

T-Mobile CEO confirms the iPhone and the death of phone subsidies - rkudeshi
http://gigaom.com/mobile/t-mobile-ceo-confirms-the-iphone-and-the-death-of-phone-subsidies/

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mdasen
I'm excited that T-Mobile is looking to boost its network and committing to a
bit of a different direction than many US carriers have taken. AT&T and
Verizon are going toward on-contract, subsidized devices paired with expensive
plans. Sprint seems to be trying to price discriminate with customers who want
the latest devices paying AT&T and Verizon style rates on-contract with Boost
and Virgin trying to pick up cheaper customers who are willing to live without
the latest devices and keeping them off the latest network that Sprint
customers get access to (4G LTE). T-Mobile seems to be trying a somewhat
European strategy. It's clearly being altered to live up to American appetites
(for example, they're going to finance what would have been the device's
subsidy). This may not turn out to be something amazing, but it's exciting to
see one of the 4 wireless companies pushing for a new direction.

It's also good to see T-Mobile pushing fast for 4G LTE. While HSPA+ 42 does
offer good speeds, the marketing perception won't change and the fact that
ping times are worse on HSPA+ does mean that important real-world use cases
can lag. I'm a little dubious of their schedule. Sprint started working on LTE
a long while ago and thought they would have 120M POPs covered by the end of
2012. Considering that they've been launching more rural areas and haven't
been able to launch in several cities they announced a while ago, it seems
like it's going to take Sprint a good while longer than they had anticipated.
T-Mobile is saying that they will have 100M POPs covered half a year from now
and 200M POPs covered a year from now. That's ambitious. Judging from Sprint's
slipping release schedule, it might be prudent to think that T-Mobile's
projections might also slip.

However, if T-Mobile's dates slip on LTE a bit, it shouldn't hurt them too
badly. Their customers can fall back to HSPA+ 42 and that provides a good
network experience (if not as good). This is in contrast to Verizon and Sprint
customers who fall back to EV-DO when out of LTE coverage range. That probably
doesn't matter for a lot of Verizon customers, but Sprint is still working to
cover top markets.

T-Mobile does have some good assets. The fact that they're going to be able to
launch with 10MHz LTE will be good since it should match what Verizon and AT&T
are deploying and out-do Sprint's 5MHz deployment. If they merge with
MetroPCS, they will have a good spectrum position to continue growing LTE on
including 20MHz LTE channels. Lower/different pricing combined with unlimited
4G might start attracting customers. Part of this is just undue excitement
over the prospect of a re-invigorated competitor in an industry dominated by
two carriers. Still, maybe T-Mobile will pull it off.

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dangrossman
I like T-Mobile's plans; I chopped my bill from $90/month to $30/month with
unlimited data use by switching over and bringing my own phone.

What doesn't make sense right now is that their no-contract "Monthly4G" plans
are a better value than the "value" plans. They have the same service levels
at the same prices, but without the contract.

If 80% of their activations are choosing the value plans, are these people
simply not noticing there's another option in the website menu? I can't
imagine why you'd sign a contract for no benefit.

~~~
modeless
The main advantage of the value plan lineup is the _truly_ unlimited data
offering, which you can't get with the Monthly 4G plans (they are "unlimited"
with throttling after a few GB, and trust me, you don't want to know how bad
the throttled speed is). You can get 500 voice minutes and unlimited data for
$55/mo, and though tethering isn't allowed they can't really stop you if your
phone is unlocked. No other carrier offers anything remotely similar.

If you don't want to tether, though, Monthly 4G is definitely the way to go.
$30/mo for 100 minutes and 5 GB data; all you need is a VoIP app and that's
perfectly serviceable, and again no other carrier offers anything similar.

~~~
bsimpson
T-Mobile will block you if you tether on Monthly4G. Your phone data will still
work, but if you use it for more than a couple minutes, the tethering will
start going to dead links.

~~~
modeless
T-Mobile's tethering block works like this: They sniff your unencrypted HTTP
traffic for user agents that look like they came from a Windows machine, and
if they find one they hijack the connection and redirect you to their
tethering upsell page. They can't sniff HTTPS connections, so HTTPS continues
to work. For HTTP you can change your user agent, or just use a Mac (which
their sniffer isn't smart enough to detect, yet).

If their sniffer becomes smarter in the future you can always switch to a VPN
for your tethering traffic, which they wouldn't be able to distinguish from a
VPN connection made by the phone itself.

Ultimately, as long as you have full control over your phone they can't stop
you from doing what you like with the data you're paying for. Of course, I
wouldn't recommend relying on routine tethering without paying your carrier
for it, but it's really nice to have on occasion.

~~~
eli
I guess I'm a square, but I'd really prefer not to cheat the rules just
because I can probably get away with breaking them.

~~~
joenathan
Data is data.

~~~
eli
Well it would a lot more "fair" to simply charge per MB rather than charge
extra for tethering, but people don't much like that idea.

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alanctgardner2
If you want to see a microcosm of this, look at the Canadian cellular market.
Most of the budget players are now on a 'tab', where they effective lend you
$200-400 which is prorated. The funny thing is the math they use:

On WIND, for example, they give you 10% credit for the value of your bill
every month. On a $50 plan (which is high for them), you get a $5 a month
subsidy for your phone. If you stay for three years, they let you off the
hook.

Meanwhile, the 'Big Three' (who own most of the budget players as well) offer
a prorated subsidy: you get 1/36 of the value of your subsidy monthly, over
three years. So, on an iPhone, you can get up to $20 a month in subsidy.
Clearly this more than outweighs the extra cost of the plans.

What's funny is, people are afraid of 'contracts', even contracts with
prorated termination fees. I once got the scary contract talk from a WIND
salesperson, so I drew a little diagram on their chalkboard of the value over
time of each contract. He saw the sharp drop at the end when they released the
remaining $200 of debt, and his jaw dropped a little. People don't really
think about this stuff rationally. Bell has even started giving a 10% discount
monthly if you buy a phone outright, which makes absolutely no sense unless
someone handed you a phone for free.

My point being, if experience in Canada proves anything, people will flock to
this as long as you market it properly.

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w1ntermute
The only reason T-Mobile is doing this is because they have a _ton_ of unused
bandwidth due to low subscriber numbers, so they're trying to differentiate
themselves from their competitors. Ultimately, it's _much_ more profitable to
use the subsidy model, because it allows you to hide the true cost of the
phone from consumers, most of whom are too stupid/ignorant/rich to
realize/care they're getting ripped off.

~~~
NoPiece
I think you are overstating the case against the subsidy model. It is hard to
compare plans because they differ in small ways (minutes. texts, etc..), but
my current ATT plan is 2 lines, 700 min, 200 texts, 'unlimited' data, and two
iphones for $125 a month. I'd need at least the T-Mobile $60 plan to get
comparable data, so it would be $120 a month; roughly the same price. More
voice and texts with T-Mobile, similar data. But I get the phones with AT&T,
so it ends being a slightly better financial deal. If you don't need voice,
the $30 T-Mobile plan is an amazing deal.

~~~
w1ntermute
You're making the assumption that we need to buy new phones every two years.
Now that the smartphone spec race is starting to slow down, we're going to see
less of a need for frequent smartphone purchases. You could easily use the
same phone for 3 or 4 years, as long as it doesn't break. But when you're on
the subsidy model, you have to pay extra for the subsidy even if you don't get
a new phone.

~~~
cube13
He wouldn't break even after 4 years, though. Nowhere near close to it,
actually.

Keep in mind that it's for 2 lines. So, with the T-mobile prices, that's $1300
up-front for two iPhone 5's(the iPhone's $650 MSRP is about average for
carrier-subsidized phones), versus $400 for the two phones through ATT. So
that means, over 48 months, for the T-mobile plan to be better, he needs to
save $900 over that period. That comes out to $18.75 per month.

The $5 he saves per month, after 48 months, would be $240. That's half of the
subsidized cost difference for one phone, but his plan has 2 phones. In that
case, the ATT plan would have saved him $600 ($6400 for ATT for 2 $200 iPhones
and $125/month for 48 months vs $7060 for 2 $650 phones and $120/month for 48
months).

In fact, at that per month price difference, it would take 15 years to make up
the difference between the ATT subsidized and non-subsidized T-mobile.

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OldSchool
I've been using T-Mobile precisely in this way for over 5 years to be able to
switch phones at will and keep recurring costs low and off-contract.

Their unlimited voice-text-2GB 3G/4G data plan has never cost me more than
$50/month per phone including all taxes and surcharges.

~~~
nathanb
Can you elaborate on "off-contract"? It sounds like even without the subsidy
you still have to commit to a two-year contract.

~~~
X-Istence
After your contract is over, you are technically off-contract.

In the past T-Mobile has also offered customers the ability to have a monthly
plan that didn't require a contract. I'm hoping that they keep that around.

~~~
nathanb
From the article:

> T-Mobile will have to explain to customers that they will actually save
> money over the length of a two-year contract by paying a lower value plan
> rate.

So it sounds like they're still locking you in to a contract at the start.
Yes, once the contract is over then you're off-contract, but if I'm not on Tmo
already that doesn't really help.

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bdcs
Wait, I thought Google was buying T-Mobile! Kidding...

I think this is great news for Google. Why? Because unlocked, unsubsidized
phones with cheap data are going to be brought to the forefront of the
consumer's attention. Consequently, margins are going to go down for carriers
(overall -- individually, TMO might get a boost) and phone producers as people
are able to quickly move to the carrier with the cheapest data, to the phone
which offers the best features per dollar. Google, in turn, will benefit as
more and more people move to cheap phones with data-heavy plans -- an
advertisers dream.

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techsupporter
Really awesome, but 1900MHz doesn't penetrate the low-e coating that my
employer uses on its office buildings. AT&T's 850MHz HSPA and 700MHz LTE do,
so I can't switch, bad though I may want it.

~~~
bdcs
If you get ANY signal through, you can use a signal booster, like CelFi:
<http://cel-fi.com/> . All they need is electricity and a window (to allow
decent GPS signal).

They're 500$ new, 200-400$ on eBay, and free with T-Mobile subscription of
18mo (and dealing with some phone bureaucracy. This may seem like a lot, but
it's a lot cheaper than paying 750$/yr more for data with AT&T, plus it will
benefit your whole office.

~~~
eli
I do not think T-Mobile is providing them free any longer, but I'd be happy to
be proven wrong.

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untog
This is great. I'm always reminded of my mother, who I handed down my 2G
iPhone to a few years ago. She's more than happy with it, but only has data on
wifi because adding data onto her plan would triple the cost of it, or some
other crazy margin.

She'll be much more likely to sign up if she can get it more affordably, with
her existing phone. She, and many others I suspect, have no need to get a new
phone every two years.

~~~
bsimpson
There are plenty of pay-as-you-go carriers that do voice + data for $50/mo. I
was on T-Mobile Monthly 4G, but their coverage is crappy. Straight Talk lets
you do either AT&T or T-Mobile for $50.

~~~
JoshTriplett
Straight Talk, though, has some major limits on what you can do with the data
connection (web only, no audio, no video), and they'll cut off your line if
you do anything they don't like, or if you use more data than they expect you
to use on their "unlimited" service. T-Mobile lets you do whatever you like
with your data connection.

~~~
andrewpi
Are you sure about no audio/video? Plenty of people on XDA recommend Straight
Talk on the Galaxy Nexus.

~~~
JoshTriplett
Quoting from the Straight Talk terms of service:

> 6\. STRAIGHT TALK UNLIMITED TALK, TEXT AND MOBILE WEB ACCESS PLAN INTENDED
> USE: Straight Talk Unlimited Talk, Text and Mobile Web Access Plans may ONLY
> be used with a Straight Talk handset for the following purposes: (i) Person
> to Person Voice Calls (ii) Text and Picture Messaging (iii) Internet
> browsing through the Straight Talk Mobile Web Service and (iv) Authorized
> Content Downloads from the Straight Talk Mobile Web Store. The Straight Talk
> Unlimited Plans MAY NOT be used for any other purpose. Examples of
> prohibited uses include, without limitation, the following: (i) continuous
> mobile to mobile or mobile to landline voice calls; (ii) automated text or
> picture messaging to another mobile device or e-mail address; (iii)
> uploading, downloading or streaming of audio or video programming or games;
> (iv) server devices or host computer applications, including, but not
> limited to, Web camera posts or broadcasts, automatic data feeds, automated
> machine-to-machine connections or peer-to-peer (P2P) file sharing; or (v) as
> a substitute or backup for private lines or dedicated data connections.

And I've seen plenty of reports of people having their service summarily
disconnected for doing audio or video streaming. I've also seen many reports
of people getting cut off after doing more than a hundred MB or so in a day,
or after doing more than a few GB in a month. Not even close to an "unlimited"
plan as advertised.

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nazgulnarsil
Never bank on explaining math to your customers.

~~~
dizzystar
Finally! I was wondering why someone didn't say this already.

T-Mobile is nuts with math anyways. My friend has a 65 dollar plan she pays
over 100 a month for.

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shmerl
Sounds good. In general, it's time for more people to stop using contract
plans with subsidized devices and higher monthly fee, and to start using non
contract plans with full price devices and lower monthly fee. Of course if
these monthly prices would really be lower.

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fbpcm
As of yesterday 3G works on T-mobile iPhones in Austin.

~~~
alexpopescu
Well, in a way that's some sort of good news, but shouldn't they actually work
in LTE instead? Playing this catch up game will not really help them grow the
business. Except maybe if they are looking at a different market segment.

~~~
CrazedGeek
T-Mobile is supposed to absorb MetroPCS's LTE network, IIRC.

~~~
tomflack
That's not exactly a sterling asset.

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nachteilig
I only switched from t-mobile because my unlocked phone couldn't use 3G on
their network. It'll be very, very tempting to go back if they have decent
coverage these days.

It doesn't seem clear that unsubsidized iPhone can work in the US, but I guess
we'll see.

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pacaro
It'll be interesting to see if anything comes of this w.r.t. the consumer
price pressure that will then be directly on phones, currently the subsidy
hides that from the consumer allowing handset manufacturers to set prices with
the carrier

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Ives
If they themselves quote a price for the iPhone starting from 650$, how is 99$
+ 20$ a month for 20 months = 499$ dollars total full price? I'm still 150$
short and that's assuming a 0% interest rate.

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joezydeco
I recently got a iPhone4 from Virgin Mobile USA for $349 and $30/month plan
and it's working just fine. Glad to see others are going this way as well.

~~~
mingramjr
How's the data speeds with Virgin?

~~~
joezydeco
Did a check last night, with 4/5 bars I got 600 kbps down, 350 kbps up. Not
spectacular, but I'm not watching YouTube in the car or anything.

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mtgx
So why aren't they already doing this with the Nexus 4 and offering it for
$300 unlocked, instead of charging $200 with contract? They can start doing
this today. They don't have to wait for the iPhone - unless they made a deal
with Apple that they can't sell a Nexus phone for half the price of what the
iPhone will be when they'll sell it unlocked.

~~~
chair6
Want a Nexus 4? Grab it direct from Google, then get a SIM card from Straight
Talk (<http://www.straighttalksim.com/>). $45 a month for 'unlimited' voice /
SMS / data (throttled after a certain amount - no big deal, if you're near
wifi often) riding on AT&T or T-Mobile networks, depending on where you live.

I converted from AT&T a month ago and it's working out pretty well so far,
after some initial headaches getting them to provision the SIM card properly.
I'm still on the AT&T network, just through the Straight Talk MVNO.

~~~
MatthewPhillips
Straight Talk is a scam and they'll block you (not throttle, block) once you
pass a pretty small usage threshold. Their own forums are nothing but people
complaining about getting cut off.

Remember that all of those carriers are reselling service. They cannot
possibly offer it for _truly_ cheaper than the big guys. They are just buying
in bulk in hopes that you don't use much.

~~~
canes123456
They mostly block on att's network. T mobile straight talk is not strict.

