T-Mobile USA kills traditional cell contracts in subscriber boost bid

T-Mobile USA kills traditional cell contracts in subscriber boost bid

Summary: By killing traditional cell phone contracts, the fourth largest US cellular network hopes to undercut its rivals who have taken on most of its defecting customers.


NEW YORK — T-Mobile has suffered a rough ride by losing close to a half-million postpaid contract customers during its recent third quarter results. But today, the fourth largest US cellular network formally announced  that it is killing the traditional two-year cell contract in favor of a different pricing structure.

"We're changing the rules," said T-Mobile president John Legere at the press event in New York. 

T-Mobile COO Mike Sievert takes time to mock AT&T's "confusing" data plans. (Credit: CNET)

Of course it's no major surprise seeing as the company jumped the gun and changed the pricing on its website last weekend. And, T-Mobile said in December that it would cut the subsidies on its devices at some point early this year, meaning customers will have to pay the full price for T-Mobile-offered devices. 

(CNET's Maggie Reardon and Kent German have a full question and answer post live to decipher the details of the new contractless data plans.)

Legere said that while there is a need to sign a contract to get a rate plan and a smartphone, the plans don't make sense. "That's on purpose," he told reporters. "The industry is broken," Legere said. "And by the way, there are no rewards for loyalty."

Here's what you need to know:

Dubbed "Simple Choice," T-Mobile's plan will offer unlimited "everything." There are no data caps, no bill shock, and no hidden fees. Just one rate plan, which will cost $50, $60 or $70, respectively, for varying degrees of service.

You can either pay for your new smartphone at the full price up-front when you start your new plan, or you can pay off the device over time with additional monthly costs. What's different is that you can leave T-Mobile at any time. That said, if you take the latter option, you will can't just jump ship to a rival network — you will have to pay off the rest of the phone's price upon leaving.

T-Mobile will also allow you to effectively bring your own device to the network — giving an entirely different spin on the enterprise buzzterm "BYOD."

Under traditional cell contracts, you would often receive a free or heavily subsidized phone and you would pay off the contract over a one or two-year period at an overall larger cost. This means you get the short term rewards of the discounted smartphone of the day, while the carrier rakes in the long-term profits. 

Now, a $20 fee per month cost on top of your tariff will go towards paying off the phone. When the phone is paid off, the fee disappears and therefore your plan goes down in price. 

While T-Mobile has seen defecting subscribers from postpaid contracts for more than two years to AT&T and Verizon, the firm has done well in prepaid no-contract plans. These, however, do not strengthen the firm's bottom line unlike postpaid contracts. Also, T-Mobile hasn't sold the iPhone up until now

The move to cut subsidies could also backfire on T-Mobile, which has lost around four million contract customers in those two years. 

It could also be a game-changer across the entire US industry, as other carriers have indicated that if T-Mobile successfully pulls this off, they too will consider pulling their subsidies in order to generate a greater slice from the phones they sell — rather than have the profits roll back to the phone manufacturers.

Topics: 4G, Networking, Smartphones

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • I'm really considering this

    I'm a Verizon customer but this pricing scheme is very attractive considering the lack of data caps. 4mbps down speed is plenty fast enough for anything I'd use it for!
    • all my coworkers have tmobile

      its way cheaper then R/O Verizon. i had it with verizons bs tiered plan. I am switching ASAP.
    • I figured that as well

      I surf the web a little bit, use navigation, and will watch netflix while I'm on a treadmill at the gym. Nothing I ever do needs LTE speeds.
      Besides that, since switching to Tmobile I get closer to 8 Mbps down and 3 up (Phoenix area). Faster than I thought it would be with my old galaxy nexus (HSPA+ 21). A friend with a Nexus 4 that can actually take advantage of the HSPA+ 42 network gets closer to 15 down. So depending on your location and device, you will probably do better than 4 Mbps.
      • Wow

        Love my job, since I've been bringing in $5600… I sit at home, music playing while I work in front of my new iMac that I got now that I'm making it online.(Click Home information)
        • Just saw an ObamaPhone commercial at lunch today on TV

          I about threw up on the thought of having to support these moochers.
          • ObamaPhone commercial

            to eversso2...Can you provide any evidence of this advert you say you saw at lunch today on TV ??? (I'll not bother to ask how you watch tv at lunch....there's none supplied at lunch where I work) But, do you know that the so called obamafones started in the federal budget which was passed under GW Bush ??? I doubt it !
          • He saw the advert in his brain

            When he stopped taking his meds.
    • Before you jump...

      Take a good look at the coverage map for where you will be using the phone. The principal reason T-Mobile has lost so many customers (like me last year) is crappy coverage. They're especially bad in the northwestern US. In some parts of Montana and Idaho I've gone over 100 miles with no signal.
  • Could be a network killer

    If BYOD is accurate, and people could bring their other carrier iPhones to T-Mobile for the unlimited data, T-Mobile's network will be choked. No device sales, just lots of data use.
    • lots of bandwidth

      according to the press conference, they have more bandwidth than they kno what to do with so hopefuly that remains true this time next year when i plan on switching after i get kicked off my unlimited verizon lte plan.
      Rick St. Vincent
      • Kicked off?

        @Rick St. Vincent

        I don't think they're actually kicking you off. They just won't extend unlimited contracts if they subsidize the phone. If you're going to buy the phone w/o subsidies, I think they will let you stay on. I don't know, though, if their unlimited plan will be cheaper than T-Mo's.
        • Verizon

          They are trying everything they can to eliminate all of the grandfathered unlimited plans. It's not just if you take a subsidized phone. I've seen them take any change of contract to eliminate unlimited data.
    • bandwidth

      The phones from AT&T aren't completely compatible with the data services on T-Mobile. I'm not sure about LTE but the 3G (and HSPDA) bands are different so most people bringing their devices over would only get 2G data speeds. That would keep it from choking it up.
      • not anymore

        T mobile is abandoning its aws and redeploying proper 3g. They are also merging with metro pcs so they will have instant lte.

        The problem with tmob is the voice quality is horendously unusable. People switching from vzw will be shocked!
        • Voice as good as any others I have tried

          I have compared a friend's Galaxy Note II on Sprint and the voice quality with my AT&T Galaxy Note is just as good. I have not tried AT&T recently, but when I moved to t-mobile 6 years ago the voice quality on t-mobile was much better than AT&T. And with my new contract at t-mobile I have 5 lines for $130/month
          • Voice quality

            Even with one bar is better than my home phone on my Nexus 4. Not sure if this is a legit issue.
        • Bad voice quality?

          I am surprised, because I have fantastic voice quality with T-Mobile. When I was using Verizon the voice service was horrible and the local switch was holding my voice messages for 3-4 days. When I complained they try to play me idiot - "it's your phone". Over all T-Mobile's customer service is the best. And the coverage (Tampa Bay) also. I have been for 3 years with both - Sprint and Verizon. Now I can also use my phone in Europe - I just need a local sim card and that's all.
        • not really shocked

          i had the opposite experience. the iPhone sounds the same on TMobile as it did on AT&T. I thought Verizon muted background noise, but that's helpful to the other person. I can tell if someone is driving, or busy, and should call back later.

          TMobile sounds closer to a wired phone.
          donald duck 313
        • No problems with T-Mobile Voice Quality

          I had T-Mobile for five years and never had problems with voice quality. I switched to AT&T in October to save money (my T-Moble service was on a corporate plan that I took over personally and I wanted to switch to my family's family plan). I think T-Mobile's voice quality is better than AT&T's. T-Mobile also has the best customer service that I've ever dealt with for any large business.
      • my AT&T phone gets 4G on t-mobile

        I have an AT&T Galaxy Note, unlocked, running on t-mobile for several months now. It picks up 4G on the t-mobile network with no problems.