Today T-Mobile announced that it will begin selling the iPhone 5, which is nice for T-Mobile customers, because that is a nice phone. But what's more interesting is the new "Uncarrier" plan, whereby T-Mobile is attempting to shake up how Americans buy smartphones.
The Uncarrier plan is a half-step towards contract-free plans. You aren't roped into a contract, as you are with other carriers. Instead, you buy a phone at full price (or pay it off incrementally) and thus get a (slightly) cheaper monthly bill. It isn't enough; American smartphone plans are still pretty bad. But at least it's movement towards something a little more transparent and consumer-focused.
Here's how you normally buy a smartphone in the U.S. You pay $199 "for the phone," up front, and you sign up (or renew) a two-year contract with that carrier. Over the course of those two years, you pay a monthly fee for your voice and data. The total price varies, but over two years, you'll probably pay somewhere between $1,800 and $2,400, depending on your plan. Rolled into this fee, secretly, you're paying the carrier back for giving you a discount on your phone. This is the "subsidization" setup.
It is a very dumb setup.
The iPhone 5 doesn't really cost $199. It costs $649. Your carrier is eating the difference, in exchange for a two-year contract. With that two-year contract, you can't switch carriers, because 1) you've signed a contract, which will cost you a fee if you want to break it, and 2) your phone has been "locked" to your carrier. (This is done by the manufacturer; it's a software lock, so it can be unlocked, but it's not easy to do.) That reduces competition between the carriers; people often stick with their carriers for years and years, because you only get one chance to switch every other year, and your old phone won't work with your new carrier anyway. That means that it also encourages you to throw your phone away and get a new one every two years. After all, you're paying $80 or $100 a month for this plan--why not spring for a new one if it's being offered, since it's subsidized to be only another $199?
This is designed to feed a cycle of consumption, and to provide the wireless carriers with stability. It's difficult and expensive for the customer to stop being a customer, so the carrier is assured to keep getting your money.
Another problem: Half of the smartphone-owning American populace is going to buy a new phone each year. So Apple, Samsung, HTC, and the rest are on once-a-year (or less!) cycles. The manufacturers have a huge, consistent, guaranteed market. The next time you think "man, this phone sure looks like last year's," remember this. This is why.
T-Mobile's new plan is marginally different. There's no two-year contract involved, but there's still a subsidy option. You can either pay that $649 up front, or you can pay only $99, and then fold an overt $20 a month into your monthly bill for two years. After two years, you'll have paid a total of $579, which is cheaper than the $649 you'd pay up front. The cheaper price and installment plan are T-Mobile's replacement for the contract--a bribe to stay with them for two years, rather than a monetary punishment if you leave (though there might be a monetary punishment if you leave as well; T-Mobile hasn't said, yet.) The monthly fees for voice and data are cheaper than Verizon, AT&T, and Sprint, but not by much. You'll spend a minimum of $50 a month for 500MB of data--that won't be enough for anyone who does more than the occasional email--and they won't charge you for going over, but they'll throttle your speed so it'll be real unpleasant.
So at the bare minimum, in which you pay $50 a month and get the installment plan on the phone, by the time your not-quite-but-almost-a-contract time is up, you've paid $1,780. Compare that to Verizon Wireless, the nation's most popular carrier. The cheapest individual plan for the iPhone 5 you can get is a 1GB plan, which costs $50 per month--except, you also have to get a "monthly line access fee," which is nonsense, and that's an extra $40 per month. Your total price over those two years, with a nice new 16GB iPhone 5? A whopping $2,360.
The alternative, here, is to just pay up front what the phone really costs, and then pay a carrier for voice and data. No contracts necessary. No subsidizing. The plans would be cheaper, because, theoretically, the price of the phone doesn't have to be built into your monthly fee--because you've already paid for the phone in full.
And! No nearly-new phones thrown in the garbage just because they're one generation old. Smartphones, especially the batteries, have to be disposed of properly; they contain metals which can cause damage to the environment. And, you know, it's wasteful.
I'll go even further: Your monthly fee should be pay-as-you go. Pay for what you use, not what you might use. The Karma Wi-Fi hotspot has the right idea: when you need more data, you buy more data. The idea that you need to sign up for a 2GB plan or a 4GB plan is ridiculous. Imagine if all of your bills worked that way! Pay the grocery store $500 per month, every month. If you eat out a lot that month and spend less on groceries, well, too bad! That's just money down the drain. If you have a big dinner party and need to pay more than $500 one month, well, you guessed wrong, so the grocery store will charge you a penalty for going over.
If you paid by the GB, rather than trying to guess how much you'll use next month, you'd pay more some months and less some months. Whether this would work out mostly depends on your usage; for heavy users, like myself, it makes sense to just spring for an unlimited plan. But not for everyone! It's the low-data users who get screwed here; on T-Mobile's plan, I'd use, say, 7GB a month, and pay $70 for the unlimited plan. So my cost per GB is $10. But if somebody only uses 500MB, they're paying $50, so their cost per GB is a hundred dollars.
Installment plans for phones, like T-Mobile's, aren't a terrible idea. Not everyone has $649 up front that they can spend on a phone. But that's a pretty expensive phone; our favorite smartphone of last year, Google's Nexus 4, is sold contract-free, unlocked, just the way it should be--and it starts at $300. That's barely more expensive than the subsidized phones.
The American system of selling smartphones discourages consumer freedom, stifles competition between the carriers, rewards reckless consumerism, and costs customers more money than necessary, all to pad profits for the enormous carriers and phone manufacturers. It is bad! Ban it, and let's everyone just buy what we want and pay for what we use.
What??? American phone companies are trying to bend people over a barrel?? Say it isn't so, Dan!
Cell phone providers have taken the same path as banks and have found that people who don't pay precise attention to what they're doing will pay a premium.
As a libertarian, I hate to suggest it, but maybe it's time for the government to step in and throw regulations at them. No one has decided that it would be profitable to do a pay-per-use system yet because the current system is (evil, but) lucrative.
So buy the damn phone from the same people that your 'carrier' shops with, without the bs. Run your phone from your pc. Give yourself all the options. Pay electric bills, not phone bills.
I wonder how much of the difference is price that was mentioned is just down to paying for Verizon versus T-Mobile.
I'm with Verizon because A) I still have unlimited data ( though they keep pushing harder and harder to get me off of it. ) and B) The other networks don't even compare for coverage. I get LTE in places other networks get no signal at all. Sure, there are those rare instances where it's the opposite, but by far Verizon has way better coverage. I can't count how many time in the middle of nowhere in the Army I would get signal and absolutely no one else ( that was on a different carrier ) would get any signal.
It would have been better to compare one of the smaller networks such as AT&T.
I'm not sure yet how I feel about these changes, and for the time being I don't care. I have 1.5 years left on my current contract. I will re-evaluate things then. Unfortunately, it just looks like I will have to start saving money on my own, and buy my phones and just stick with Verizon. Then, I will be paying the same price for my monthly bill but also be fronting the full cost of the phone. That's the only way I can see keeping both Verizon and unlimited data though. ( Unlimited on Verizon btw is the same price as the lowest data plan, $30 per month.) I'm certainly not paying several times more to get the same. Unless some pay as you go comes out with an actually proper price of less than about $10 per gig, then I have to stay unlimited.
Also: Don't think for a minute that if manufacturers go to releasing phones only once every 2 years that there will be any bigger leaps. It won't happen. Sure, they will have twice as long to develop it, but with competitors also releasing only once every 2 years they will have far less pressure to create better phones. You're an idiot if you are buying a new phone every single year anyways as you are both paying the subsidy for your previous phone, as well as the full price for the new one. You buy a phone every 2 years at the earliest, which sees a huge difference. Compare the galaxy S2 to the S4 and you'll see. Heck, there's a big difference between the S3 and 4, it was just over-hyped and people expected more than they should have.
There are dozens of cell phone carriers in the U.S. If you don't like the service offering of yours, switch.
Several U.S. carriers offer pay-per-use plans as well as plans that don't include phones as part of the cost (you buy your own).
So what's the problem?
"Ban it, and let's everyone just buy what we want and pay for what we use."
It is not often that people contradict themselves so quickly. This one is in a single sentence.
There is no need to ban anything if your goal is to let people buy what they want.
If people prefer the new offer, then they will stop buying the old offers that have annoying contracts.
That said, I agree with your overall analysis. I welcome this new development and I hope it will have positive competitive effect.
AT&T and Verizon phones aren't just "locked" to prevent changing carriers. There are hardware differences in the phones, and protocols used by the carrier's transmission equipment. Phones for these two carriers can never be used on each others system.
The real ripoff is that you can't use a smartphone on a network without being forced to buy an expensive data plan. Even if OWN the phone - don't use their data, and have the 3/4G data network shut off on the phone. If they detect you talking on a smartphone, they'll add the data plan, without even notifying you. So forget about just using your WiFi - you'll end up paying for 4G anyway.
Virgin Mobile, Unlimited internet unlimited text 300 minutes. Still greathearted in at $25/m, new accounts its $35. This thing runs off the sprint network but does not roam at all and coverage is a bit spotty but your $100/m bills make my $300 cell phone booster look cheap.
I bought and use a ATT&T Sumsung a157 unlocked with T-mobile with no issues.
Ting does essentially what this article is calling for: pay only for what you use. Its pretty good for families who don't use tons of data. I recently switched and am saving about $150/month on 5 lines.
Its a sprint mvno. Android smartphones only (for now). But you get LTE and tethering/hotspot for free.
You can use my referal link for $25 off a phone or get a service credit ;)
Why compare Verizon's plan? It's obviously the most expensive.
I've been with AT&T for wireless for almost a decade.
My Galaxy S3 cost me $100 for my new contract last October, and currently paying $80 a month for 600 minutes (grandfathered), unlimited texting, and 2GB of data (fine for what I use my phone for). Figures out to $2020.00 for the next 24 months.
I don't have a problem with contracts. Maybe people who live paycheck to paycheck do. But then maybe they didn't need an expensive iPhone and hordes of data in the first place. Unless they don't own a PC, then my bad.
Comcast on the other hand..... Highway robbery....
Gorlock: I can use my Verizon Samsung Galaxy S3 on GSM networks. While the vast majority of the time you can't go between the 2 because of the difference between CDMA and GSM, there ARE some which can. Typically these are so-called "World" phones, as most other places use GSM. That being said, you will need a different SIM card, which is hardware, but there's nothing to crack here in most cases.
I wholeheartedly agree with you on the second post though. I really wanted to just give my old HTC Incredible to my mom. She wouldn't use the data portions of it at all, but she had no choice. If she wanted to activate the Incredible, it would require a data plan. ARGH! That one really pisses me off.
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+2 on he comment about using Ting. They already do exactly what this article suggests: charging you for only what you use. I don't know anyone who has switched without saving considerable money. I love the smartphone without the wasteful data plan. It amazes me that people are so entrenched in the way the big companies do it now, that they don't even register when I tell them about Ting. It is serious what they're slogan says: mobile that makes sense.
I have an Android Motorola smart phone with unlimited minutes, unlimited text, unlimited data, no roaming charges, and can make phone calls from anywhere in the world where there is WiFi back to the USA and Canada for free. With no contract to sign, I can cancel at any time with no termination fee. The phone has all the usual apps, and more apps to download from Google Play Store. It has maps, GPS, webrowser, voice navigation, and voice recognition for search, input, and hands-free operation. The touch screen is 1 and 7/8" wide by 3 and 1/4" height.
I pay $19 per month. You must buy the phone, a one-time cost of $249, and pay a one-time setup fee of $10. For the first 30 days, if you don't like it for any reason, return the phone and get your $249 + $10 = $259 back.
I can tell you the name of the company, but that would be inappropriate for Comments. However, you can find out yourself by googling "no contract $19 per month" and enjoy the beginning of the end of big phone companies scamming you into spending thousands of dollars.
Cell phone service providers cannot "screw you" unless you allow them to. Signing service contracts is entirely voluntary on the part of consumers. The only entity that can "screw you" financially without your consent, are governments.
like Rose explained I am alarmed that a student can get paid $9191 in four weeks on the computer. did you see this website <strong>-- Buzz80.ℂOM</strong>
Really, I feel Apple iPhone buyers are the ones who crave for any news of very small upgrades. Not really new at that and people who just have to have Apple anything are stupid and crazy.I would go for a Motorola smartphone that don't cost for overpriced iPhones. Droid RAZR MAXX HD is the phone for me. And I think I should be able to change or upgrade when I like for compitition and price wars to bring plan prices down for data.
remember that these telco's are in business to make LOTSA $$$ so they can make LOTSA profits! and to do that you gotta have a subscriber model that works. and the working part absolutely dictates that ALL of them gouge we the people to the maximum that we're able to tolerate. so. to do this you lock peole into contracts #1. give them some eye-candy they can't refuse (paying for ludicrously priced hardware over time). and of course not only that. now you gotta pay through the nose for SERVICE as well (and while you're at it don't even THINK about checking out text costs per gb!... you would be SHOCKED!). no doubt about it john q is just plain STUPID and getting STUPIDER with each passing day. so prove me wrong and get SMART. buy a tracfone, people. because I for one have absolutely no sympathy for ANYBODY that's paying EIGHT HUNDRED DOLLARS FOR A GIG OF (text) DATA!
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I jumped all of those hurdles and now I enjoy FREE unlimited 4G service. Smart Money says check this out the only company offering FREE cellphone service (until other companies get smart enough to follow suit, but in the meantime their the one and only) goto www.solavei.com/ybtelecom
This is like invasion of the bodysnatchers everyone with common sense is getting in on this. The only thing is will they get in sooner or later! Pssst!!! There are advantages to getting in sooner, here's one: MY CELLPHONE COMPANY PAYS ME!!! Enjoy!