Norman Chan of Tested made an interesting point while discussing T-Mobile's new data plans: the closer the phones in our pockets come to being our primary computers the more we should think about phone purchases as computer purchases. The current model most carriers follow is to sell a subsidized phone for anywhere from free to $200 and recoup the loss they take on that sale over the length of a two year contract. While that worked quite well for inexpensive feature phones on low cost plans, smartphones are a different animal.
The average consumer could reasonably expect to continue using their smartphone for much longer than the standard two year contract, barring failure of the hardware or a dunk in the drink. The smartphone market is reaching a point where it is difficult to differentiate new hardware from the old hardware. Some manufacturers have tried adding extra sensors and other features (the Galaxy S4 has a humidity sensor) while others have tried to differentiate through limiting software updates (Apple made Siri a 4S exclusive feature).
Assuming that is the case, AT&T and Verizon could be at a disadvantage if they do not offer discounted rates competitive with T-Mobile's. There has been some discussion about whether or not T-Mobile's plan is any different from the traditional contract model in the United States. While there is not a huge difference between the two (an iPhone on Verizon costs $10 more per month) after the addition of the $20 monthly payment, the simple separation of the phone payment and service payment makes all the difference in the world.
What this separation means to T-Mobile customer is that once the phone has been paid for (whether in a lump sum or at $20 per month interest-free) they are no longer making a $20 phone payment and their total bill will drop to $50 a month. On traditional contract plans the cost of the phone is built into the two year agreement but the payments do not change after completion of the agreement.
Taking into account the $200 down payment for an iPhone 5 on Verizon, an iPhone's cost of $650 could be paid off at just under $20 per month (T-Mobile is offering the iPhone at $579, $71 dollars less than list price). Verizon's most basic plan for an iPhone starts at $80 for 300 MB of data and unlimited talk and text. Once the phone has been paid for, payments remain at $80 a month; the consumer is still paying the subsidy for the phone even after the phone has been more than paid for.
On top of this discrepancy are the additional benefits offered by T-Mobile's new plans. The $50 plan actually includes unlimited 2G data (slow, but better than nothing) as well as 500 MB of LTE data and unlimited talk and text. Going over the allotted 300 MB on a Verizon plan would require purchasing an additional data at $10 per GB. T-Mobile also does not require a cancellation fee after the customer's once the balance of the phone payments has been paid.
While one can nitpick the details of T-Mobile's new plan and call it "confusing", the reality is that the new plans are much more consumer-friendly than those of the other major wireless carriers. T-Mobile makes it clear at the outset what the customer is paying for and how much the are paying for it.
It is past time we started thinking about the computers in our pockets like we do the computers on our desks. While it is convenient for our carrier of choice to autodraft $100 or more dollars from our account for a vague, barely-understood service plan can we really afford to continue shoveling away money in exchange for "cheap" phones? We would never do that for our notebook or desktop computers. While T-Mobile is not a wireless messiah, their new plans are a step in a more consumer-friendly direction. One can only hope the other major carriers follow suit.
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