The Friday Debate: Is the Uncarrier model the future of phone contracts?

by: Bogdan PetrovanMarch 29, 2013

The-Friday-Debate aa Image: Evan Forester/Flickr

We are all mobile geeks, here at Android Authority. We love everything with a power button. We like to comment the latest news and endlessly argue over which phone is better. On the Friday Debate, we pick a hot issue and proceed to discuss it. Join us!

“Stop the bullshit!” said T-Mobile’s colorful CEO John Legere on Tuesday. After months of speculation and leaks, the magenta carrier finally unveiled its Uncarrier strategy. Legere was referring of course to the pricing model of American carriers, which T-Mobile is decided to turn on its head. Uncarrier means that T-Mobile won’t subsidize phones anymore. Customers will pay their devices, either when signing up for the contract or through monthly installments. But is this new way of selling services a viable business for T-Mo? Will the no subsidy model spread in the US, or is it just a false alarm?

At this week’s Friday Debate, we ask: Is the Uncarrier model the future of phone contracts?

Read our arguments, vote in the poll, sound off in the comments!

Joe Hindy (G+): no-contract is going mainstream

Over the last year or so, there has been a lot of talk of no-contract plans in the United States. Companies like Straight Talk and PlatinumTel are gaining a loyal following of customers who enjoy all the services of more expensive carriers at much less of a cost. It isn’t mainstream yet, but it’s gaining traction.

This is why T-Mobile’s move to no-contracts is so brilliant. As much as our audience may dislike this analogy, it’s a lot like the release of the iPhone right when smartphones were gaining mainstream attention. Similarly, no-contract plans are gaining traction, but T-Mobile will be making them mainstream. Whether or not it’ll increase their customer base remains to be seen. However, I would not be surprised to see the other carriers in the US shoring up their no-contract offerings and giving the US much better no-contract options than we’ve ever seen before. The age of contract plans is coming to an end and T-Mobile was just smart enough to cash in on it first.

Daniel Charlton (G+): Marketing is crucial

Most places in the world emphasize the contractless approach.  I think it’s smart of T-Mobile to go this way.  I also like that they are bringing a non-subsidy model for reducing up-front device costs.  It gives the consumer a lot better visibility into the fact that they are paying $X per month for service and some separate $Y per month for the device.

I think where they are tripping up is in their marketing materials.  They are focusing entirely on the ‘unlimited’ marketing but ignoring the fact that most people don’t care about that.  It’s especially a problem for the ‘base” portion of the plan.  $50 per month gets you unlimited minutes and texts.  People are using increasingly fewer minutes and non-SMS based texting (Google Voice or like a thousand other options).  T-Mobile still has options that are not unlimited minutes and texts (at least according to their customer service response to my G+ post asking about it), but they don’t appear anywhere on their website or in their marketing materials.  I know at least for me, the new pricing (with that $50 base cost) is more expensive that I pay right now for my (on-contract) T-Mobile service.

Marketing the unlimited everything plan at $70 is great, but it’d be just as useful to know that consumers can get an ‘everything they need’ plan for more like $40 or $50 a month.  Showing off the lower end of the pricing spectrum would put the company in a position to compete on price with the likes of Cricket and Metro PCS and the high end providers like Verizon and AT&T at the same time.  Right now, they are really only targeting that higher end with their marketing.

Derek Ross (G+): T-Mobile could pull it off

T-Mobile’s move to re-brand themselves as the ‘UnCarrier’ aligns their non-contract approach with the rest of the world. This approach has been successful outside of the United States for quite some time. John Legere put it best when he said “”Customers love smartphones, everyone hates contracts”.

While T-Mobile’s methods might be great on paper, when it comes to overall coverage, they still don’t have that large of a footprint compared to their competitors. As T-Mobile continues to gain traction, such as their Metro PCS acquisition and LTE rollout, hopefully we’ll see their “UnCarrier” methods shake-up the mobile industry here in the US. Someone needs to do something to advocate change. I think T-Mobile might just be the company to do it.

Tanay Sood (G+): More than swagger is needed

Well, the rest of the world is following this system, so why not T-Mobile? They definitely know what they are doing as evidenced by John Legere’s newly found swagger and confidence. As long as T-Mobile puts their money where their mouth is and start actively promoting the potential savings to be had after switching to their new plans, I feel consumers will start to consider the switch sooner rather than later. They have the plans, they now have the phones (the iPhone 5 and all the 2013 flagships including the HTC One and the Samsung GS4 will be making an appearance on the carrier), all they now need is the coverage.

People are not going to switch unless T-Mobile provides excellent coverage and speeds in their area; as they keep improving their network, the reasons to keep ignoring them will continue to decrease.

Brad Ward (G+): Give me coverage

T-Mobile’s uncarrier model is the future, but I doubt it’s going to shake up the wireless industry in the U.S. right away. The mobile operator is offering a lot of nice things that will no doubt attract a truckload of customers, but as +Derek Ross said, their footprint isn’t that large compared to their competitors.

The model already works outside of the U.S., and there’s no doubt that it’ll shake things up here when T-Mobile is able to better their coverage. T-Mobile can offer all of the nice discounts they want, but it’s not going to shake things up until their coverage gets better.

When T-Mobile gets coverage on par with AT&T and Verizon, the uncarrier model will really take off. Who knows, it may even force AT&T and Verizon to start switching things up.

Vote in our poll and join the discussion!

[poll id=”246″]

  • On a Clear Day

    As far as I am aware this will be the first time that a major carrier, offering top quality phones – rather than the crumbs from the table – as phones has done this.

    I think it will be a smashing success. I calculated one time that if someone got a contract carriers “exceptional deal” of say $200.00 for a $600 +/- smartphone, and paid a monthly contract fee, as someone everyone knows is doing, of say $120.00 a month – they end up paying about $1000.00 more at the end of 2 years than if they had just bought the phone outright and gone with a lower cost carrier at say $50.00 a month for service.

    I believe CEO John Legere also said on Tuesday that something to the effect that if we don’t do a good job then take your phone to someone else next month.

    This means that service – rather than a legal contract that threatens your credit rating – is what is going to keep people with them – AS IT SHOULD BE.

    I agree with him; “Time to stop the bullshit!” and time for the greedy, contract model of the carriers to go the way of the Great Awk.

    The Great Auk (Pinguinus impennis) was a large, flightless bird of the alcid family that became extinct in the mid-19th century.

    • Justin Winker

      So, the Dodo? xD

      But seriously, I completely agree with you. Split out the cost for the service and the device, and allow me to pay the device off on MY terms, not yours. If your service costs more and isn’t worth it over another carrier’s, then i want to switch now, not a year and a half later.

      • On a Clear Day

        Yeah, just like Dodo bird – why didn’t I think of that!

  • Justin Winker

    I was amazed at the results, then I saw that only 25 people had voted already Dx

    I think it will succeed, but for it to succeed on T-Mobile, they need to pick up more coverage. I have no coverage in my area from them (unless you count roaming on AT&T’s 2G network). If someone like VZW or AT&T picked it up, then I think it would work extremely well, and could create converts out of quite a few people on the others’ networks.

    • On a Clear Day

      Success breeds success Justin. As this model picks up steam, as they bring in tons of money from it they naturally will be able to invest, upgrade, expand and so on, and on, and on!

      And, if you travel to a place far away, and back of beyond, then buy the cheapest Verizon phone possible that works on their pay as you go plan, and just bite the bullet and use the internet in your hotel room.

      I mean it would almost as horrible as being water boarded to go without being able to check one’s email or twit – I tweet – one’s friends every half hour, but heck I bet you, like myself, are really a tough guy at heart and might be able to bear up and deal with it!

  • I am jumping ship, I am tired of AT&T! $70 a month sounds pretty awesome!

  • Sean Anderson

    The plan will only work when their coverage gets better. I purchased the Nexus 4 but use Straight Talk with the AT&T sim card because the coverage with T-Mo is too spotty and the in building coverage horrible in my market.

  • Jason Graham

    I’m a current TMobile customer and after an hour on the phone with them its obvious they only want new customers for this uncarrier approach. If I convert to a new plan its a $200 fee, I still have to pay until my contract is up, and my bill (3 phones) goes up. I’m not seeing the advantage here.

  • According T-Mo’s own coverage map, my area is very well covered by them. I just ordered the Nexus for and am just about ready to jump ship from a Verizon contract so I will be paying T-Mo a visit pretty soon.

  • fvkstevejobs

    im tired of verizon limited plans and still charge me more then $115.00, i’ll be at t-mobile as soon as the S4 comes out.

  • Doug

    I think the industry is headed this direction, but I’m not convinced it will be all T-Mobile’s doing. Their coverage is not all that great, leaving the door open for AT&T to offer the same model and take far more customers. They’re starting the ball rolling, but people won’t go to a weaker carrier for this model alone.

  • I have an Android phone and a tablet one of which is by my side most of the time. I use them constantly when I am somewhere indoors. So far, so normal.

    Here is the odd bit – I have only turned 3G on about four times in a year. I don’t have a contract and I don’t need one – 99% of my use of Android is over Wifi. If I want a network dependent service I wait until I am in a place where there is Wifi or I use 2G to make a call or send a text.

    I know this may sound odd but an Android smartphone is not just a mobility device (ie something that needs 3G when you are moving about). It is also an amazingly good touchscreen 2G phone and a fabulous touchscreen handheld computer. It just happens that I use smartphone mainly as the latter two.

  • Jack

    T-mobileis the best this is good to teach the money hungry and less services at&t and Verizon a lesson

  • magnifico17

    clearly the answer is an emphatic yes.t-mobile is smart enough to embrace the future from a long way off.

  • credo

    Your still in a contract with this model its just hidden under 24 month payment aggreement…so even if you switch carriers your still stuck paying off a phone at a higher cost on top of a monthly fee which ends up being more expensive than [email protected] and verizon. The unsubsidized model will nvr work manufacturers charge way too much money and consumers want to pay a low amount of money for phones. All this does is create a finance plan for phones instead of a contract just fancy way to advertise lambs will bahhhh

    • On a Clear Day

      Too often all of us fall into the trap of allowing our desire for instant gratification to rule. We want a nice new car, phone, shoes, dress – whatever – and rather than say to ourselves, “Well, I really can’t afford that right now and I would be unwise to mortgage myself with a credit card at an exorbitant rate of interest, I am going to be responsible and bide my time, save my money and then IF I really do want it, then I’ll buy it when I can afford it.”

      Nope, we whip out that credit card and stupidly buy allowing ourselves to conveniently believe the salesperson who says, “You’ll never get a deal like this again.” Yeah sure, “The check in mail; I love you , etc.”

      T-Mobile’s model is one that encourages responsibility by not sugar coating the reality of what the phone costs so that the hidden agenda of the carrier – getting us “hooked”, obligated, inescapably contracted for two years – remains hidden until several months late we ultimately utter the words, “Why on earth did I sign that damn contract?!”

      T-Mobile’s model also allow you to pick and choose and move among what ever providers you wish – save for Sprint and Verizon.

      I fail to see how people who use their head; buy a phone that suits their purposes and which they can take elsewhere if T-Mobile doesn’t serve them well and earn their business are acting like sheep. In fact, I see it exactly the opposite way.

  • nishantsirohi123

    India have had unlocked devices since beginning.

    there is no other downside of this apart from the higher initial price at the time of purchase

    we get the international models, unlocked, with the manufacturing units of most companies being in India , china or Asean, we get great price thanks to the trade agreements

    Also it keeps the mobile network careers in check, they have no other way of making money other than call rates and data charges, so there is fierce compatition becuase of 6,7 private networks and the omnipresent government run bsNL network means there is always cut throat competition. With the recently introduced mobile number portability means that companies with poor network and service have lost huge number of subscribers

  • yalequ