T-Mobile Bumps Data Prices, Pushes Customers to "Go European"
March 27, 2012 10:40 AM
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(Source: Dreamworks Pictures)
Some are interpreting bump as push to move customers into value plans
Deutsche Telekom AG's (
) T-Mobile USA has struggled lately,
shedding 700k customers in Q4 2011
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. (
) and Vodafone Group Plc.'s (
) -- 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.
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. (
), AT&T Inc. (
), 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.
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
, 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 [
]. 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. (
). 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.
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RE: Discounts don't compensate for phone hardware
3/27/2012 12:48:48 PM
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.
RE: Discounts don't compensate for phone hardware
3/27/2012 6:18:47 PM
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.
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