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  (Source: Dreamworks Pictures)
Some are interpreting bump as push to move customers into value plans

Deutsche Telekom AG's (ETR:DTE) T-Mobile USA has struggled lately, shedding 700k customers in Q4 2011 and committing to painful layoffs.  The carrier -- America's fourth largest -- still represents a strong value, and recent additions -- such as on-demand $10 USD/month unlimited calling option that is added or dropped automatically to prevent overages -- sweeten that deal.

I. Higher Prices -- For the Classic Plan 

The company is now making a risky move in a bid to drive customers from the discounted hardware "Classic" plans, into the more European "Value Plan", which requires customers to buy their own hardware.  

To push customers in that direction, T-Mobile is bumping data rates on its top tiers.  Effective April 4, data rates will bump from $20, $30, and $60 USD/month for 2, 5, and 10 GB, respectively to $20, $35, and $65 USD/month, an increase of $5 on each "Classic" plan (except for the 2 GB plan, which holds steady).

To be fair to ol' pinkie, the carrier's rate is still lower than its competitors.  For example, during its double data promotion Verizon Wireless -- a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc.'s (LON:VOD) -- offered customers 4 GB for $30 USD/month, 10 GB for $50 USD/month, and 20 GB for $80 USD/month.  In other words, T-Mobile's new pricing still beats Verizon's temporary discount at the more common 5 GB tier, though faltering at the higher tiers (a 20 GB option isn't even offered).  

And also consider that when you go over your limit on Verizon you get hit with overages, where as on T-Mobile you just get throttled; your connection is "unlimited" price-wise, though not speed-wise.

A price bump is a bit of a psychological blow to T-Mobile's image as a budget carrier.  So why would it do it?  Well, it appears that T-Mobile is pushing customers to adopt its Value Plans.

Data Plans T-Mobile
T-Mobile is making it more expensive to stick with the Classic plan. [Image Source: TmoNews]

II. Will T-Mobile's European Strategy Win Over American Consumers

T-Mobile's Value Plans definitely go against the status quo in the U.S. market, which is to offer discounted handsets, but at the cost of more expensive contracts.  By contrast, T-Mobile's Value Plan offers no handset discounts.  

The very European plan urges customers to buy their own handsets at full price.

The payoff comes when you get cheaper contract rates.  Before contracts were $5 USD/month cheaper for the voice plan, and $5 USD/month cheaper for the data plan (except for the 2GB plan, which was $10 USD/month cheaper).  The new rates raise the relative difference to $10 USD/month on all tiers of the data plan.

In other words, you may pay for that phone up front, but you'll save $15x24 = $360 over your 2 year contract.  Further, you can always bring your smartphone from another carrier over to T-Mobile and take advantage of Value Plan pricing.

For the most part Sprint Nextel Corp. (S), AT&T Inc. (T), and Verizon Wireless all practice the same policy -- premium plans, discounted hardware.  T-Mobile is trying something a bit different -- well, on some of its plans at least.  While its traditional plans are increasingly less attractive, T-Mobile does of course still offer the aforementioned discounted hardware-based "Classic" plans, as well.

T-Mobile wide

In terms of carrier mobility, there's really not much of a difference between the plans.  On T-Mobile you'll be jumping to a more expensive carrier, losing your chance to repay your hardware with your value plan if you switch.  On the flip side of the coin, if you get discounted hardware from, say AT&T, and switch to T-Mobile, you'll be hit with early termination fees -- either way there's a financial downside, T-Mobile's is just structured in a bit less punitive manner.

One final factor to consider is that T-Mobile is the only carrier to have no concrete plans to deploy LTE [1][2][3].  While it still continues its slightly sad "4G" rebranding of HSPA+ -- a technology referred to as "3.5G" by experts on standards committees -- the much faster LTE of Verizon and AT&T is nowhere to be seen.  

T-Mobile's handset selection also leaves much to be desired, though you can always buy an unlocked handset like a $480 USD Galaxy Nexus from or a $730 USD unlocked iPhone 4S from Apple, Inc. (AAPL).  Given the Value Plan discounts, these phones would end up draining your wallet roughly $120 USD and $370 USD, respectively.

Ultimately, T-Mobile USA may be fighting a culture war -- while its competitors may be more expensive over the full life of a contract, their phones are dramatically cheaper up front.  In that regard they appeal to the impulsive American customer, where as T-Mobile's more measured approach may not be as psychologically as compelling.

Source: TMONews

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Discounts don't compensate for phone hardware
By tayb on 3/27/2012 10:59:07 AM , Rating: 5
I actually much prefer the European model where you own the phone and pay a lower monthly fee. The problem with this model in America is that the lower monthly fee does not come anywhere NEAR compensating the price of new phone hardware. The joy of not signing a contract just doesn't do it for me.

The thing that I am interested in most is a data only plan. Voice plans and texting are ripoffs. Unfortunately t-mobile rips you off if you ONLY want data. $50 gets me 500 minutes, unlimited texting, and 2GB of data or $40 just gets me 2GB of data without the texting of minutes. What a sham.

Thanks but no thanks t-mobile.

RE: Discounts don't compensate for phone hardware
By king6887 on 3/27/2012 12:00:55 PM , Rating: 2
I'm not sure what exactly they are saying the European model is here. I think maybe you'd prefer something like i'm using here in the UK.

2-year contract with unlimited & uncapped data (with tethering), 300 free texts and 300 free minutes a month (also has a free extra that makes calls in the evening free regardless of minute allowance). Various choices of handsets, my HTC Desire-S puts that contract at £25 a month which is about $40 i think.

By MrBlastman on 3/27/2012 1:46:14 PM , Rating: 2
Screw contracts. I'm going to Straighttalk/Walmart plan for data/voice/text etc. I just found out they even let you use your own phone on their plan now, not just models they were offering. You simply need to buy a sim card from them and that is all.

RE: Discounts don't compensate for phone hardware
By sglive on 3/27/2012 12:27:32 PM , Rating: 3
T-mobile has their "Unlimited Web & Text with 100 Minutes Talk" plan that has 5GB at 4G/3G, unlimited text and 100 minutes for only $30 a month.

I've been using it for the last month and I like it so far.

RE: Discounts don't compensate for phone hardware
By tayb on 3/27/2012 12:31:02 PM , Rating: 2
I had not seen that until just now. That's a pretty good price but it seems like force you to buy a new phone to sign up for the service. 5GB at 4G speeds, unlimited texts, and 100 minutes is a pretty damn good deal at $30 though.

RE: Discounts don't compensate for phone hardware
By JMC2000 on 3/27/2012 1:38:43 PM , Rating: 2
Actually, you don't have to buy a new phone to get the $30 service, you just have to buy the "SIM Activation Kit" from T-Mobile for about $7.

By AmbroseAthan on 3/27/2012 2:48:23 PM , Rating: 2
This is only $1.99 through a web special right now on tmobile's site. This is almost enough for me to try and get a Samsung Note rooted to work on T-Mobile.

RE: Discounts don't compensate for phone hardware
By Lerianis on 3/27/2012 6:10:55 PM , Rating: 1
You joking, tayb? That is a TERRIBLE deal.... less than two hours worth of talk time...... yeah, most people use a lot more than that, even older people like my parents!

By Trisped on 3/27/2012 6:25:17 PM , Rating: 2
I use 10-20 minutes a month max.
I receive 10-20 texts and sent 1-5 a month.

Most of my communication happens at work (using their land lines) or via email or a VOIP system (like Vent when playing games).

I am currently on a family plan with Verizon where I only pay the $15 a month to keep my phone connected and for texting (250 texts a month I think). I am thinking about looking into this since it would be way cheaper then what I am currently doing, I could buy my own phone (I hate the subsidized phones because you end up paying $50-150 tax on a "free" phone. Plus it is my phone, I will do what I want to it.) and not worry that I am "missing out" because I do not get a new phone every 2 years (I usually get a new phone ever 4).

By BillyBatson on 3/28/2012 4:04:10 AM , Rating: 2
I have an iPhone on AT&T unlimited internet(capped at 3gb), unlimited txt, 450 mins.
I have used less than 1 hour of talk time peak and off peak combined for the last 3 years. Rollover doesn't even matter to me.
I send/receive an average of 6k txts a month
Several dozen mms a month
And use an average of 5-6gb of data a month (I normally get capped around the 12th day of the month.

That is a great sounding plan for someone who doesn't talk a lot like me. Hell if my iphone4 was "3.5g" capable and was dual-sim could pick up this tmobile plan, mapbe swap between sims for the data.

By chµck on 3/27/2012 1:29:39 PM , Rating: 2
It's not true 4g, but it's fast enough.
I'd rather have them invest in a stronger infrastructure rather than boosting speeds. My signal drops when I'm in a building with more than 2 floors.

RE: Discounts don't compensate for phone hardware
By Egglick on 3/27/2012 12:48:48 PM , Rating: 2
The only trouble is, the phone manufacturers charge obscene retail prices for their phones. When you pay $350 up front, you feel as if you're putting yourself at risk by investing in the device itself. Indeed, in either case the phone you choose may end up being a piece of trash, but if said phone was a freebie along with a more expensive plan, you're more or less covered to swap it for something else within a given timeframe.

If you drop $350+ on a phone for a Value plan, you might be SOL. Especially so if you buy a phone off Ebay or something to avoid paying full retail.

By Trisped on 3/27/2012 6:18:47 PM , Rating: 3
That is the same even if you buy the phone with the contract discount. You could be trapped in a 2 year contract without a working phone. Then you have the choice of paying for a new phone, or breaking contract and paying the early termination fee which is probably more the same as the amount the contract subsidized, so you are out the higher service fees you have been paying.

By lennylim on 3/27/2012 2:31:37 PM , Rating: 2
T-Mobile has a $30/month prepaid plan that sounds like what you're asking for. 5GB of data at 4G speed (above that at 2G speed), unlimited text, and 100 minutes of talk.

By corduroygt on 3/27/2012 6:27:03 PM , Rating: 2
You can get good value plans with smaller carriers like SimpleTalk, StraightTalk, and RedPocket. $40-50 including tax for everything unlimited and 1-2GB of data.

By FishTankX on 3/27/2012 10:23:57 PM , Rating: 2
To be fair, let's break down the $50 plan vs the $40 plan.

$50 plan
2GB of Data
~300MB of voice traffic (assuming they use 64 killobit mono voice which honestly is being WAY too generous)
and unlimited texts (which is a pittance of data, assuming each text is ~2kB in size you're looking at, even in the extreme case of 5000 texts per month, about 10MB of data)

$40 plan
2GB of data

So in terms of load to their network, the $50 plan gives you about 2.3GB of real data, vs the $40 plan which gives you 2GB of real data.

This seems like you're getting a lower price per GB on the $40 plan.

If you're concerned about paying more for voice and data, why not use mobile skype and google voice for texting? That would save you the $10 and is unlikely to eat too heavily into your data, no?

By OCedHrt on 3/28/2012 6:28:30 AM , Rating: 2
Actually, T-Mobile does come quite close if they don't already more than compensate you for the hardware.

You can get unlimited minutes and text with 2 GB of data for $60/month on T-Mobile with 2 year contract. AT&T offers unlimited minutes for $70/month without text or data. Add them both and you're at $110 or higher. That's $50 * 24 or a savings of $1200 over 2 years. Enough to buy nearly any phone.

Of course most people don't need unlimited minutes, but even the cheapest AT&T plan at 450 minutes is $40/month. Add the minimum 300 mb data for $20/month and you're at $60/month. The T-Mobile 500 minutes with 200 mb data would be $40/month. The savings are only $480 here but you're not going to get an iPhone from AT&T for free on this plan either.

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