Wednesday, March 27, 2013

T-Mobile does away with contracts

T-Mobile held a big event this week to announce a huge change for the company. As of now, they are completely getting rid of the standard 2-year contract model that proliferates the wireless industry in the United States. Customers will now pay for the plan and the phone separately with no long-term commitment. This is kind of a big deal.

I've written about this before, but I'll do a quick recap. The way things are typically done in the US is to chose your carrier first, then pick from their selection of phones. You sign a 2-year contract in exchange for a lower priced phone, usually $99 or $199 instead of $500 or more. The two obvious problems with this plan? When your 2-year commitment is over, your plan price doesn't go down; and if you already have a phone you want to use, you still pay the same monthly price as those who took the "discounted" new phone.


T-Mobile is now changing the game completely. Customers simply pick the amount of data they want (all plans include unlimited talk and text). The best plan is truly unlimited everything (actually unlimited, no fake caps or throttling) for $70 per month.

Customers can bring their own device let that be the end of it. Their bill is $70 per month with no contract. As the T-Mobile CEO put it at the event, "if we suck this month, drop us!"

However, if customers don't have their own phone or want a new one, they can purchase one on an installment plan. High end smartphones like the HTC One or iPhone 5 will cost $99 down plus $20 per month until the device is paid off. If you cancel your plan, there's no termination fee, you simply pay the remaining balance on the device.

So for someone who wants an unlimited plan plus a new phone, their bill would be $90 per month until the phone is paid off, afterwhich it drops back to $70! Now THAT'S the way it should work! Of course, devices can also be purchased outright at full price, and you're free to bring a device you purchased elsewhere.

These new plans definitely fly in the face of the way US consumers have been trained to think. T-Mobile is offering some incredible value and freedom here, but they face a serious uphill battle to educate the general public. The new plans, along with their upcoming LTE network, have serious potential to bring in new customeres...if it's marketed correctly.

Here's to T-Mobile for changing the game. Let's hope it works.