T-Mobile USA Goes to "No Contract" Pricing

T-Mobile USA has formally introduced its “no-contract” approach to mobile service pricing. T-Mobile USA says its “bold” approach means “T-Mobile is canceling its membership in the out-of-touch wireless club,” said John Legere, president and CEO of T-Mobile USA. “This is an industry filled with ridiculously confusing contracts, limits on how much data you can use or when you can upgrade, and monthly bills that make little sense.”

T-Mobile USA now says it will change all of that. Skeptics might disagree.

Sprint has emphasized “simplicity” for years. And one might argue that Verizon Wireless “Share  Everything” and AT&T “Mobile Share” use the same simplifying principles as T-Mobile USA’s “new” “Simple Choice” plans.

“Simple Choice asks customers two basic questions: How many lines do you need, and how much high-speed data would you like?” T-Mobile USA says. But some would point out that is precisely how the Mobile Share an Share Everything plans work, as well.

Nor is the shift away from contracts as dramatic as it might sound, for end users who really do not want to pay full retail price for their new devices.

T-Mobile USA is hedging its bets, by offering installment plans that have the advantage of allowing T-Mobile USA to post lower recurring costs of service for its usage plans, since the installment charges are “separate.”

Will consumers really care if the out of pocket monthly payments for T-Mobile USA service are marginally lower, in the case of services without subsidies but with an installment plan? In other words, will most consumers actually wind up saving money on a recurring, out of pocket basis?

If one assumes most consumers still are going to opt for device installment plans rather than buying their devices outright, the savings are relatively slight, on a recurring basis, for purchases involving high-end devices, though some could save money.

T-Mobile USA has a $60-a-month 2.5 gigabyte data plan is more than $300 cheaper over two years than an AT&T plan that offers 3 gigabytes and 450 minutes of talk time with the same device. For a user who opts for the installment plan, that works out to about $12.50 a month lower bills than for the rival AT&T plan.

There is an argument that T-Mobile USA plans will save more, compared to service from Verizon Wireless. A user buying that same T-Mobile USA plan, and using the installment plan, would save perhaps $20.83 a month, over two years, compared to a single-user Verizon Wireless plan with 2 gigabytes of data (though the Verizon Wireless plan also would offer unlimited talking and text messaging.

The point is that the actual differences in end user behavior, or the potential savings, might be more subtle than T-Mobile USA seems to suggest will be the case.