May 26, 2017

State of the Art: T-Mobile Breaks Free of Cellphone Contracts and Penalties

Would you speak up if you were overbilled for a meal? Would you complain if you paid for a book from Amazon.com that never arrived?

Or what if you had to keep making monthly mortgage payments even after your loan was fully repaid?

Well, guess what? If you’re like most people, you’re participating in exactly that kind of ripoff right now. It’s the Great Cellphone Subsidy Con.

When you buy a cellphone — an iPhone or Android phone, let’s say — you pay $200. Now, the real price for that sophisticated piece of electronics is around $600. But Verizon, ATT and Sprint are very thoughtful. They subsidize the phone. Your $200 is a down payment. You pay off the remaining $400 over the course of your two-year contract.

It’s just like buying a house or a car: you put some cash down and pay the rest in installments. Right?

Wrong. Here’s the difference: Once you’ve finished paying off your handset, your monthly bill doesn’t go down. You keep reimbursing the cellphone company as though you still owed it. Forever.

And speaking of the two-year contract, why aren’t you outraged about that? What other service in modern life locks you in for two years? Home phone service? Cable TV service? Internet? Magazine subscriptions? Baby sitter? Lawn maintenance? In any other industry, you can switch to a rival if you ever become unhappy. Companies have to work for your loyalty.

But not in the cellphone industry. If you try to leave your cellphone carrier before two years are up, you’re slapped with a penalty of hundreds of dollars.

If you’re not outraged by those ripoffs, maybe it’s because you think you’re helpless. All of the Big Four carriers follow the same rules, so, you know — what are you gonna do?

Last week, the landscape changed. T-Mobile violated the unwritten conspiracy code of cellphone carriers. It admitted that the emperors have no clothes. John J. Legere, T-Mobile’s chief executive, took to the stage not only to expose the usurious schemes, but to announce that it wouldn’t be playing those games anymore.

It was a Steve Jobs moment: when somebody got so fed up with the shoddy way some business is being run (say, phone design or selling music) that he reinvented it, disruptively.

At the new T-Mobile, the Great Cellphone Subsidy Con is over. You can buy your phone outright, if you like — an iPhone 5 is $580, a Samsung Galaxy S III is $550. Or you can treat it like a car or a house: pay $100 for the phone now, and pay off the rest over time, $20 a month.

That may sound like the existing phone subsidy con, but it’s different in a few big ways. You pay only what the phone really costs. You don’t pay interest, and you stop paying when you’ve paid for the phone; in other words, your monthly bill will drop by $20 a month, just as it should. (You can also pay it off sooner, if you like. If you have a good month and want to put, say, $70 toward your phone payoff, that’s fine.)

T-Mobile doesn’t care what phone you use, either; if it works on T-Mobile’s network, you can use it. And why not? Why shouldn’t you buy one phone you really love, and use it freely as you hop from carrier to carrier? Would you buy a car that uses only one brand of gas?

Yet another radical change: There are no more yearly contracts at T-Mobile. You can leave at any time. “If we suck this month, drop us,” said Mr. Legere. “Go somewhere else.”

In the new T-Mobile world, there are only three plans.

All come with unlimited phone calls, unlimited texts, free tethering (which allows your laptop to get online via your phone) and unlimited Internet. The only difference among the plans is how much high-speed wireless Internet you get each month: 500 megabytes ($50 a month), 2 gigabytes ($60) or unlimited ($70).

E-mail: pogue@nytimes.com

Article source: http://www.nytimes.com/2013/04/04/technology/personaltech/t-mobile-breaks-free-of-cellphone-contracts-and-penalties.html?partner=rss&emc=rss