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We're hearing a ton of interesting information about T-Mobile's plans for the future today as part of Deutsche Telekom's analyst conference, and this may be the biggest yet. Starting in 2013, T-Mobile USA will no longer be subsidizing handsets with 2-year contracts, and will instead sell devices at full price or on installments. This means that devices and service will be completely separate going forward.

This is almost a carbon copy of its current "Value Plan" offerings, which give you cheaper monthly service prices (generally $20-$30 less) when you buy a phone full-priced or bring your own -- a model international users will be familiar with. T-Mobile said that 80-percent of its new line activations were on Value Plans in the last quarter, which means that this won't be too big of a shift from the way they're currently operating.

To the end user, the overall cost of smartphone ownership for the 2-year contract period will decrease, even when buying a device with monthly installments. Real savings can be had when holding onto a device for a longer period of time as well. The real roadblock here is going to be one of consumer education on the part of T-Mobile, which needs to explain to customers the benefits of this model. U.S. wireless customers are very comfortable with the idea of a subsidized handset that is bundled together with service.

Source: GigaOM

 

Reader comments

T-Mobile to stop subsidizing handsets in 2013

97 Comments

Verizon? Are you listening? Please, please, PLEASE do this! I don't want you to subsidize my phone to the tune of $20/mo. I'd rather you let me supply my own phone and knock that $20 off my monthly bill.

Yes Sir, Don't worry people will be hearing plenty from Tmobile these next 120 days. It's their time in the spot light I agree 100% on these changes.

I think it is an excellent idea. I am on a Value Plan and even with the $20 a month charge for the phone, my bill is lower. Plus after 20 months the phone is MINE and the $20 charge drops off (not so with subsidized plans). I can also pay off the phone sooner and have a cheap bill until I decide to get a new phone.

Correct me if I'm wrong but a Value Plan still requires a two year contract.

Prepay plans don't let you roam so why not go to Straight Talk and use the same towers for a cheaper price.

T-Mobile should offer the Value plans for people who buy a phone outright or bring their own phone without commitment.

Yes the Value Plan is a 2-year contract. It is the exact same as a "Classic Plan" in every way (roaming, features, etc.), except there is no subsidy and it has a lower price.

The excuse they give for the 2 year contract is that it's needed to finance the phones... But when u bring u'r own phone and don't need any of the financing they still stick u with the same ETF & contract... Maybe they should at the very list half the ETF if u'r not financing a phone thru TMobile...

Also the Value Plan prices are great for single and maybe 2 line Family Plans when u only fiance one phone... But once u get to 2 or higher the addon $20 phone charges make it higher then locked in prices for migrating customers from classic to value...

The only time Value might be a slight better for 2 or more finance lines is when they have the full down payment rebate deals...

Great idea since I think that our cellular market should move towards being like the rest of the world's, but I can't help but think that they're doing this because they need the money to pay for the new iPhones.

T-Mobile has talked about how much it hates the device subsidy model for years and years now, trying to move away from it all the way back when debuted "Even More Plus" plans. This isn't a new development because of the iPhone.

Or this signals Apple has a plan to respond to the Nexus with the next iteration of the iPhone for late 2013 (when it would work on t-mo).

Either way, this is a good option for some consumers.

Why would Apple be even remotely threatened by the Nexus line. Their more worried about Samsung.

I don't think its Nexus or Samsung - its the Android ecosystem. Handsets of different sizes and capabilities that cover the gamut of the end user's needs. Apple can't play except in the luxury market and that's an ever shrinking market as it becomes more saturated.

I'm on one of these plans. Over the two years I save about $30 per line, so between my wife and I'm saving $60.

Per month! Right?

So 720 per year, which is enough saving to buy each of you a middle of the line smartphone per year, or one of you a top notch phone every other year.

/me: Jealous

Eventually folks are going to wake up and realize that the "subsidy/contract" model is costing them more than the "unsubsidized phone/contract-free MVNO" model.

I am hoping I got to eventually. I moved to a value plan and paid cash for my Note 2. While the rep at the store was pushing value plans to other clients, I walked in with a classic plan and she was surprised that i did not want to remain on the classic plan. She agreed, this was cheaper in the long run, but said most people on classic don't want to pay for their phone. Then she offered me the equipment finance option and I said, no, just run my card for the phone. She was a little shocked again, but i felt like I made the best deal. The phone is fully mine the minute I walked out the door and I got the best rate they were offering.

Bring on the value plans.

I am not a fan of Apple, based on their recent actions, but I am happy that T-Mobile will carry it. Also agree that AT&T is their target, Sprints network is a joke. One of my employees needed to put Good on his phone today. In the time I could do a factory reset, and reload all of my apps, he was only able to download one app, and Good is not that large. I suggested we go to lunch while his phone continue the download, and we are in a LTE market for Sprint.

Bring it on T-Mobile - good for you.

So are they also dropping ETF then? If you dropped service you would be liable for the unpaid balance on the device anyway so the ETF isn't needed.

Nope.. They still stick u with the exact same ETF as the classic plan whether u'r financing a phone or not... So I don't see much value or sense on getting locked in to a contract when u'r buying u'r own devices... It's ass backwards... If they are really going to copy the European model... Then they need to get rid of the contract side of it when u'r not getting any financing or subsidy for the phones...

Hmmm. I'm glad I got them to sell me my work GS3 when it first came out for $80+tax with a 2 year contract. At $499-$80=$419 I don't know how long it would take to recoup that $419 that initially gets shelled out. I'm sure its a savings but convincing my boss to buy me a $500+tax phone would be like pulling teeth with no pain killers...

About effing time... I really think a big part of the fragmentation of Android is because of the carrier's interference with the OEMs and Google.

This will do absolutely nothing to fix fragmentation. If you come with your own handset you are still relying on people to come up with updates, not google themselves. If you come with a headset from a different carrier, unlocked, you still have to rely on an update from the carrier. This moves means zilch to fragmentation....

you've got it ALL wrong....if you come from another gsm carrier and you've unlocked your phone that was sold as a locked one, you've undoubtedly unbranded it, as well....and if you haven't, it's your own fault because there's no holding you back. this will lift your relying on carrier updates. The same goes for the phones bought factory unlocked....you don't HAVE TO wait for a single dev to release a rom....you can use the unbranded ones direct from the namufacturer. You've also forgotten about the entire nexus line that DOES get their updates google-direct. I don't know where you got the idea that anyone is ever required to wait for a dev to release a rom for your device.....it's never the case!!

Fragmentation of Android is just like Fragmentation of Windows back in the Compaq/Packard Bell days...

Until Google drops the hammer on 3rd-party UIs there will be fragmentation - It's not the carriers creating fragmentation, it's the OEMs with their horrid aftermarket shells...

This is identical to what was happening on Windows PCs until Microsoft banned 3rd-party UI shells like 'Packard Bell Navigator'...

Wow. This is nice. I just wish that they had more widespread service. If they did, I'd switch over in a heartbeat, with a Nexus 4... If they are ever back in stock...

Same here in ND.

And Dan, just because the map shows coverage does not mean you can get a T-Mobile phone there. The coverage map shows we have coverage here too, but I've had friends that had T-Mobile who moved here and were eventually booted by them because they don't actually own the towers here so it was more expensive to have them as a customer living here than to just kick them off.

I was on the value plan when I was with tmobile and now living in S Korea this is the ONLY way companies do business. You pay for your smart phone every month until you own it and it expires when your contract does. If t-mobile really gets smarter they will allow different contract lengths. I signed a 3 year deal here.

I'm amazed out how modernized tmobile's thinking is. It's a shame they don't have a larger network because their business acumen blows these other fools out of the water!!!

You won't need to. If other manufacturers follow the the pricing model of Nexus devices, you may see cheaper phones.

If not, you can probably just pay monthly installments and still come out cheaper than a 2 year contract.

If you want to save money there's no cheaper solution than republic wireless. Pay $259 for their Android phone and get unlimited everything for $19/month - with no contract. Now THAT'S cheap!

Ok, so read the story again.

Andrew said: "will instead sell devices at full price or on installments. "

So if you can't afford it out of pocket, you get it on installments.
There will be TWO items on your bill: Your service, and your handset payment.

After the phone is paid off, there will be only ONE item on the bill. Just the service.

The big difference here, is when the phone is paid off, your bill is much lower.
Perhaps they will let you choose the payment period (6 payments, 12 payments, etc).

Net result is it will be cheaper than it is now.

Wow... I see T-Mobile getting bought out by Google very soon for sharing a very similar view point.

T-Mobile just separated itself from the pack of money hungry wolves. Lets see how this plays out.

I don't think that would be in Google's best interests, although I think it will create some great synergy with carriers and phone manufacturers alike. Tmo will rid itself of the whole gamble of the choosing game when picking phones it should sell. It'll pretty much open up the field so next year should be pretty interesting to say the least. Although the article has it right, educating the public and so on because I think there might be some initial fallout till people get it.

How about EIP w/o contract or subsidized w/ contract? No more Classic Plan either. Just Value Plan with those options. It's a win/win for customers and for T-Mo. I've been w/ T-Mo all my life and I would love this.

T mobile is sounding better and better. Too bad we are kind of stuck on Verizon since my wife is a flight attendant and is often in smaller towns. I would switch to T-Mo in a second.

I've never bought a phone from a provider cause they are never unlocked. No way I'm paying $500 for a phone that's still locked to T-Mobile.

I wish those AWS bands could disappear. I know that was the only spectrum available for T-Mobile to buy a few years ago but so many phones aren't penta-band equipped. It really limits your options for unlocked devices,unless you like your data running at EDGE speeds.

I heard a commercial today for a GSIII for $90 down and $90 a month for 8 months. I would rather pay the $699 MSRP up front and save $20 a month on the service.

well this still does not beat the pre-paid plans that they have..$30 a month with a nexus 4 cant beat that( i dont use many minutes but that may be a deal breaker for some)

Just for people to get jealous:

Smartphone plans in Austria (Europe):

http://bob.at/smartbob-xl
1500 Minutes talk (you only pay outgoing calls, incoming are always free and unlimited)
1500 SMS
1500 MB Data:
10€ (aprox. 13$) tax included per month

https://www.yesss.at/diskont-handyfonieren/aktion%3A-yesss!-supersmart!/...
1000 of all (talk, sms and MB data)
8,80€ (aprox. 10$) tax included per month

No activation fees, no other fees whatsoever (voicemail, call ID and all that shit is always included).

And subsidized Smartphone-Plans are 20-30€...

Why should I be jealous of 1.5GB of data? Here in the US we can get unlimited everything for $19 a month.

Show me a plan that let me use my GT-N7100 with unlimited everything for $19 per month and I will ditch Straight Talk immediately.

And: if the plan requires you to get a specific (low-end) device, it is not interesting. In Europe, it doesn't matter what device you have, the plan works.

T-Mobiles step is certainly interesting and the idea of device installments is good, it is similar to Europe. On the other hand, the price levels has to go down since you can get a Note II (for example) for $50-60 per month including the device installment and 5 GB of data on a carrier like 3.

Another thing T-Mobile can do is to beat the system (regulatory taxes and fees) by upgrading their Monthly 4G plans with unlimited data (like the Value Plans) and sell it in packages of 3, 6 or 12 months of service (like Straight Talk). I.e: "Buy 3 months of Monthly 4G and you get unlimited data" etc.

Since regulatory taxes and fees affects contracts, switching to a "prepaid contract model" where you buy service for 3, 6 or 12 months (perhaps with auto payment) would eliminate them altogether and make the plans even more competitive.

It would also be great if T-Mobile dared to start selling standard devices. That means factory unlocked, unbranded international ones rather than continuing the US practice of special designed products with different packaging and hardware alterations.

With extra device expenses eliminated, the money can be invested in the network and service instead.

Carriers can sell devices but they shouldn't manipulate them. There is no need for FOUR different Galaxy Note IIs in ONE market for example.

1) Monthly 4G can be set up on auto-pay & works just like a regular contract-plan except (a) no contract, and (b) some features (busy-no-answer-forward, roaming) disabled.

2) They will never drop carrier-branded handsets, because they MAKE MONEY on those deals, from the companies that pay to have their products featured on the phone (eg, Microsoft paid Verizon to put BING (gach! yeuck!) as the only search option on their Android devices)...

This isn't bad news at all to me. I just started pre-paid plans on our phones for the very reason you state in the article (lower cost over a two-year period).

I've been on a classic plan forever. I just upgraded one line to a Nexus 4 and have another line eligible. I wonder if I could upgrade that line to a Nexus 4 before they switch everyone to a value plan. If we're all going to be switched anyways, it might be the last chance to get a phone subsidized.

Why not StraightTalk? Because it really isn't cheaper, in some cases. The "unlimited" plan is $5 more a month than what I'm paying for the same thing.

And no wifi calling.

No, groveIP and such are not an acceptable substitute, as they don't provide T-mobile service.

If you live in a dead-zone (all carriers, like I do) you *need* WiFi calling, and SIP hacks are not a viable alternative.

They did this back in 09. I bought a blackberry bold with the even more plan. And let me tell ya, it's a great deal. Right now I just bought a Note 2 and I'm gonna use the $100 rebate on my $400 balance, making it $15 a month. Sell your old phone and that money can go to your balance too. We pay $91 a month plus $20 for the phone.

why does anyone care at all about this??? Honestly, it;s the stupidest thing I've ever heard for those who are subsidizing them....

let's say on-contract, your monthly base price is $70. What they are going to do is now, instead of charging the $70/month base price, it gets lowered to $50. When you buy the phone, they add $20/month onto the plan to cover the full face-value cost of the device. You are paying the same amount unless you already own an unlocked device!!!! This hasn't changed anything from month to month with your bill!!!! What is all the excitement about, people?? Unless you already own an unlocked phone this means absolutely NOTHING to you lmfao

What u fail to understand is that what u said is only theory. Really right now you really don't know how much more you are paying per month for the device.

The beauty of pricing it like this is that you can see how much you are paying for phones. It will force company's like apple and Samsung to lower handset prices...

So rather than T-mobile paying to offset the cost of the phone I will have to finance it? F you T-mobile. No wonder they're bleeding customers left and right. If you have to finance a phone you are in real trouble. Pretty soon everything in America is going to be purchased with financing, Already most major purchases are because things cost too much and wages are too low in this country. But a cell phone? Give me a break.

The only way this can be could good is if it leads to lower prices for all smartphones. Are you listening Apple and Samsung? $650 for a phone? Are you kidding me? If the prices came down to something more reasonable like $350 to $450 then subsidies would not be necessary. Hopefully the cash cow for Samsung and Apple will soon be over. Look at the Nexus selling for $350. Lumia 920 with 32gb selling for $450.

I think this is a step in the right direction, but I think the model should go vurther. No subsidy should mean NO carrier locking, NO changes to direct-from-factory experience (no bloatware or carrier changes to the software from the manufacturer), and no carier involvement in updates from the manufacturer. I'm also still having some trouble with the idea of signing a contract with an ETF without any value-add.

Alternatively, if the manufacturer wants to load additional software then they should apply the Kindle model and offer handsets in two flavors, plain full price and bloated with a discounted (meaning still subsidized) price for those who are willing to put up with it to save money.

...Joe K.

Let me break it down for you.

Varizon - Monthly fee $80, phone cost $200, contract 2 years
T-Mabile - Monthly fee $60, phone cost $600, contract 2 years

Costs are added up and divided by 24 to show cost per month over 2 years. Where it gets interesting is after 24 months(for those that do not instantly upgrade).
Varizon - $88.33 a month until you leave the service
T-Mabile - $85 a month for 24 months, then $60 a month afterwards.

Do you not see the savings in both scenarios? You save $3 a month for 24 months($72) then you save $28 a month for any month beyond you do not upgrade. The flaw in subsidizing your phone now is that Verizon does not lower your billing after your 2 year cycle has run its course, which shows that subsidizing your phone is a lie to lock you in to their rates. Keep in mind that I've had Verizon going back to the mid 90's so I'm well aware of what they're doing. I've lived abroad in Europe and Japan and I loved how they handled cell phone contracts, always hoping it would get adopted here.

I don't think many Android Central readers plan to have a phone for more than 24 months, especially since on Verizon you can upgrade after 20 months. Also, the $60 savings ($3/month for 20 months) that you claim exists is not particularly significant for most, since many prefer Verizon's service, and would gladly pay an extra $3/month for it.

Also, I'm confused about your numbers. There is no $80 option with the new Share Everything Plans. We also have no idea what T-Mobile's pricing plans will be.

Sure, there's likely a cost savings here vs. Verizon. But isn't T-Mobile already cheaper than Verizon?

I'm sure you'll notice I did not compare pricing from Verizon and T-Mobile. Most of the companies have equal level pricing for equal level plans. I've been price shopping all 4 companies for our business for at least 12 months since our contracts ran out back in April and trust me, they are a lot closer than most think. Also of note, since I'm a great example, I frequent this site daily and I ready nearly every article and go test out new phones when stores get them but I'm currently at 8 months past our contract and it would have been nice if the subsidy pricing had been reduced since none of the phones on the corporate plan have since been upgraded.

Also of note, T-Mobile's pricing is slightly cheaper currently and their plans are currently better. Their lacking in the coverage department but that will change soon as they're already committing 10+ billion in the next few years to really upgrade their infrastructure. Once that completes they'll have a more level playing field on coverage and the advantage on phone pricing and plan pricing. Point being, the big V will have to take notice or their users will flock to T-M like they did to ATT before the unlimited data days.

I see, so you purposely misspelled Verizon and T-Mobile to show that you were using them as examples of companies that do not exist, and to pin guessed prices to these nonexistent companies, in order to laud the guessed/non-existent savings.

Yes.....This. I hate the whole subsidized phone deal. Always have. Then charge a $375 ETF because of it. VZW will never do this until they first wipe most of their unlimited plan customers into a shared plan. That is their dangle right now. You get no subsidy on a phone upgrade unless you get rid of unlimited. No way, no sir, no how. I will gladly pay $600 for a new phone in 2 years to keep my unlimited. I can tether at home canceling my cable modem now that I have an LTE signal in the house. That's a far greater savings over two years than $600. Not worth it. you can have my unlimited when you pry it from my cold dead fingers. Data is NOT a commodity, it never runs out, so you shouldn't get to charge me for it.

The process of moving data around a network - especially when RF spectrum is involved - is a very expensive commodity...

This really is the way to go. Hopefully consumers will "get it" so it becomes the norm. I don't have that much faith in my fellow Americans though. They don't really think things through long-term. There's also a stupid stigma attached to prepaid here in the USA...too many people look down on it as if it's only for ghetto broke welfare people who don't have a job or work a crappy low paying job. It's turning around slowly, but people in the USA really are dumb enough to think paying more for something makes them a superior person.

Personally, I don't need a new phone every two years. My bank account is winning hardcore with me rocking an older device and doing the prepaid thing. My service is generally better since it piggybacks off a better carrier than my contracted one, I pay less, and no one can tell the difference.

I'm open to the whole idea that T-Mobile is trying to do. My only problem with this logic is explaining why A) I would agree to sign a 2-year contract if I'm paying full price for my phone, B) I would have a ETF for a phone that's paid for in full, and C)How long it would take for them to really improve their network coverage.

My wife had a tracfone that used T-Mobile coverage that was sub-par at best. She brought another tracfone that use AT&T coverage that was an improvement. She's even receiving calls where she couldn't make a call before on her Sprint phone.

I was thinking of using the T-Mobile unlimited 4g plan for a back up phone (I'm really digging the HTC Windows Phone 8x & 8s), but may end up going with AT&T prepaid plan ($25.00 unlimited talk and text + $25.00 for 1gb of data). Since it will not be my main phone line, data and onboard storage won't be as important on this phone.

If network coverage improves, then I'd make the switch for my secondary line. Sprint remains my primary line ONLY because of the EVO line. Sprint appears to have a great relationship with HTC and I prefer them as my go to OEM for phones (and unlike most readers on here, I actually enjoy the sense ui). The SoftBank deal (if allowed to go through) would also help them out a lot as well.

Overall, 2013 look like it's shaping up to be a great year for both Sprint and T-Mobile customers. :-)

There should be no contract and no ETF if there is no subsidy. That is the reason behind the contact is to make sure that the carrier isn;t losing out on the cost of the device. I would be ok with this if there is no contract. If AT&T tries to pull that I will just go to some other carrier, but of course there is collusion amongst these guys so this will be the way of the future. No subsidy and still a contract with an ETF, either way they are going to make us pay more. Wake up people!!!

Doesn't like most of the world do this anyways? I know in Finland, I haven't seen any carrier that subsidizes, and it seems to greatly reduce the monthly billing price... €35 a month for 2800 text, a good amount of calling (can't remember how many), and unlimited data... compare that to anything here in the USA... it would run well over $100 monthly... I personally like the idea of buying my phone outright... Now if only I could get any T-Mobile signal in my area >:(

Good idea but for me it's going to rough. My phone is old and not likely to last another 2 years and I just can't afford the $600 outset on a new phone. Yeah there are the significant FUTURE savings but thats alot of cash to fork over.

You could start, I dunno, saving your money since you KNOW you'll need a new device. Put $20 or so back every paycheck. If you get paid every two weeks, that's $520 in a year's time. You pay $20-$50 more than you have to every month for your plan because of the subsidy. In a year's time you can stop paying that $20-$50 difference and you're way ahead.

This is basic financial math and people not understanding it is why our global economy is down the pooper.

Oh and you don't NEED to buy the latest $600 phone. You can get something less expensive.