But it will cost me $150 if I buy it from T-Mobile. Is there some sort of catch? It looks like Wal-Mart's plans are $10 more a month than the ones offered by T-Mobile's website. So my question is could I buy the device at Wal-Mart and take it (unused) to T-mobile and use it in a new no-contract plan that is $10 a month cheaper? Also do you know if this device comes unlocked so I can I take it to another GSM carrier, like AT&T or one that operates overseas?

Thanks for any help,
Terry

Dear Terry,
The Nokia Lumia 521 is a terrific phone at a great price, regardless of whether you buy it from Wal-Mart or T-Mobile. While many other smartphones cost $600 and above at full price, this phone fully paid for is only $150, which is less than many smartphones cost after a subsidy and with a two-year contract.

Nokia Lumia 521
Lumia 521 Josh Miller/CNET

CNET editor Jessica Dolcourt, who reviewed the device for CNET, agrees that it's a good deal. In her review she said that it "packs in a better camera and more software features than you might expect for its $150 off-contract price tag." And she called it one of the best bargain smartphones on the Windows 8 platform.

The fact that you can get this device for a penny from Wal-Mart makes it an even better deal. But there is a catch. And if your gut tells you that this deal is too good to be true. Listen to your gut, because it is.

Wal-Mart.com is selling two service plans for the Lumia 521, according to its website. There is the $60 a month plan, which includes unlimited talk and text messaging and 500MB of data. The device with this plan as you point out is 1 penny. Wal-Mart.com also offers a $50 a month plan that also includes unlimited talk and text messaging and 500MB of data per month. The device for this service is listed at $185.

Meanwhile, T-Mobile also sells the $50 a month plan, which also includes unlimited talk and text messaging as well as 500MB of data. The device bought from T-Mobile with this service plan is $150.

At first glance the first Wal-Mart plan seems like a steal. The device is practically free. But as you'll notice the service is $10 more a month for the exact same service. That adds up to $120 per year. As you suggested in your question: Why don't you buy the Lumia 521 at the reduced price from Wal-Mart.com and then just switch it over to another T-Mobile? After all, the device is still operating on T-Mobile's network.

Even though that sounds like a great idea, it's not so easy. Buying the phone at the special Wal-Mart price requires you to sign a two-year service contract. A sales representative for Wal-Mart.com told me that you could technically switch to another T-Mobile plan after 6 months of your contract, but switching to a new plan, even though you are staying within the same carrier will likely trigger an early termination fee.

The other Wal-Mart plan and the plan offered by T-Mobile on its Website for this device are $10 a month less expensive than the Wal-Mart contract plan, but the phones are considerably more expensive. That said, these plans do not require a contract. So when you buy these devices and pay full price for them, you are able to switch your plan as much as you like.

The bottom line when it comes to your specific question on this particular phone, is that you can't really "game" the system. If you want the "free" phone, you will have to be locked into a contract and you will end up paying nearly $100 more for the device over the life of the contract compared to if you had bought it without a contract and just paid up front for the device.

Wal-Mart Wireless is offering the Lumia 521 for a penny. But there's a catch. Customers have to agree to a two-year contract and pay $10 a more for service. Wal-Mart Wireless screen shot

What happened to the uncarrier?
It's surprising that T-Mobile is allowing Wal-Mart to resell this phone in such a way, since the company has made such a big stink lately about being the "uncarrier" that no longer requires customers to sign two-year contracts . But I suppose you have to remember that the phone and service are still being sold by Wal-Mart and not directly by T-Mobile. What this means for consumers is that they should be careful when purchasing devices from any third-party retailer, such as Wal-Mart, instead of the carrier. You must double check the fine print to make sure you understand what the restrictions are. And if it looks too good to be true, it likely is.

Unfortunately, I think offers such as these are terribly misleading for consumers, especially in light of T-Mobile's Simple Choice marketing, which claims the company has done away with deceptive pricing to give consumers a more forthright experience when shopping for a phone and service.

This leads me into answering your second question. If you buy the Lumia 521 at full price from either Wal-Mart or T-Mobile, could you use it on another carrier's network?

The answer is no. Regardless of whether you have a two-year contract, finance your device over a couple of years or buy it outright, it will be locked to T-Mobile. This is true of most phones sold by any major carrier.

Even though other carriers, such as AT&T and Verizon are allowing customers to buy phones at full price to avoid a contract, those devices are still locked to those carrier networks. In order to use those phones on another operator's network, users must satisfy certain criteria and get an unlock code from the carrier. (Verizon's 4G LTE phones are typically not locked for GSM/LTE use, but they are locked for CDMA use. But since there are no other operators that use the same LTE spectrum frequency and band plan as Verizon, the phones won't operate on another carrier's 4G LTE network nor will they work on another operator's CDMA network.)

From a consumer's perspective this makes little sense, and I personally think it's anticompetitive. It seems the only purpose of the software carrier locks is to keep consumers tied to a particular service, even once the consumer owns the device. Imagine if Comcast or Time Warner Cable told you that you had to "unlock" your laptop before you could change your home broadband service to Verizon Fios.

As your question demonstrates, these policies are confusing to consumers.

So what should you and other wireless subscribers do? Be cautious. The bottom line is that even if you buy a device at full price, if you are purchasing it from a carrier or part of a service package, it's likely to be locked to that specific carrier. And if you want to unlock the device, you will likely have to jump through hoops to do it.

To reiterate: If you really want the Lumia 521, buy it at the $150 price directly from T-Mobile. You will end up spending $100 less over two years than if you get the device for a penny from Wal-Mart and you won't be locked into a two-year contract. And if you want to take this device to AT&T or some other GSM carrier that supports the same radio frequencies as the Lumia 521, satisfy whatever requirements you must from T-Mobile and then ask for the unlock code to unlock your device.

Good luck!

A glitch in activating a phone from Amazon

Dear Maggie,
My husband purchased a prepaid phone ( LG Spirit ) from Amazon.com and took it to a MetroPCS store only to be told that they cannot activate it. I have been told by previous customers that the store won't do it because it wasn't purchased there. Is there any way that we can get this phone activated and working without all the hassle? I would really hate to see $229 bucks go down the drain.

Thanks,
Pam

Dear Pam,
I reached out to a MetroPCS representative to see what the policy is here. To the best of my knowledge when you buy a device from Amazon or any other third-party retailer for a specific carrier, you should be able to activate that device on that carrier without any issues.

Josh Miller/CNET

And that's exactly what the MetroPCS representative told me in an email:

"MetroPCS devices and products are sold through leading national retail partners, including Amazon.com. Once a customer purchases a MetroPCS phone from one of our retail partners, they can activate it by calling MetroPCS' toll-free activation line, visiting MetroPCS.com or a MetroPCS store."

In other words, the MetroPCS representative you spoke with gave you inaccurate information. My suggestion is that you call the toll-free activation line as the spokesperson suggests and see what happens. If you have further problems, I would call customer service and ask to speak to a manager.

What about unlocked phones?
Your question also got me thinking about how MetroPCS handles unlocked devices on its network. I'm not sure if you are aware, but T-Mobile bought MetroPCS earlier this year. The companies finalized the deal in May. And now T-Mobile is working to integrate MetroPCS's network with its own. This is challenging considering that T-Mobile is a GSM carrier and MetroPCS uses a different technology called CDMA.

For several months now, T-Mobile has been pushing its new service plans, which allow people to bring unlocked GSM devices to its network. And now that MetroPCS is part of T-Mobile, it also is allowing consumers to bring some unlocked phones onto that network.

But there are a couple of caveats. MetroPCS is only allowing people to bring unlocked GSM devices, including the iPhone and Android smartphones to its network. It is not allowing unlocked CDMA phones to come to its network. And because the MetroPCS network is primarily CDMA, the cities in which GSM compatible devices can be used is limited to only a few places in which it's transitioned over to GSM. This includes, Atlanta, Boston, Dallas, Hartford (Conn.), Las Vegas, Philadelphia, and San Francisco.

For consumers interested in finding out if their unlocked device is compatible with the MetroPCS network, check out this website: metropcs.com/keepyourphone.

I hope this answered your question and offered some more insight into which devices can and can't be used on MetroPC's network. Good luck!

Ask Maggie is an advice column that answers readers' wireless and broadband questions. The column now appears twice a week on CNET offering readers a double dosage of Ask Maggie's advice. If you have a question, I'd love to hear from you. Please send me an e-mail at maggie dot reardon at cbs dot com. And please put "Ask Maggie" in the subject header. You can also follow me on Facebook on my Ask Maggie page.

 

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