Is Cablevision's $10 Wi-Fi-only mobile service a good deal?

The average American household spends more than $1,600 a year for cell phone service, so it's little surprise that families are looking for ways to keep costs under control.

This is why New York-based Cablevision's new $9.95-a-month Freewheel mobile service, which launched last week, sounds so appealing. Cablevision, the first major cable operator to launch such a service, is offering unlimited talk, text and data for less than the cost of a movie ticket in New York City. The service is geared toward people on a budget and is meant to offer families an inexpensive option for a child's first smartphone service.

But Cablevision isn't the only company that sees family wireless budgets under strain. The major wireless companies have recently revised service offerings to create more attractive family plans. And small upstarts are also offering highly discounted services.

Still, Cablevision's move could shake up the wireless industry, as it marks the cable industry's first foray into the mobile-phone market. But will it really be able to compete?

That's the question I answer in this edition of Ask Maggie.

Dear Maggie,

I've got a couple of tweens at home itching for smartphones. I've been reluctant to get them smartphones, because even on a family plan, the cost is pretty steep. I've heard of Cablevision's $10-a-month plan, which sounds like a good deal. Is it as good a deal as it sounds?

Thanks,

Mama on a Budget

Dear Mama on a Budget,

This is a great question. I agree that $9.95 a month sounds like an awesome deal when you consider the average American household spends about $139 a month on mobile-phone service, according to JD Power and Associates. But once you dig a little deeper, you'll see this service has some serious limitations. And once you compare it to other offers from established wireless competitors as well as smaller outfits, you'll see the $9.95 price tag isn't such a bargain after all.

First, let's take a look at what you get for Freewheel's $9.95 service:

• Unlimited data
• Unlimited talk and text from anywhere in the world
• No annual contract

Sounds terrific, right? After all, the two largest wireless operators in the US no longer offer unlimited data. And even the smaller players have hidden caps on their services. For instance, T-Mobile doesn't charge customers when they exceed their monthly data usage. Instead, it slows down access.

Freewheel doesn't have data caps and there's no throttling or slowing down of service. But before you get too excited about Freewheel, there are a few limitations of the service you should consider.

The limitations

The first major limitation is that the service only works within Wi-Fi hot spots. This may be fine if you spend all your time in places with Wi-Fi, such as at your office, home or school. Cablevision also claims it has 1.1 million Wi-Fi hot spots which customers of Freewheel can automatically and freely use. But the service does not provide access to customers when they're outside of a Wi-Fi hot spot.

That could be a deal breaker for you if you are giving your kids mobile phones so they can call you from baseball practice to pick them up or if you want them to have a way to reach you in case of an emergency no matter where they are.

Even with Cablevision's promised hot spots, the reality is that Wi-Fi isn't everywhere. By contrast, cellular service generally is all around you. What this means for potential customers of Cablevision's Freewheel service is that the price might be attractive, but you're very limited in where you can use the service.

The other major limitation of the service is that currently only one smartphone works with the service: Motorola's Moto G. This is a fantastic budget smartphone. I'm a big fan of Motorola Android phones. And Cablevision is offering a version of the device at a significant discount. The Moto G typically sells for $180. Cablevision is offering it for just $100 without a contract. Keep in mind, an off-contract iPhone 6 costs $650.

The main drawback with this limitation is that you're forced to buy a new smartphone for your kids. You can't simply give your kids your hand-me-down smartphones.

The competition

When you consider these limitations and you start comparing the service to competing Wi-Fi calling services like Republic Wireless, Freedom Pop and Scratch Wireless, the $9.95 offer doesn't sound that great. The offer looks even worse if you don't live in Cablevision territory or you don't subscribe to Cablevision's Optimum broadband service. Without an Optimum subscription, Freewheel costs $30 a month.

Let's take Republic Wireless as an example. You can get the same unlimited calling, texting and data offer when on a Wi-Fi network for $5 a month from Republic Wireless. That's half the price of what Cablevision is offering for a nearly identical service. And for just $5 more a month, you can get unlimited voice calls and text messaging even when you're not in a Wi-Fi hot spot. How? Republic customers subscribed to this service can roam for free onto Sprint's wireless network. If you're willing to pay $25 a month, you can also access Sprint's data network when Wi-Fi isn't available.

FreedomPop and Scratch Wireless have similar offers that allow customers to roam onto a cellular network when Wi-Fi is not available.

Similar to Cablevision's offer, these other services typically work only with a small set of smartphones. For example, Republic Wireless' service only works with three main phones: Moto X, Moto E and Moto G. These are all fine phones, but the fact that you can't bring your own device to the service is a limitation. So far, only FreedomPop allows you to bring a phone to its Wi-Fi calling service.

How's Freewheel stack up to the big boys?

When you sit down and do the math, the service also may not be much more expensive than simply adding your kids to your existing mobile-phone plan. Take AT&T as an example. Adding a smartphone to an existing Mobile Share Plan on AT&T can cost you as little as $15 a month. (If you subscribe to 10GB or more of data per month, the price for adding a smartphone that uses AT&T's Next no-contract plan is only $15 a month. It's $25 per month to add a smartphone on AT&T Next if you subscribe to a data plan that is less than 10GB.)

What this means is that for some families who are already subscribing to AT&T's service and using 10GB of data, which for a family of four results in about 2.5GB of data per person per month, adding a smartphone user only costs $5 more a month than it would cost if you subscribed to Cablevision's Freewheel service, provided you are a Cablevision broadband subscriber. If you're not, then the AT&T plan could actually save you $15 a month.

If you and your husband are already subscribing to T-Mobile's service, adding additional lines will only cost $10 per line no matter which data package you are subscribed to. Sprint has tried to sweeten deals for families by offering a 20GB shared-data family plan for $100 a month, which allows you to add up to 10 smartphones.

Once you consider the fact that the Freewheel service only provides mobile access while in a Wi-Fi network, family plans from the major wireless operators, even traditionally pricey plans from AT&T and Verizon, look like better deals. What's more, if you go with a traditional mobile service, you may not need to buy new phones for your kids to add them to your service plan. They can use hand-me-down phones so long as they're compatible with your carrier's network.

The bottom line is that even though Cablevision's $9.95 mobile plan sounds like a good deal, you can easily find less expensive options that offer you better coverage from competitors.