T-Mobile: A Major Change? Not Exactly

March 27th, 2013

If you believe T-Mobile’s hype machine, they are doing away with the traditional wireless carrier contract. Instead of being saddled with a two-year contract and early termination fees if you quit early, the handset will be unbundled from your cellular plan. So you will get a lower price, sort of.

Now it’s true that T-Mobile has offered cheaper prices than the competition, and the decision to roll out LTE service will help the company catch up with AT&T, Sprint and Verizon Wireless. But it’ll take time, since only seven U.S. markets are getting LTE from T-Mobile in the initial rollout, including Houston, Las Vegas and Phoenix. But not New York City, Chicago, or any of the very largest cities. But give them time. The company promises support for 200 million U.S. residents by the end of the year.

As to the handsets, you can buy one upfront with a single payment of hundreds of dollars for the flagship models from major companies. Or, and this is the catcher, make a smaller down payment and pay the rest over 24 months. So when the iPhone 5 arrives on April 12, the down payment will be $99, with an additional $480 paid over a 20 month period. Total cost $579. The iPhone 4 and iPhone 4s will be appropriately cheaper. After two years, the phone is yours, and your T-Mobile monthly payments will be reduced accordingly.

Yes, you can cancel your T-Mobile plan at any time, but you’re still obligated to pay for the phone. So how does that differ from the early termination fees exacted by other carriers?

T-Mobile can rightly argue that, with a traditional subsidized deal, even after two years you are still making payments on your handset, since the price doesn’t drop. So T-Mobile gets kudos for honesty. At the same time, many customers do upgrade handsets every couple of years, so the cost advantages may be less certain in the real world. There is also the issue of getting credit approval for a payment plan, and the standards could be more stringent than the wireless contract itself. That remains to be seen.

Meanwhile, it’s not that iPhone users haven’t already signed up with T-Mobile. An estimated two million iPhones are on the carrier’s network now, but saddled with what are essentially 2G download speeds, because T-Mobile uses a frequency for 4G speeds, 1700MHz, that isn’t supported by the iPhone. But the company is reportedly working on switching a large portion of their network to 1900MHz, same as AT&T, in the coming months. That will mean a sudden and very large speed boost for existing iPhone customers. In any case, the T-Mobile version of the iPhone is a tweaked version that already supports the existing frequencies, which may explain why it took a little more time for Apple’s smartphone to be offered.

So how will you benefit from T-Mobile’s official support for the iPhone? Well, if you’re an AT&T customer with a contract due to expire soon, or you’re in the market for a new wireless plan, having an affordable alternative is a good thing. If you have an iPhone 5 to bring to T-Mobile, or plan on buying one, you may suddenly experience higher quality calls (sometimes anyway), because T-Mobile will be the U.S. only carrier to offer the handset’s HD Voice feature. Though Apple touted the high fidelity voice feature during the iPhone 5 rollout last September, it hasn’t meant a thing for U.S. customers.

Early reports from those who attended the T-Mobile rollout report more robust voice quality, although it may not account for much if the person at the other end of call isn’t using T-Mobile. But it will provide T-Mobile with yet another competitive advantage.

The rise of T-Mobile from failed AT&T merger partner is actually a good thing. It gives Apple a wider reach, but it also offers some needed competition for the top three carriers. It will also give an alternative for disgruntled AT&T users. T-Mobile has rated somewhat better than AT&T, although your experience will vary from city to city.

While I realize some of you may depend on Consumer Reports to accurately rate wireless carriers, the recent ratings are curiously contradictory. So, for example, T-Mobile rates a 64, just two points ahead of AT&T for what the magazine calls “Standard Service,” which means postpaid, where you’re billed for services you’ve already received. Under the “Prepaid Service” category, where you pay for your services in advance, T-Mobile gets a 76, third in the list, while AT&T’s GoPhone service garners a 68, which is dead last. Assuming the same or a similar handset, you’d expect the ratings between prepaid and postpaid services to be essentially identical. You are, after all, using the same network; only the payment plan is different.

But that isn’t what CR’s survey shows, and that would appear to put the entire rating structure in question. But it’s not that the magazine will ever presume to explain such discrepancies. Ratings of this sort are largely based on reader responses to questionnaires, a highly subjective and inaccurate resource, rather than direct research into actual carrier performance in any individual city.

In any case, the media is already touting T-Mobile’s decision to kill traditional carrier contracts as a sea change for the wireless industry. But if you are obligated to pay for your new handset every single month for the same period as the standard subsidy deal, what difference does it make? Marketing wins again over logic.

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2 Responses to “T-Mobile: A Major Change? Not Exactly”

  1. Articles you should read (March 27) …. says:

    […] “T-Mobile: A Major Change? Not Exactly: If you believe T-Mobile’s hype machine, they are doing away with the traditional wireless carrier contract. Instead of being saddled with a two-year contract and early termination fees if you quit early, the handset will be unbundled from your cellular plan. So you will get a lower price, sort of.” — “The Tech Night Owl” (www.technightowl.com) […]

  2. David says:

    I really like seeing the price of the phone separated from the price of the service and wish every carrier was that honest about what your money is paying for.

    The true beneficiaries of a rapid replacement cycle are the phone manufacturers and carriers who are constantly collecting money for new hardware. Rapid replacement also means they don’t have to provide OS updates for any of their phones because they know you’ll be getting a new one soon anyway.

    The losers are the environment and customers who are essentially renting a phone forever. Yet it’s claimed that customers are the ones demanding the option of getting a new phone even more frequently than the phone company mandates. What’s wrong with using a 2 year old phone?

    At least now people will see that using an older phone or purchasing a used one can save them $20/mo.

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