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Downsides include up-front costs and sometimes patchy network

T-Mobile USA -- invigorated by a merger with MetroPCS Communications Inc. (PCS), courtesy of the partial acquisition of MetroPCS by parent Deutsche Telekom AG's (ETR:DTE) -- is looking to rock the U.S. cellular market by switching to a mostly subsidy-free "UNcarrier" model.

I. The Rollout

Traditionally smartphones in the U.S. cost anywhere from nothing (free) to a couple hundred dollars.  The true cost of these smartphone devices can be $600 USD or more.  But carriers have transferred that cost to customers over the life of the plan via higher service bills.  

It's long seemed a clever psychological gambit; tricking customers into thinking they're paying less.  But it's not one that everyone is happy with.  Of late opposition to the subsidy model has been mounting.  And T-Mobile USA is leading the critics.

Starting today you'll be able to buy an unsubsidized handset from the carrier or elsewhere and then build a service package buffet-style that works for you.

Unsubsidized plans
T-Mobile rolls out its new unsubsidized pricing scheme today.
[Image Source: T-Mobile USA via TMONews]

Pricing varies based on the amount of data you select (500 MB, 2 GB, 4 GB, 6 GB, 8 GB, 10 GB, 12 GB, and unlimited options are possible).  For the 500 MB option you get that, plus unlimited talk and text for $50 USD/month.  For $20 USD you get "unlimited" data (no overages), while for each $10 USD more, you get 2 GB of unthrottled data.

II. What Do You Gain? What Do You Lose?

So how does this stack up to other carriers? You have to remember; you're not getting your handset subsidized.  

With that in mind let's consider a 1 GB data contract with unlimited talk and text.  On the nation's largest network -- Verizon Communications Inc. (VZ) and Vodafone Group Plc.'s (LON:VOD) joint-subsidiary Verizon Wireless -- you get this for $90 USD/month on a two-year contract.  The same contract is $60 USD/month on T-Mobile.  So you save $720 USD over the course of the two-year contract by picking T-Mobile.

Most premium smartphones on T-Mobile fall in the $400-500 USD range, so even with the cost of the phone, you'll still come out a couple hundred dollars ahead.  Plus T-Mobile USA does offer financing to essentially lessen the blow of paying for your new phone up front.  There's (of course) a small fee (interest) involved, but overall it's not as bad as a subsidized plan.

Also recall that T-Mobile subscribers are now "free" and can leave at any time -- versus subsidized contract customers on other networks who face incremental cancellation fee penalties for jumping ship before the contract's 2 years are up.

Buying handsets like the HTC One may be expensive unsubsidized, but T-Mobile's pricing scheme will save you significantly over the course of your contract.

So the upsides are being contract free, saving money, and having a more clear perspective on what you're paying for service versus what you're paying for hardware.

About the only downsides are that you do have to pay up-front, and more importantly that T-Mobile's HSPA+ 3.5G network leaves something to be desired in terms of coverage and speed.  T-Mobile has promised an aggressive LTE rollout this year to catch up with rivals Verizon, Sprint Nextel Corp. (S), and AT&T, Inc. (T), but it's premature to assume it will achieve its ambitious goals for that push.

Regardless, if you want the best contract price-wise T-Mobile is the place to be (or possibly one of Sprint's various pre-paid brands).  With handsets like the HTC One by HTC Corp. (TPE:2498) and the Galaxy S IV by Samsung Electronics Comp., Ltd (KSC:005930) incoming, T-Mobile may see a strong pickup if it can properly advertise just how good a deal it's giving U.S. customers.

Source: TMONews

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What about existing contracts?
By jjlj on 3/25/2013 2:34:00 PM , Rating: 2
I'm going to assume you have to finish it out? I'm going to do some more research.

RE: What about existing contracts?
By txDrum on 3/25/2013 2:45:32 PM , Rating: 4
Yes. That's not exactly T-mobile's fault, but it's true.

I like what T-mobile is doing. I think differentiation will be good for them. I just hope they know how to sell it properly. I tried explaining the difference between the European model and American model of phone selling to my brother (a fairly tech-literate person) but for some reason he didn't seem to understand it. If T-mobile can show people that they're saving money, then they could pick up a lot of customers.

Also, aggressive marketing of the HTC one would be good for both HTC and T-mobile.

RE: What about existing contracts?
By othercents on 3/25/2013 3:01:37 PM , Rating: 2
I think they will let you move plans, because you have always been able to move plans within T-Mobile, however keep in mind that your current plan might be better than the new one. T-Mobile has removed the minute based plans and made everything unlimited text and talk, so the $20 discount some people get for using the 1500 minute plan is unavailable anymore.

Overall they are still the better price and they did reduce the international talk and text to $10 a month.

RE: What about existing contracts?
By jjlj on 3/25/2013 3:12:17 PM , Rating: 2
Well, I just asked my wife to call them and see. She just signed a 2 year contract a few months ago. Fingers crossed because she is paying about $110 per month and if we can get it down to $60+ tax/fees that would be awesome!

RE: What about existing contracts?
By jjlj on 3/25/2013 3:24:37 PM , Rating: 5
So here is the deal. We can pay a $200 migration fee, or we can wait till May 2014 and switch. By my math we can save about $320 if we pay the $200 fee and switch to the $60 plan, assuming that it would come to about $70 after taxes and fees.

RE: What about existing contracts?
By othercents on 3/25/2013 4:49:50 PM , Rating: 2
Might still be $110 a month including fees if she is paying the extra $20 per month for monthly payments on the phone, $20 per month for unlimited data, and $7.99 per month for premium handset protection. The best you can do is drop the $20 per month for unlimited data which should still default to the 500mb data plan, but not confirmed.

By quiksilvr on 3/25/2013 7:41:32 PM , Rating: 2
She will only have to pay for the phone in monthly installments if she doesn't pay the $200 fee. The whole point of the $200 fee to get out of contract is to mitigate the cost of the phone. Once she pays the $200 fee, she doesn't have to pay monthly installments for the phone too.

RE: What about existing contracts?
By xti on 3/25/2013 5:08:13 PM , Rating: 2
reminds me of the urge that customers want to pick their cable channels a la carte, and not just packaged...which is obviously a good, simple thing yet still so revolutionary by todays standards.

all it takes is for some mainstream company, in this case tmobile, and im sure/hoping the rest follow.

By DT_Reader on 3/26/2013 12:36:37 AM , Rating: 2
I just hope they know how to sell it properly.
The way to sell it properly is to show the total cost over 2 years vs. AT&T, and point out what a ripoff AT&T is. It's that simple.

RE: What about existing contracts?
By TSS on 3/26/2013 11:19:24 AM , Rating: 2

I have to be pessimistic about this one. Here in europe all carriers offer pre-paid and subsidized subscriptions. The people also know pre-paid is alot cheaper. Even so the vast majority of smartphone users are still younger people (it'll take another decade before the smartphone generation hits disposable income) who can't afford 500 euro's up front. So the vast majority of phones are bought on contract.

Even so, i recently bought a pre-paid smartphone of about 350 euro's. T-mobile has the largest selection of the carriers in my country but thing is - i didn't buy it from a carrier. That's silly. I bought it from a webshop, a so called "box shoveller" like amazon who just buys massive quantities to sell on margin. Would've cost me almost 100 euro's extra if i'd bought it at t-mobile.

Ysee the thing is people buying pre-paid are already looking to save money so they will try to save the most money possible (this is logical, you have to have saved the money upfront to buy prepaid in the first place). Which is webshop + sim only subscription, and has always been.

If i'd had to wager a guess "why now" t-mobile is starting to offer this deal, i'd point at the trillion+ dollars in student loan debt. Students are probably the biggest section of the smartphone market. They don't have money so they're all on contracts. Since tuition and such is going up, that leaves less credit - or money that can be paid monthly instead of upfront - to spend on smartphones. I'd suspect the carriers have already seen a significant drop in sales because of this, and it's always the small fish that blink first as their margins for error are smaller.

In other words T-mobile wants to get a piece of the people who do still have money, because the people who don't have money are running out of possible money.

RE: What about existing contracts?
By Solandri on 3/25/2013 5:40:35 PM , Rating: 2
T-mobile already automatically cuts your monthly service fee $15-$20 (depending on type of service) once you're out of contract.

RE: What about existing contracts?
By Nutzo on 3/26/2013 12:27:49 PM , Rating: 2
They've never done that on my plan.

I'm currently on T-Mobile with 500 minutes/unlimited text/2GB data for $70, with a subsidized phone (SIII for $200 deal)

Under the new plans it’s Unlimited Voice/text/2.5Gb data for $60, or .5GB data for $50
Don’t need unlimited voice, as I don’t even come close to the 500 minutes due to the free night and weekends.

If I wanted to get the SIII under the new plan I would have to pay $549 up front or $70+$20/month.

Total cost for my old subsidized plan over 24 months $200+($70*24)=$1880 (not including taxes)
New plan, buying the phone up front $550+($60*24)=$1990
New plan making payments on the phone $70+(80*24)=$1990

So, at least in the case of the S3, you might as well pay monthly
In either case, the new plan is $110 MORE expensive than the old subsidized plan. Not a deal.

By room200 on 3/25/2013 2:42:05 PM , Rating: 2
The other plus is that Verizon offers no unlimited plan to new subscribers. This is a huge rip-off because of the outrageous fees they charge to deliver data. I have the grandfathered unlimited data plan. As soon as they find a way to take it from me, it's bye bye Verizon, hello T-Mobile or anyone else. Chicago coverage is good with any of them.

RE: Forgot
By jjlj on 3/25/2013 3:04:27 PM , Rating: 2
Well, you can't upgrade your phone and keep unlimited data. You have to pay full price or buy a used phone and still pay the contract/subsidized monthly price. I found a way around it because I am on a business share plan. I took someone else's upgrade, activated it briefly on their number then switched the phone to my number after it was activated. This temporarily deactivated their current phone during the process. This means that my line will be eligible for an upgrade but I can't use it and neither can anyone else. They aren't supposed to do that, so I was told. Luckily I have been using the same sales rep at a corporate store for years.

But we recently changed our business plan to a data share plan, so now we have unlimited minutes and text but share a pool of 50GB per month. We average 30GB usage, and they sell data in buckets of 10, 20 or 50 if I'm not mistaken. So we chose 50GB.

RE: Forgot
By room200 on 3/25/2013 3:31:27 PM , Rating: 2
I always buy my phones outright anyway and you have to think ahead about your strategy for upgrading. I keep all of my original boxes, manuals, accessories, receipts, etc. Those things go a long way in getting an excellent price for your used phone. Also, I keep my phone protected at all times (case, screen protector). I always receive top dollar for my phones, especially when I throw in the accessories.

RE: Forgot
By DT_Reader on 3/26/2013 12:43:02 AM , Rating: 2
I don't want or need an unlimited plan. Can I get a voice-only plan? I want a phone with wi-fi (lots have it), in which case I don't need 4G. The only time I'm out of range of wi-fi is when I'm driving, and I don't use my phone when I'm driving.

Total BS
By Motoman on 3/25/2013 3:02:59 PM , Rating: 1
First of all, you're still getting a limited amount of data before being "throttled" - so the term "Unlimited" is an outright lie. Always has been, and I find it unbelievable that a regulatory body hasn't smacked them down for that. Secondly, when you're "throttled" one might expect that your speed gets cut in half, maybe...or perhaps as severely as 75%.

Nope. When you get throttled, your speed will frequently be about 10k. Significantly worse than you get with dial-up.

Also, you can pay an upcharge to use the up-to-12.5Gb plans on tethering or hotspot usage...but they refuse to sell their $70 add-on *actually* unlimited data plan for use with hotspot or tethering...or on their mobile hotspot devices. Making the entire exercise's just a bunch of marketing BS that doesn't actually help anyone.

...and yes, I just got done talking with one of their CS reps to verify that.

RE: Total BS
By Stiggalicious on 3/25/2013 4:35:06 PM , Rating: 2
I call out your shenanigans, because I tend to see about 100kbits after throttling. Sometimes it gets down to 50k or so in spots of poor coverage or high density, but for the most part my average is 100k after being throttled.

Source: I actually have T-Mobile as my phone carrier.

RE: Total BS
By Motoman on 3/25/13, Rating: 0
RE: Total BS
By Motoman on 3/25/2013 4:59:52 PM , Rating: 1
Oh, and as for the inevitable "well then why are you still a T-Mobile customer?"

...we have little choice. We live in the suburbs of a major metropolitan area of ~4 million people. I can be downtown in about 30 minutes. But we're "rural" - make no mistake. We are on 50 acres ourselves, and have 5 other houses as our neighbors close by. We're also 1.5 miles past the point where DSL ends. And there's no cable here. Satellite...don't even get me started. Did that once. Not going to do it again. And the cellular service that has the best reception here? T-Mobile.

So, we're kind of a captive audience.

For the past few months though, I've been trying EVDO Depot for internet. And yes, the website looks maybe not that great, and I've been taking it with a grain of salt myself. But in terms of putting my money where my mouth is, we're really trying to leave T-Mobile. This appears to be our only option at the time.

For $120 a month we get unlimited data without throttling, served over the Sprint network. You'll note that earlier I said that T-Mobile was the only service that has good coverage here...and it is. The Sprint tower is farther away, and frankly it's pretty spotty. But I'm planning on putting up a huge YAGI antenna, or potentially something else this spring to boost our access to the Sprint network, and then (hopefully) everything will be peachy.

Yes, $120 is a painful amount of money to pay for internet every month...but when your only other option is $80 a month for 10Gb, and then ~10k after that...$120 starts to look pretty good.

Note that I'm not even necessarily recommending EVDO a number of ways I'm unimpressed, like the fact that we got used equipment from them for starters...but the fact of the matter is that we simply have no choice.

And then:
This comment is apparently spam and we do not allow spam comments. the f%ck is that spam?

RE: Total BS
By chick0n on 3/25/2013 9:42:18 PM , Rating: 2
you are full of crap, I've been with T-mobile for over 10 YEARS and I have new and old plan.

Never got as slow as you said.

you might as well stfu and go Sprint/AT&T/Verizon and enjoy their rip offs :)

RE: Total BS
By Motoman on 3/25/2013 9:51:56 PM , Rating: 2
You're a liar.


I've confirmed that data rate with T-Mobile themselves on more than one occasion.

10$ for 2GB but 20$ for unlimited?
By txDrum on 3/25/2013 2:51:37 PM , Rating: 2
I don't understand. You can add 2GB for 10$ a month up to 12gb, but 20$ a month gives you unlimited? I'm not sure what the incentive is to add more than 2gb?

What am I missing?

By menting on 3/25/2013 4:07:14 PM , Rating: 2
the 2GB tiers include tethering, whereas the "unlimited" only gives you 500MB of tethering..

Yes, it's confusing as hell.

By Rukkian on 3/25/2013 5:04:14 PM , Rating: 2
The unlimited forbids tethering.

Faux G
By One43637 on 3/25/2013 6:04:47 PM , Rating: 2
Currently on Tmobile and did a speed test today. Results are:

45ms Ping
13.13Mbps down
1.94Mbps up

Not bad for fake 4G, and more than fast enough for just about anything the average consumer will use it for.

RE: Faux G
By chick0n on 3/25/2013 9:47:59 PM , Rating: 2
Don't worry, AT&T's "OMG LTE" gets ONLY 18 Mbps MAX (at least in my area, with FULL BARS) and forget about calls it drops every 5-7 minutes no matter what you do (b4 anybody wanna blame the phone, it's the same no matter which phone)

Great but
By djc208 on 3/25/2013 3:19:02 PM , Rating: 3
The only problem is that if you've spent $500-$700 on a phone about the only place you can "leave" to is AT&T if you want to keep the phone.

While nothing would stop you from selling the phone and going somewhere else that's trouble of a different kind.

The advantage of the European model is that you have more than once chose that will work with the same phone. Most of the time there are only two options for either technology type in the US.

Important omission
By Sivar on 3/25/2013 3:14:09 PM , Rating: 2
Contracts often do not pay for all of a higher-end phone. "Free" contract phones are often the low or sometimes mid-range units, where higher end devices still require upfront payment.
Thus, no-contract savings can be even more significant for those doing the math with the more expensive devices.

By Nutzo on 3/25/2013 6:33:23 PM , Rating: 2
Fo example:
Nexas 4 16GB
T-Moble Price: $458
Google Direct Price: $349

Galaxy S3
T-Mobile Price: $550
Unlocked at Amazon $470

Seems like it would be a better deal to bring your own phone.

I like this a lot
By BifurcatedBoat on 3/25/2013 6:59:33 PM , Rating: 2
This opens up a lot of options. I may switch from Verizon to T-Mobile when I look into upgrading my phone; maybe when the Motorola X-Phone comes out.

Virgin Mobile!
By danjw1 on 3/26/2013 2:08:21 PM , Rating: 2
With virgin mobile, you can get 300minutes with unlimited data and messaging for $35/mo. They are serviced by the Sprint network, so you do have to deal with being treated as a second class citizen by the network. But, it is comparable to what T-Mobile is offering.

Proof that the subsidy model is WIDELY unpopular?
By name99 on 3/25/13, Rating: -1
By room200 on 3/25/2013 3:27:07 PM , Rating: 2
Yes. I mean God forbid they'd try a different business model than everyone else; MUST be desperation. (sarcasm off)

By Solandri on 3/25/2013 5:48:01 PM , Rating: 2
Part of the problem is that most people under the subsidy model don't realize they're being ripped off once they're out of contract. In theory your monthly service fee should drop because your phone is no longer being subsidized. In practice, nobody but T-mobile does it.

Opposition to the subsidy model would rise dramatically if carriers were forced to label the subsidy in the bill. Then when people started getting out-of-contract bills with the subsidy still listed, they'd understand what's going on.

The whole thing needs to move from a subsidy model to a loan model anyway, just like with car loans or leases. All the subsidy model does is allow the carriers to hide the true cost of the phone in the monthly service fee. In all other respects, it's treated just like a loan (credit check, early termination fee).

By DT_Reader on 3/26/2013 12:51:19 AM , Rating: 2
You forget this has been the Phone Company business model since forever. When AT&T introduced colored phones (they were always black) they charged a premium of around $6/month, which was a LOT in the 1950s. A colored phone was a luxury item. Then, in the late 1960s, anyone could get any color offered for the price of black. But those who already had a colored phone kept paying that $6/month surcharge right up until the government broke up Ma Bell in the 1970s and finally allowed you to own your own phone.

The telephone business has always been, and always will be, a rip-off.

By Reclaimer77 on 3/25/2013 6:04:24 PM , Rating: 1
Yup. I probably wouldn't have a smartphone without the subsidy model. Not because the money is an issue, but just because if I had to buy the phone I would talk myself out it thinking of how much more cooler stuff I could get with that money instead. I would think "$700 for a phone that is obsolete after a year? I'll just buy a cheap phone and upgrade my computer or build a new machine" etc etc.

That's the real kicker, obsolescence. The rate that (non-Apple) smartphones are advancing is insane right now. I really don't even WANT to buy one outright when it's just going to be a doorstop in 15 months. The current subsidy model makes it extremely easy to use a phone then upgrade when that phone becomes crap or your contract expires.

It's like back in the day when we were dropping $2.5k plus on a new computer, only to have it's performance doubled and tripled by newer models after only a year or so, along with newer features we didn't have! God that sucked.

The model isn't unpopular at all. This is plainly obvious to anyone by just looking at how many people buy into it!

By Dr of crap on 3/26/2013 1:00:53 PM , Rating: 2
My point exactly.
EVERYONE on this site falls all over the latest cell phones that come out. AND that happens in less time then the 2 year plan you sign up for.

SOOOOO when your 2 years are up you upgrade to the next phone and ect...

With this new model, you'll jump ship earlier, fork out more money, and there will be A LOT of people dropping out because they CAN'T AFFORD to pay for service. That's why we all buy cars by monthly payments, cell phones/service by monthly service. Up front pricing might save you a bit, but it will also make a large segment of people KEEP their existing cell phones longer.

"The Space Elevator will be built about 50 years after everyone stops laughing" -- Sir Arthur C. Clarke

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