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March 26th 2013 2:28 pm

T-Mobile introduces contract-free plans, but will you switch?

T-Mobile is finally introducing their new contract-free plans. Under these plans, the cost of the device would be factored into your bill over 24 months. So, if we use the just-announced T-Mobile iPhone 5 (www.engadget.com­/2013­/03­/26­/t­-mobile­-iphone/) as an example, T-Mobile is asking you to put down $99 and then pay $20/month over 24 months, which brings your total cost for the device to $579. Additionally, after the phone is paid off you get the bonus of a cheaper bill!

Now as far as the plans go, T-Mobile is offering unlimited talk, text, web, and 500MB of "high-speed data" for $50/month. A second line is $30, and each line after that is $10. T-Mobile is also offering 2GB of high-speed data for $10 and unlimited high-speed data for $20. One thing to note with these plans are that you can get tethering but only the FIRST 500MB of tethered data is at high-speed regardless of the plan choice. More on that is here: www.t­-mobile.com­/cell­-phone­-plans and you can use a little calculator tool here: www.t­-mobile.com­/shop­/plans­/individual­-plans.aspx

There are a lot of different ways you can mess with the numbers here, but I'll stick with the iPhone 5 for ease-of-comparison and look at a single line and a 2-device line with the base options (500MB data) to keep this as clean as possible


Single line:
$50 plan
$20 device charge (iPhone cost per month)
$70 total a month

Two lines:
$80 plan
$40 device charge (same as above)
$120 total


Single line:
$69 plan (unlimited minutes)
$20 text (unlimited messages)
$20 (300Mb data)
$109 total a month

Family plan (using the plan that is not data-sharing since it's still offered)
$119 plan (unlimited minutes)
$40 data (300mb at $20 per phone)
$30 text (unlimited text)
$189 total a month and no tethering included


Single line:
$40 device charge
$50 for the plan (unlimited text, voice and 1GB data)
$90 total a month

Family share:
$80 device charge ($40 per device)
$50 for the plan (same as above)
$130 total a month

At first glance, there isn't much to be saved when you look at these plans compared to Verizon, especially if you factor in coverage and speed. but if you remove the $20 device charge, the cost savings can add up. Over a year you're talking about $480 for a single line and $600 for an account with two lines.

Keep in mind a huge benefit of this is no contract, so at any point you're free to upgrade to a new device without the issue of paying full price up front -- though if you drop your coverage, you're still liable for the full cost of the phone. T-Mobile is even allowing you to trade the device in for "fair market credit" (www.engadget.com­/2013­/03­/26­/t­-mobile­-if­-you­-cancel...). Oh, and after the device is paid off you can also unlock it! (www.engadget.com­/2013­/03­/26­/t­-mobile­-handsets­-will...).

There is certainly a lot to digest with the new offering and it will be tempting for current subscribers to abandon their contract-laden plans. However, there is the issue of early termination fees. Let's also not forget that T-Mobile is doing this assuming the fair majority of the consumer market hates the current contract market, when I'd wager most just continue to operate under contracts because it has become so routine.

Edit: just came across some info about paying off your phone early: support.t­-mobile.com­/docs­/DOC­-1674

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9 replies

That definitely sounds tempting, but for a couple of sticky points for me personally.
  1. It's assuming unlimited voice for all plans, of which I would use something like 50 minutes per month. That would matter to me, as it means cost savings with ATT/VZW.
  2. I have a discount with ATT that gives me all I need for $50 per month, so... yea. Still, T-Mo looks like a good option for people without any such discounts.
One thing I'm interested to see with this new pricing strategy is that it allows for much cheaper phone plans for anyone who doesn't feel it necessary to upgrade every two years or people who bring their own phones. Not that I'm one of those people, but I understand they exist.
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So for 2gb of data (which I think you would need to be honest) it would be a $60 plan on T-Mobile + $20 for iphone. That's $80/month, versus $100/month on Verizon ($40 line fee + $60 for the plan). And this way there's no contract.

You could bump your $20/month for the iphone up to $40/month and have it paid off in a year. If you did this you could have the latest and greatest phone every year instead of every 2 years on another network, I gotta say, that's tempting.
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I haven't been able to find anything to say if you can pay off the device earlier with higher monthly payments. I think it's either full price, T-Mobile's monthly plan or paying off the remaining balance.
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It would be interesting to see how T-Mo responded to you cutting them a check for $20 extra though if they don't have such a policy. Would they just apply it to next month's bill, issue a refund, or what?

If it's the former, you could still pay off the device earlier (in installments) by just ignoring the bill you receive and overpaying every month. Much like I do with my car payment (according to my last bill, I owe $0 this month, and my next payment isn't due until late 2014).

If anything, having you pay off the balance in larger installments would be better for them, since their payment plans have no associated %APR or anything. They're just getting more money up front instead of on the back end (time value of money, better cash flow for the company, etc). Unless, of course, early payoffs led to early departures from the company.
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i just reupped with my carrier about 8 months ago, so this isn't applicable to me for a while, but what i'm really hoping is that the other carriers match tmobile's plan to drop monthly rates once someone's paid off the handset subsidy.
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I would have to say that I am seriously considering Tmobile for service. I am currently a Verizon customer and compared my plan to the new Tmobile plans. I would save $80 a month, I have 2 iphones (both unlimited and 1 tethering) and 2 feature phones (no data). I am going to set up a Tmobile plan and test out the coverage at the places my family and I use the phone. While I know the coverage is not going to beat Verizon, I am wondering if the balance between the coverage and the savings will make me switch.
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That isn't a bad way to test this. If I had a spare T-Mo capable phone laying around I would go through the same test myself.
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I love my Sprint bill personally.

Less than $75/month gets me 450 minutes, unlimited text, unlimited data, and insurance on the phone. Granted my price is knocked down due to an old employee discount from a past employer, but it's hard to beat.

Also, T-Mobile isn't available in my area to tempt me. If they were, I'd jump to test their network for a phone not available on Sprint (of which there are a lot).
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For people coming off a contract, I see the novelty of T-Mobile. However, getting iPhone 5 six months late kinda ruins it for a large percentage. T-Mobile doesn't actually make money though so not offering a long term contract actually helps free them of liability when they go under.

Also, I really think the contract thing is overblown. Are you suddenly not going to have a smartphone? If you're planning on living overseas soon then it makes sense, otherwise avoiding a contract is like being scared of big brother. Being paranoid for little reason.

The way you compare the AT&T family plan is dumb. Family share makes sense and allowed my family of four smartphones to decrease our bill by $20 and have a total data bucket of 10GB to share. Our total bill is close to what you show for a family plan ($240), though you don't mention how many phones you have on this family plan.

Wake up, T-Mobile will be out of business soon and fear of contracts is overrated.
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