Pete Pachal2013-03-27 23:00:13 UTCT-Mobile wants to kill the wireless contract. I think I speak for everyone in America when I say, "Have at 'em, cowboy." The company's plan to change the way the U.S. wireless industry does business is bold — and it might even have a shot — but as the nation's fourth-largest carrier, it's got a big uphill battle on its hands.
The idea is simple: Instead of selling cheap phones tied to two-year contracts that most customers loathe, instead sell the phone at full price and keep the price low by letting customers pay off the phone (interest free!) over two years.
Isn't that a contract by any other name? After all, if you want to switch carriers or buy a new phone, you'll still have to pay off the old phone, which is akin to an early termination fee. So your carrier gets your money either way, right?
Not necessarily. For the iPhone 5, at least, our own analysis showed that buying the phone from T-Mobile will cost you $600 less than an iPhone on AT&T, Verizon or Sprint over two years — a significant savings. When I asked T-Mobile regional vice president of marketing Jason Young whether the new plans are de facto contracts, he said transparency and flexibility is the difference.
"With T-Mobile, there's not a contract. That's an equipment installment plan. It gives you transparency about how long it'll take to pay off that phone over time. If you decide to trade your phone in for the residual value and apply that to another phone, you've got that flexibility."
Flexibility is nice. We like flexibility. It's particularly useful these days since phones become obsolete in months or weeks, and most carrier contracts make the costs of upgrading before you hit the 18-month mark prohibitive (I still carry an iPhone 4S, and not an iPhone 5 for that reason).
When T-Mobile CEO John Legere got up on stage at yesterday's event to rail against the horrible status quo of two-year contracts, he had me at "Stop the bullsh-t." His presentation was spirited to say the least, and although it was peppered with vulgarities, he had a sincerity that was infectious. You couldn't help but root for the guy — check out the highlights in this video:
Again, getting a phone contract-free is nice, but you know what else is nice? A reliable and consistent network. While T-Mobile's new no-contracts approach is compelling — and potentially a money-saver — it's network simply doesn't cover as much of the map as the big guys. And its LTE network is just getting started whereas Verizon's and AT&T's already reach most of the country.
"I think it's a great point," says Tom Ellefson, T-Mobile's regional vice president of engineering and operations. "Ultimately your service has to be where you live, work and play. Right now our focus is on technology upgrades. Once we sort of get to that point, we'll continue the network rollouts that we're doing."
T-Mobile won't be finished the bulk of its LTE upgrade until late this year, and then it'll need to work on integrating the spectrum it's obtaining from MetroPCS. Maybe the map will get larger then.
There's also the question of T-Mobile's future as a corporate entity. It's now two years past its failed attempt to get acquired by AT&T, after which the company publicly said it has "no Plan B." Since then it appears to be really making a go of staying in the game, leveraging its spectrum assets, buying MetroPCS and this week's "un-leashing" of wireless contracts. But is it still doomed to remain in fourth place?
Maybe not, if enough customers hate their contracts so much that they'll jump ship for magenta-adorned freedom. After all, T-Mobile finally brought the iPhone onboard — plugging a persistent leak in their subscriber base.
T-Mobile's contractless vision isn't groundbreaking (it's similar to how many wireless carriers operate in Europe), but it's definitely preferable to the alternative. That doesn't mean you should ignore the weaknesses of its network, but at least if it doesn't work out, you'll be able to leave anytime you want.
Do you think you'll switch to T-Mobile now that it's eliminated contracts? Share your reasoning in the comments.
Image courtesy of Mashable, Pete Pachal
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