Achtung, T-Mobile: if Project Dark is $50 unlimited, you're in trouble
Put yourself in T-Mobile USA's shoes for a moment: rumor has it that the guys who pay the bills aren't happy. History, happenstance, and the realities of electromagnetics have left you with an oddball 3G frequency that literally no other carrier in the world uses (at least, not for HSPA). Larger competitors don't take you as seriously as you'd like, and you don't have smaller ones -- they're all regionals who don't play in the same space you do. So what's your next move?
Rumors have been swirling the past few days about a "Project Dark" (or "Black," depending on who you believe) that revolves around a few key strategies designed to turn the entire industry upside down by rapidly pilfering market share from T-Mobile's competition -- possibly to the point of leapfrogging Sprint. The first element to this is allegedly a barrage of data-rich devices including two Nokia Nseries (the N900 being one of them) and a continued heavy push to stay the Android market leader through introductions like the Motorola CLIQ and Samsung Behold II. We're totally cool with that part -- T-Mobile's investing heavily in its 3G market lately, literally lighting up new markets every few days, and it only makes sense that they'd want devices ready and able to take advantage of those speeds. The next part says that Dark will see 21Mbps HSPA+ get rolled out at a breakneck pace, presumably designed to put pressure on AT&T which is still in the midst of a less sensational 7.2Mbps introduction. Neither the handset strategy nor the 21Mbps plans are really baseless rumors; with the exception of a single unnamed Nokia, all of the phones mentioned for Dark are very real, and T-Mobile's senior vice president of engineering operations has gone on record committing to a national HSPA+ rollout next year. It's all happening -- call it Dark, Black, Light, Blue, Magenta, whatever you want.
That brings us to the final tenet of Dark, which has T-Mobile planning a blockbuster $50 all-you-can-eat plan that would undercut its nearest national competitor -- Sprint, with its Simply Everything plan -- by a ridiculous $50 (AT&T's recently-announced unlimited prepaid plan comes in at $60, but it lacks data, the most critical element here). Sounds enticing, doesn't it? Too good to be true, even, but we don't doubt T-Mobile would do it just to shake things up, especially since they've always had a reputation for undercutting the competition.
Unfortunately, it's a fool's game -- and if it happens, we're pretty sure it's going to end in tears. Here's why:
Boost Mobile -- operating on Nextel's historically robust network -- had bouts of trouble with the influx of subscriber adds brought about by its own $50 unlimited plan, and that was on a totally different scale: the phones aren't nearly as interesting and 3G data simply doesn't exist. When potential customers realize they can get, say, an N900 or a CLIQ and stream Pandora or last.fm until the cows come home for that same $50, there'll be a run on stores, riots in the streets, overturned cars, the whole nine yards. And that's before 10,000 new customers a day get home, turn on their phones, start downloading apps, make Skype calls, and cause cell sites to spontaneously combust.
Capping your potential revenue per customer at $50 a month isn't a recipe for heavy capital reinvestment, which is exactly what T-Mobile will need a lot of to make good on Dark -- and fast. In fact, both Verizon and AT&T have total ARPUs (average revenue per user) above the $50 mark already, and T-Mobile's current postpaid ARPU is up there, too. Translation: excluding a subscriber influx, T-Mobile would be taking in less money per postpaid customer than it is now while offering considerably (infinitely?) more service. Including the inevitable influx, sure, revenue goes through the roof -- but profit is a huge question mark.
One of T-Mobile's hallmarks has been stellar customer service. Historically, the carrier has never offered the biggest coverage footprint or the biggest handset selection, but you could basically always count on 'em to take care of you. Think they'll be able to keep that reputation intact with one-third again as many subscribers within a few months' time?
We're not doubting that T-Mobile is planning its 3G network (whether it be HSPA or HSPA+) for increased capacity, but the magnitude of advanced planning and expense that would be required to accommodate the number of high data consumption adds brought about by a plan this cheap would be truly staggering. It's the perfect storm -- the carrier would be simultaneously adding the most powerful devices it's ever offered and dramatically undercutting its closest competition on plan pricing, and the resulting strain would be picked up by an untested network.
Network build-outs are measured in months or years, not days. If markets start imploding because T-Mobile realizes it doesn't actually have the infrastructure to suddenly be the number two or three carrier, that's not a problem it can solve quickly -- or cheaply.
In a perfect world, we'd all have Cortex A9-powered phones running the mega-powerful operating system of your choice with 2GB of internal RAM and a 4.5-inch WVGA display hooked up to a network offering all-you-can-eat voice, data, and messaging in exchange for the pennies and lint in our pockets, but the cold, hard realities of spectrum allocation, technology, and the surly bonds of capitalism conspire to make it impossible. We beg of you, T-Mobile -- for the good of your network and your customers -- don't pull the trigger on this unless you're absolutely positive you've covered every contingency (and history suggests you've got some work to do there).
