Things have a funny way of timing out sometimes. Last week I responded to a piece at Phone Scoop about the carrier pricing model. The author claimed that cell phone companies were “scamming” you by charging you a price that includes a device subsidy, even if they aren’t currently subsidizing your device. My response is that if you don’t like it, you can find another carrier where you can pay an unsubsidized price. Starting today, T-Mobile will be one of those carriers.
For about a year now T-Mobile has been vocal in its opposition to device subsidies. They work for the larger carriers, giving them predictable monthly income streams. But smaller carriers need a competitive advantage at this point. Instead of merely speaking out about the inefficiencies of subsidy pricing, T-Mobile acted — and in a bold manner. Their new plans really do take the subsidy out.
The idea is similar to that of AT&T and Verizon, in that every plan gets unlimited talk and text. The costs of those services have shrunk so greatly in the past few years that carriers can afford this allotment without taking much of a hit on the margins. The real battle is for data profits, and that’s where every carrier focuses its attention. T-Mobile is no different. It provides you 500MB of high-speed data with the basic plan. After that you don’t get cut off, but instead are reduced to 2G speeds. Not ideal, but it’s better than being cut off.
Where T-Mobile truly differentiates itself is with data pricing. You want 2GB of additional data? That’ll cost you only $10 per month extra. So for $60 per month you get unlimited talk, text, and 2.5GB of data. You can’t get a smartphone plan for that cheap at any of the big carriers. want unlimited data? T-Mobile offers that, too: that’s only $70 per month, with 500MB allocated for mobile hotspot service. You can also pay to add to your hotspot allotment; hotspot tethering is included with limited data plans.
These prices look so attractive, because T-Mobile is no longer offering device subsidies. That is, you’re on the hook for the full cost of the device. But even then, the pricing can work out in your favor. T-Mobile essentially offers 0% financing on handsets, so you can pay it off during the course of your contract, with no additional fees. That is, you can walk into a store and get a Samsung Galaxy S III for $70 up front, and then add $20 to your monthly bill.
Let’s work that out compared to Verizon. With Big Red you’re paying $200 up front for the Galaxy S III, and then $100 per month on an individual plan that provides 2GB of data. In 24 months that comes to $2,600. With T-Mobile you get the same phone, plus an additional 500MB of data each month, for $1,990. If you so choose you can pay 65 percent less up front, and pay $80 per month for service, which is still far cheaper than Verizon. Or you can upgrade to unlimited and pay $2,230 over 24 months, or $90 per month with handset financing.
Make no mistake: T-Mobile just made smartphone ownership cheaper. Now that subsidy you pay is actually a payment for your device. Once you’re paid off, you stop paying. The zero percent financing means you don’t have to — and shouldn’t, really — pay for your device in full up front. They still have plenty of disadvantages, such as a weaker network. But they can compensate much for that with both their new plans and the MetroPCS merger. It’s tough to view T-Mobile optimistically, given all the trouble they’ve faced in the last two years. But for the first time in a while things are starting to look at least partly sunny.
The post T-Mobile Makes A Play To End Subsidies and Contracts appeared first on MobileMoo.