Verizon CEO praises T-Mobile’s ‘uncarrier’ approach

April 4, 2013

verizon-store

As we all know, T-Mobile recently stopped subsidizing phones. This move is a pretty radical departure from the typical business model all carriers promote. Typically, a device is subsidized and a contract is signed, which lowers the upfront cost of the device… but keeps us tied down to carriers for two years or so.

At a conference yesterday, Verizon CEO Lowell McAdam praised T-Mobile’s efforts to end subsidies. He mentioned Verizon was very interested in what T-Mobile was doing, and would be watching them closely. McAdam also said that it would be “pretty easy” to shift Verizon’s contracted model to the new design, if customers were asking for such a thing.

You can go into any carrier and purchase a device off-contract, but it’s not promoted, or even encouraged. T-Mobile is the first to break from tradition and educate customers on unsubsidized devices, rather than just take their money and run. The education of customers is critical to the success of their new venture, and only time will tell if they’re able to successfully do so.

This isn’t the first time McAdam has made favorable comments about T-Mobile’s new path. Back in January, at the Consumer Electronics Show, the Verizon CEO said the shift away from subsidized phones was “a great thing”. He also said Verizon would be keeping an eye on the situation, and that switching to that plan would be easy… so long as customers were interested.

I think I hear an echo…

Comments

  • RaptorOO7

    So does this mean Verizon will reduce the data/voice plan pricing since they will be charging full boat on the hardware . . . I doubt it and won’t believe it until its in black and white. Verizon will not reduce their strangle hold on their customers and pricing plans.

  • cvgordo

    what are the chances of verizon getting rid of unlimited data anytime soon? they’re requiring people to buy phones outright to keep it right? if they switch to the uncarrier model then what?

    • Larkhillv

      I thought Verizon did away with unlimited data already, unless you were grandfathered in, in which case you will not have unlimited data once you renew your contract. So yeah, by the end of 2014, I think VZW will have no unlimited data at all.

      • Nick Schiwy

        Not, as the person above stated, the person buys their new phone off contract. It’s either win-lose or lose-win when it comes to grandfathered unlimited plan owners. Personally I would buy my phone outright to keep unlimited data but I took a different course altogether and got a new phone off contract and going to a new carrier :)

    • Adrayven

      The uncarrier model differentiates between data on phone and tethering. You can get unlimited on phone and still have tethering, but tethering data costs additional. I would not be surprised, IF they adopted this model, they would do the same as t-mobile in that regard as well.

      I think it will depend on how successful t-mobile is with this new model. I personally like it, I like seeing my total, but separate costs. I HATE hidden fees more than not having unlimited. It’s smells of back-handed sales tactics trying to pull wool over consumers eyes.

      Personally, I think Verizon and other carriers should be required to break out the phone costs even with their plans in their current state. Transparency in this regard would benefit the consumer greatly and force a certain level of competition that carriers ATT and Verizon have OBVIOUSLY been trying to avoid to keep fees high.

  • Marlon Milligan

    That was somewhat of a nice comment :-)

  • http://twitter.com/BorisChernin Boris Chernin

    Let me clarify T-Mobile’s strategy: over the last couple of years they have seen a mass exodus of customers from their network, and have instituted many significant cost cutting measures. This non-subsidization strategy is to avoid getting stuck with the bill for the handset when the customer leaves their network.

    Since the government has imposed a maximum Early Termination Fee (ETF) that carriers can hit customers with that leave before their contract is up, T-Mobile was limited in the amount they could recoup from customer churn. Someone would leave the network, pay the $200 ETF, and keep a $600 phone that T-Mobile would not be able to recoup anything on, because the revenue to offset the subsidy was built into the rate plan.

    By breaking the charge for the phone out of the rate plan and making it a separate charge, T-Mobile wins on multiple counts:

    1. their plans appear SUBSTANTIALLY cheaper than competitors.

    2. when a customer leaves prior to contract expiration, they are responsible for the ETF ($200+tax), but also for the balance of the phone.

    Example: a customer buys a phone & plan with T-Mobile for $99 down and $20/mo over a two year contract. After 6 months they break their contract, and are hit with $200+ ETF, plus $360 balance of the phone. So it would cost this person almost $600 to leave T-Mobile.

    No wonder other carriers are interested in this model. It puts severe financial penalties on customer churn, and allows the carriers to recoup substantially more should the customer actually leave.

    • 80hd

      Tmobile does not have ETF fees anymore because they don’t have contracts.

      You can buy the phone, leave tmobile, and pay nothing but the balance on the phone because that’s all you owe.

      A $600 phone costs $600 and nothing else.

      • http://twitter.com/BorisChernin Boris Chernin

        maybe for new customers. the example i used above is what happened to me last week.

        • Thatguy

          So you have 2 phones now, I think were missing half of your story.

        • http://twitter.com/hiromasaki Chad Vincent

          So you were on the Value (or Even More+) plan, not the Uncarrier plan. :)

          Those had a 2-year contract in addition to unsubsidized phones. The Uncarrier plans they have now have no contract, thus no ETF.

        • Sol

          You were on value plan, and stupid enough to leave prior to asking them to move you over to simple plan. Thats your fault. They moved me over this week and dropped my contract.. no ETF.. and if I left the simple plan, no etf..

          Sucks to be you I guess. lol

      • Adrayven

        Correct. However, I bet he was on the Value plan, and failed to ask to move over to the new Simple Choice plan. Then he could have quit anytime he wants. no etf.

        I talked to a rep, I want to get the iPhone 5 and he said that they will move me over to the no contract plans at no cost.. Will get this done this weekend I think. Then preorder my iPhone 5..

        Wish people would actually research what they say prior to saying it.

    • Oli72

      awesome info.

  • http://www.facebook.com/chris.d.cheat Chris D Cheatham

    That would be nice of Verizon but as long as they are not GSM, I’m not interested. I just switched from Verizon to T-Mobile this week with my new Nexus 4. I have no regrets.

  • Oli72

    nice try Verizon. thank you for the pillow talk. when consumer from the Big 3 (VerizonSprintAt&t) sheep wake up and see that they is getting feed fake grass then they will wake up. i left Sprint to T-Mobile 2 months ago and will never look back.

    • Cole Raney

      The trouble is T-mobiles coverage. I can’t get t-mobile where I am.

  • Ryanjayce

    You connect is based on Location…… All 4 are great companies but your connection with each is based on location….