Conventional wisdom says, and consumers certainly seem to think, that family wireless plans offered by cellular carriers are a great deal. In exchange for tying other family members into one service plan at the standard $10 per month, consumers can cut down on their wireless spending and get the convenience of having one bill. Carriers, meanwhile, get stickier customers who are less likely to churn.
However, family plans have some downsides for consumers. Topping the list is the fact that adding other lines to the plan also means adding additional early termination fees if the family decides to change carriers before their contract is up-and at up to $200 a pop, a family of four could be looking at $800 in penalties for switching. While some carriers reduce activation fees for add-a-lines, none of them reduce termination fees. If a parent adds a child out of sync with the main line contract, then contracts ending at different times can also contribute to making switching a hassle-a problem for consumers, a boon for carriers.
But family plans aren’t all rainbows and lollipops for operators. Across the industry, the average revenue per user has dropped in recent years due in part to the massive migrations of customers onto family plans. According to Kirk Parsons, director of wireless services for J.D. Power and Associates, the number of U.S. households with two or more members sharing a wireless plan was around 45 percent in 2006, up from 11 percent in 2000.
“If you hijack on another plan, it’s much cheaper on a per-user basis,” Parsons said.
Verizon Wireless and Cingular Wireless L.L.C. recently have managed to reverse declining ARPU due to strong growth in data use. But in spite of the overall strength of data revenues, most current family plans don’t make it easy or affordable for families to start using data services. Adding extras to family plans can tally up quickly. While carriers are happy to dole out minutes that can be shared among family members, they’ve been
stingy about doing the same for add-on services such as messaging and data use. Verizon Wireless’ Vcast entertainment service and Sprint Nextel Corp.’s Power Vision offering are both available only on a per-line basis, but at around $15 a pop, access for the whole family can get pricey.
Messaging is also typically a per-line option, often starting at around $5 per line. T-Mobile USA Inc. is the only national carrier to offer a messaging plan that can be shared among family-plan members; for a flat fee of $20 a month, up to five shared lines can make use of unlimited SMS and MMS.
“Nobody else does that, and T-Mobile stands out,” said Current Analysis analyst William Ho. “They get kudos from their subscriber base for doing that. Instead of $5 times how many family members, they grab the whole thing in one fell swoop.”
And that unlimited aspect is important, considering that youth are the biggest messaging users.
Who’s watching the children?
Another family-plan weakness is the lack of parental ability to set limits on, or cut off, features such as messaging or voice calls when the monthly limit has been reached-thus leaving frustrated parents to foot the bill, without many options to control their children’s usage.
“I have friends who have kids, they have nightmares because they can’t monitor what they’re doing,” Parsons said. “Everyone is texting each other and going over their plan-$30, $40, $50 a month.”
Sprint Nextel attempts to soften the overage blow with its Fair & Flexible plans that lump a bucket of overage minutes for a flat rate, though the carrier has recently raised the price per minute of that option.
Prepaid shortfalls
Prepaid is typically touted as the solution to this problem-but that doesn’t tie young users to a carrier the way that family plans do. Mobile virtual network operator Disney Mobile was launched with features that allow parents to limit usage without completely cutting off their kids’ ability to use the phone in an emergency, and the national carriers have yet to adopt Disney Mobile’s approach beyond an emphasis on tracking children’s handsets via GPS.
Disney Mobile also addresses a problem which large families face with wireless, in that the national carrier typically limit the number of shared lines to a maximum of five; Disney Mobile allows a total of nine shared lines on one plan.
Meanwhile, Alltel Corp. has introduced its MyCircle service – for individual or family plans – that allows users to select up to 10 wireless or wireline numbers on any network to call for free, effectively expanding the reach of the family plan beyond the plan members and the carrier’s network. T-Mobile USA recently introduced a new user interface called myFaves that allows users to choose five numbers for unlimited calling. Both Alltel and T-Mobile USA’s plans for families include unlimited mobile-to-mobile calling among users on the same network (although that option is not included in T-Mobile USA’s individual myFaves plans).
“I think probably the other carriers will adopt that as well, having ‘friends’ on another network,” Parsons said. “That’s something I think is going to take hold and become more of a mass product.”
