T-Mobile Frees U.S. Customers of Subsidies, Provides Appealing Flexibility, Price
March 25, 2013 1:58 PM
comment(s) - last by
Downsides include up-front costs and sometimes patchy network
T-Mobile USA -- invigorated by a
merger with MetroPCS
Communications Inc. (
), courtesy of the partial acquisition of MetroPCS by parent Deutsche Telekom AG's (
) -- is looking to
rock the U.S. cellular market
by switching to a
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
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.
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. (
) and Vodafone Group Plc.'s (
) 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. (
), and AT&T, Inc. (
), 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
by HTC Corp. (
the Galaxy S IV
by Samsung Electronics Comp., Ltd (
) incoming, T-Mobile may see a strong pickup if it can properly advertise just how good a deal it's giving U.S. customers.
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RE: Proof that the subsidy model is WIDELY unpopular?
3/25/2013 6:04:24 PM
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"
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!
RE: Proof that the subsidy model is WIDELY unpopular?
Dr of crap
Dr of crap
3/26/2013 1:00:53 PM
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.
"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook
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