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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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RE: Frankly...
By Reclaimer77 on 3/27/2012 8:17:07 PM , Rating: 0
Uhhh these smartphones go anywhere from $400 to upwards of $800 for premium models. The iPhone 4S unlocked is still $833 bucks! The phone everyone and his mother wants.

Your idea of "regulating" (one of my least favorite words) subsidized contracts out of the market seems like it would be a huge blow to the entire industry and consumers. What about people who still want an iPhone or Droid, Note, etc etc but aren't in a position to invest $800 on a phone?

The model you are describing has been available for years now. Yet time and time again, people go with a big carrier fully aware of the contracts, the ETF's, all of it. You can buy a phone and take it to Trac Phone or Smart Talk what have you, but only the minority do that.

They have little to no incentive to be concerned with what their customer experience is when you can't leave them anyway.

Quite a jaded and unrealistic view of business, Moto. A 2 year contract certainly doesn't mean they can treat you like crap and still expect to retain customers. A business plan where you rely on an income stream for only 2 years is surely a failed one.

I'm really finding it hard to accept your premise that an industry so large and ever growing is totally unconcerned about customer experience, customer service, and repeat business. We all hear the horror stories and griping customers, but there's tens of millions of people who feel they are getting what they paid for. It's just human nature to focus on the ONE bad experience while ignoring the many good.

If those 2 things up there happened, the industry would have to reinvent itself into a customer-centric environment

Or it would "reinvent" itself into a monopoly with Verizon Wireless eventually taking it's place as the single remaining provider because they were the only ones with enough capital and market share to survive these changes.

The unintended consequences of such a major industry-wide you really believe they'll be none?

RE: Frankly...
By FayKnaim on 3/28/2012 1:11:13 AM , Rating: 1
What about people who still want an iPhone or Droid, Note, etc etc but aren't in a position to invest $800 on a phone?

I bought five phones from T-Mobile over the last few years. For me, my wife, my parents, and my brother. I saved a lot of money buy paying "full price" and getting no contract plans from T-Mobile with great prices. All phones have a $50 a month plan with unlimited everything, talk, text, data (maybe throttled at 5gb). Best part: T-Mobile itself offers payment plans for the phones. For example, the G2 that I bought for $500 from them; they just asked into how many months I would like my phone payments divided. I said two years, so that worked out to be $20 a month, included with the regular bill.

Now isn't this much better? Transparent, more flexible, and cheaper to the consumer.

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