Who saves with T-Mobile deal and Sprint's new 'Framily' plan?

If you're tempted by Sprint's new "Framily" plan and T-Mobile's promise to pay our early termination fees, check out this Ask Maggie column, where CNET's Marguerite Reardon explains who's likely to save money.

T-Mobile and Sprint made some big announcements at the Consumer Electronics Show in Las Vegas this week that on the surface look like they could save wireless subscribers big bucks.

But a close look at these plans reveals that they aren't for everyone. And while it's true some people will get a good deal out of these new plans, not everyone will be able to save money. In this edition of Ask Maggie, I offer my take on these plans.

I also explain to another reader what T-Mobile's Wideband LTE network is all about.

Am I really getting such a good deal?

Dear Maggie,
I saw that Sprint and T-Mobile announced some cool new plans and offers this week at CES that could save me money. (I'm a Verizon subscriber.) But I'm wondering if there is some kind catch? How does Sprint's new "Framily" plan stack up to other family plans? And is T-Mobile's new plan to pay off people's early termination fees really a bargain?

Thanks,
Skeptical

Dear Skeptical,
You are smart to be cautious of these offers. In order to answer whether these plans and initiatives are a good deal for you, you will have to pull out your calculator and crunch some numbers. The reality is that some consumers will save money, but not everyone will.

Sprint's 'Framily' plan

Let me start with Sprint's Framily plan . The name of this plan basically implies that it's a plan meant for both friends and family. In other words, there's no requirement that everyone share the same bill or live in the same household. Up to 10 individuals can sign up for the plan.

Sprint offers a new family plan it calls the "Framily Plan." The more customers who sign on the plan the bigger the savings. Sprint

Under this plan, the first customer pays $55 a month for the first line of service, which gets unlimited voice service, text messaging, and 1GB of data. For each additional new Sprint customer who joins the family plan, which the company is calling a "framily" group, the cost per person for the service goes down $5 a month up to a maximum monthly discount of $30 a month.

The greatest savings are realized after seven people sign up for a family plan. At that magic number each individual pays $25 a month. This is a great deal if you can get six other people to join your plan with you.

When compared with individual plans that offer a similar amount of data, text messaging, and voice service, Sprint's Framily Plan is definitely a good deal. For example, an individual on T-Mobile will pay twice as much per month and only get 500MB a month of data before that data is slowed down considerably. Verizon is at the top of the heap with an individual subscriber who wants 1GB of data, unlimited text messaging, and voice calling, paying $90 per month. That's nearly four times more what the seven individuals on Sprint pay each.

But when you look at other family plans, you can see that Sprint's cost advantage shrinks. Under T-Mobile's family plan, which only allows a maximum of five individuals on the plan, the price can go down to as low as $22 a month if five people are signed up for the plan. In fact for only four lines on the family plan, the T-Mobile price per user is the same as Sprint's $25 offer, which requires four people on the plan.

Of course, as I noted above, T-Mobile's plan only offers half the data per month at top speeds that Sprint is offering on its plan. So if you and your six other friends or family members need at least 1GB of data each per month, then the Sprint plan really is the best deal out there.

Meanwhile, even when customers share data, AT&T and Verizon are still more expensive than either of their smaller competitors. An individual on AT&T who is on a traditional contract plan with a subsidized phone will pay $85 per month for 1GB of data. The price does start to drop per subscriber as you increase the amount of data but share the bucket of data across multiple people. Once six people are sharing 6GB of data, the cost per subscriber each month is $53.30. And eight people sharing 8GB of data will pay $51.25 each per month.

These prices are similar to what people would pay on Verizon as well, which for postpaid customers only offers contracts with subsidized devices. An individual on Verizon subscribed to 1GB of data pays $90 a month. But just like with AT&T the price goes down per subscriber as they share data. And the pricing is exactly the same as AT&T's for six users sharing 6GB of data and eight users using 8GB of data, $53.30 and $51.25, respectively.

AT&T customers can lower their costs by $15 a month by bringing their own devices to the AT&T network.

The conclusion here is that this new deal from Sprint can offer big savings for certain customers. If you are switching from AT&T and Verizon, the savings are huge. If you're a T-Mobile customer who already owns your phone, there's no reason to switch for this deal.

And remember, as I pointed out earlier, customers who get the maximum savings on these Sprint plans need a minimum of seven people on their family plan. Sprint has tried to make the management of these plans easier by allowing individuals to receive their own bills. But one big drawback to the Framily plan is that once a seventh person drops out of the family plan, everyone else's monthly bill goes up. And the cost keeps going up the more people leave the service. Still, even if you don't have six friends or family members who you can add to your Sprint plan, you'll still save some money compared with similar offerings from AT&T and Verizon.

T-Mobile ETF offer
Now to answer your question about T-Mobile's announcement. On Wednesday, the company announced it would pay early termination fees for customers who are leaving AT&T, Sprint, or Verizon for T-Mobile's network . The payout can be as high as $650 per line.

T-Mobile CEO John Legere
T-Mobile CEO John Legere at CES 2014. James Martin/CNET

The way it works is that customers can trade in their current devices to any T-Mobile location and switch to a postpaid Simple Choice Plan. They will receive an instant credit, based on the value of their phone, of up to $300. These customers can then purchase any eligible device, including T-Mobile's most popular smartphones, without putting any money down. Customers who qualify can finance the phone over 24 months with no interest.

After customers get the final bill from their old carrier, which shows their early termination fee (ETF), they can either mail that bill to T-Mobile or upload it to a Web site. T-Mobile then sends an additional payment equal to those fees, up to $350 per line.

The big catch is that in order to qualify, customers must trade their old phone, purchase a new T-Mobile phone, and port their number to T-Mobile. This means that T-Mobile will not pay your ETF if you want to bring your phone from your current carrier to T-Mobile's network.

The math
Several bloggers have already begun to do the math to see whether this deal is worthwhile. Not surprisingly, the answers are as varied as the devices and plans that people currently subscribe to.

For example, Jon Brodkin at Ars Technica compared the cost of buying a new 64GB iPhone 5S on his "ancient" Verizon service plan and replacing it with the same device on T-Mobile. He found that the switch would actually cost him $150 over two years. He concluded it would actually be cheaper if he paid his early termination fee to Verizon and kept his existing phone on the T-Mobile network.

The reason is largely because the 64GB iPhone 5S is an expensive device, and because he has an older Verizon plan that offers 6GB of data for $75 per month. He noted in his analysis that if he were on one of Verizon's newer plans, which I mentioned above could cost about $90 per month for just 1GB of data per month, and if he had a less-expensive device, then the math might work out better in T-Mobile's favor.

For instance, Steve Kovach of Business Insider, who pays $110 for his Verizon service, wrote an article this week in which he said he would actually save $20 a month by switching to T-Mobile. Kovach said he has an older iPhone 5, and he was on a plan with only 2GB of data. For him, switching to T-Mobile and allowing it to pay his ETF makes sense.

What these two examples illustrate is that every customer's situation is different. But no matter how you slice and dice the numbers, T-Mobile is a better fit for customers who have already paid off their phones or are willing to buy a less-expensive unlocked device, such as the Moto G, Moto X, or a Google Nexus phone. And no matter how you do the math, you will save more money if you can wait until the end of your contract and bring a device with you to T-Mobile.

But not everyone wants to use an older phone, and not everyone wants to wait until the end of their current contract with another carrier. T-Mobile is trying to sweeten the deal for these consumers so that they will make the leap to its network sooner rather than later.

Keep in mind that the executives at T-Mobile are still running a business that ultimately needs to make a profit. This ETF offer is really designed to lure more subscribers to the T-Mobile network. And T-Mobile doesn't expect to lose a lot of money by offering it. This is why this incredible sounding ETF offer only applies if you choose to trade in your device and buy another phone from T-Mobile.

T-Mobile executives have admitted that they plan to take the phones that people trade in and resell them in the market , thus making back part of the cost of buying the devices from customers. In other words, the company wouldn't be able to pay you or anyone else's early termination fee if there wasn't a way to help recoup some of the cost.

The bottom line
The Sprint Framily plan and the new T-Mobile ETF offer sound like great opportunities for consumers. And for some people, these deals will save them money. But in order to know if the deal is right for you, get your calculator out and start crunching the numbers. Depending on your individual circumstance, these terrific sounding deals may actually cost you more money than you are currently paying now.

The most important thing to remember when you are assessing whether to leave your current carrier or not for either T-Mobile or Sprint is to first figure out if the service you plan to replace it with offers the coverage and reliability that you need. Both Sprint and T-Mobile can offer less-expensive plans and options for you and your family. But if you can't get reception where you live and work, and even where you plan to vacation, then it's probably not worth it. And the fact is that Sprint and T-Mobile still struggle with network coverage. This is mostly because neither carrier has a large holding of low-frequency spectrum.

T-Mobile announced this week a deal to get some of Verizon's low-frequency spectrum , but many experts say this is only the first step needed to build out a bigger network footprint that extends deep into rural and suburban areas. The company still needs more low-frequency spectrum. And that means that most T-Mobile customers won't start to see coverage improvement for a year or more.

Good luck. And thanks for asking your questions!

What is Wideband LTE?

Dear Maggie,
This week T-Mobile said it has the fastest wireless network in the US, because it's using Wideband LTE. I have never heard of Wideband LTE and was wondering if you could explain what it is? Is it like WCDMA and a totally new technology?

Thanks,
Jeffrey

Dear Jeffrey,
T-Mobile is famous for using marketing terms to describe its network in an effort to make it sound better than its competitors. Remember when T-Mobile claimed its HSPA+ network was 4G ? Wideband LTE is another example of this.

T-Mobile Wideband LTE
T-Mobile Wideband LTE unveiled at CES 2014 James Martin/CNET

The truth is that Wideband LTE is nothing more than a marketing term. It's meant to describe parts of the network where the carrier is using more wireless spectrum to deliver its 4G LTE service. The company said that any part of the network that is using 15x15MHz channels of spectrum to deliver service is considered "Wideband LTE." Currently, T-Mobile has 15x15MHz deployed in Detroit. And it has 20x20MHz channels of spectrum deployed in Dallas.

The more spectrum that is available for the service, the faster the service is. It's like a highway. The more lanes available, the less congestion there is and people can zoom up and down the highway as fast as they can.

Most carriers today are using 10x10MHz channels to deliver LTE services. That's what T-Mobile has throughout most of its network. Many experts would say that the 10x10MHz is the minimum you need to deliver an LTE service.

As more people buy 4G devices and people use more data, every carrier will likely be increasing the amount of spectrum allocated to the 4G LTE service. Verizon is starting to add spectrum to its LTE network. That is one reason why the company has swapped some of its lower-frequency spectrum with T-Mobile for higher-frequency spectrum. Verizon has established its 4G LTE footprint with 10x10MHz channels of 700MHz across the US. But now that it has so many customers and they are using more data, the company is starting to see some congestion problems on its network in some cities like New York.

T-Mobile CTO Neville Ray at the company's press conference at CES 2014 talking about T-Mobile's speedy wireless network. CNET/James Martin

In an effort to alleviate capacity constraints in dense urban areas, it's adding more spectrum to its network, namely higher-frequency AWS spectrum. Signals on higher-frequency spectrum transmit over shorter distances, but higher-frequency spectrum offers more capacity. At any rate, Verizon is adding this spectrum to its network to increase capacity, which will increase speeds, just like T-Mobile is using additional spectrum in certain markets to increase its capacity and raise data rates.

Because Wideband LTE is not a different technology, it means that the 4G LTE devices customers buy today will work in areas of the country where T-Mobile has deployed the so-called Wideband LTE.

Even though the terminology is just a lot of marketing gobbledygoo, the increases in speed are real. A spokeswoman for the carrier said that the term is used to help customers understand that those parts of the network will get faster service. And the term is not meant to confuse wireless customers.

I hope this explanation cleared up this issue. 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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