T-Mobile Ends Cellular Contracts

T-Mobile Ends Cellular Contracts

The smallest of the nation's big wireless carriers tries a different approach

With cellular customers awash in expensive monthly bills and long-term contracts, struggling wireless carrier T-Mobile is trying a different tactic: It’s eliminating those contracts and lowering prices across the board. The question is: Will users accept the perceived downsides of T-Mobile’s more limited availability in order to save money?

T-Mobile—the smallest of the four biggest US-based wireless carriers by far—announced its strategy change at an event Tuesday in which it branded itself as the “un-carrier.” And CEO John Legree—an interesting character on many levels—won big points for his plain talk and clear vision.

“This is the biggest crock of s#!t I've ever heard in my life,” he said at the Tuesday event. “Do you have any idea how much you're paying [your wireless carrier]?”

Related: "T-Mobile, Verizon Now Selling Windows Phone 8 Handsets"

T-Mobile’s plan is simple: It’s not doing what the other major carriers are doing, and in this way is behaving more like upstart regional competitors such as US Cellular and Leap/Cricket Wireless. That is, rather than rope customers into two-year contracts each time they purchase a new smartphone, T-Mobile will let customers buy those phones outright instead, and at prices that are lower than similar purchases directly from the phone maker or at other carriers. And the firm is offering monthly services that exceed those of other carriers while costing less. This saves money, of course, but it also means that customers can pack up and leave at any time.

The carrier is offering unlimited talk, text, and Internet access, including 500MB of mobile hotspot (tethering) access for $70 per month. But customers can save even more with a $50 plan that provides unlimited talk, text, and Internet, though data speeds are slowed after the first 500MB per month. This compares with average monthly fees in the $100 range at the other major wireless carriers.

T-Mobile is also finally offering Apple’s iPhone 5, and claims to be “the only carrier to offer the iPhone 5 without a contract … on a screaming 4G LTE network.” Because Apple’s handset is so expensive—it normally costs $650 or more to buy it outright—T-Mobile in this one case is requiring a $100 down payment plus an additional $20 per month over two years. Customers can still leave the carrier, but to do so they’d need to pay off the remainder of that iPhone 5 responsibility.

(Other high-end smartphones will come with similar T-Mobile vigs, including the BlackBerry Z10, HTC One, Samsung Galaxy Note II, and Samsung Galaxy S 4. But their monthly fees going forward will vary somewhat; all are less expensive overall than the iPhone 5.)

While T-Mobile is understandably celebrating its acquisition of the iPhone 5, the special payment situation that this and other high-end phones requires explains why T-Mobile is changing its strategy overall: Many smartphones are simply too expensive, and by hiding that cost inside of two-year contracts, wireless carriers are, in T-Mobile’s words, fooling customers into thinking otherwise.

T-Mobile has other issues, of course. As the smallest of the big carriers, it has the least desirable and least advanced network, as well. The firm announced plans to change that, and is finally rolling out 4G LTE services in seven metropolitan areas—Baltimore, Houston, Kansas City, Las Vegas, Phoenix,  San Jose, and Washington, DC. It plans to expand this offering throughout 2013 and says it will provide 4G LTE connectivity to 200 million users by the end of the year.

Related: "Nokia to Ship Previously Unannounced Lumia 810 via T-Mobile"

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