Death of the contract: A T-Mobile exclusive

Chase Bonar
 from Winter Springs, FL
Published: March 1, 2013

Earlier today, our counterparts at TmoNews broke a rumor from a trusted source that the Magenta network could be dropping the word "contract" from their vocabulary. That's right, there may not be any such thing as a 2-year commitment at T-Mobile. The same goes for Early Termination Fees. Rumor has it that this could go into effect later this month.

The rest of the rumor says that existing customers can finish out their current contracts, or upgrade to a new device without a contract, whichever comes first. Also, there will be a new equipment installment plan tier presumably to differentiate between budget, feature, mid-range, and flagship smartphones. TmoNews also reports that the carrier is looking to keep all smartphones under $99. This up-front fee is the down payment in what is a long engagement (up to 20 months) of flat-rate payments. If you're interested in a $699 smartphone (unsubsidized price), you can pay $99 up-front followed by twenty $30 payments. The result would bring the total right back up to the unsubsidized $699 price tag.

However, these are rumors, and even though the basis of them aligns with T-Mobile's announcement of a no-contract approach to the 2013 year, be careful what you wish for.

So, what could this mean for you and I?

Basically, T-Mobile is in the midst of a serious rebranding. It could mean a few things for the company. We recently caught wind of T-Mobile's branding as the "uncarrier" in Las Vegas at the Consumer Electronics Show. At their press event in January, they also announced a nationwide roll-out of HD Voice. They raised the blind again by announcing themselves as the first carrier to offer Nationwide Unlimited 4G without a contract, but did so without any inclination as to when.

I was intrigued, but didn't know how it would be possible. Contracts protect the carrier at the expense of the customer's flexibility. The contract commits customers to their network, payments, and a smartphone for a certain amount of time. In short, I was skeptical as to how one of the big four wireless carriers could pull this off and still am. So, essentially, since T-Mobile will have less protection, how far will they go to ensure their own safety?

As with most contracts, T-Mobile will need to protect themselves. I'm expecting a protection plan to kick in alongside any pending "no-contract" announcement, as well as a simultaneous update to the return and damage policies. T-Mobile would not take this big of a risk without implementing protection plans to shield themselves from an influx of damaged devices that are still technically owned by the carrier.

Just the thought of a customer not paying their monthly bill could turn into a tricky situation for the carrier. What would happen if the device is sold second-hand without fulfilling the payment term? Will T-Mobile be obligated to replace any devices? Is the company preparing for more returns and exchanges? Will the deductions on payment plans go up to deter customers from going case-less? How will upgrades be handled prior to contract fulfillment? Do you pay-out the rest of the term, and own the device, or can it be exchanged for its remaining value? Can you return smartphones like a lease program?

Clearly, it's about to get cray. Not only are we looking at a radical change to the contracted mobile industry, we are looking at an increased amount of responsibility on the part of the consumer. T-Mobile is playing a blind hand and I think it has some serious consequences if it does not play out.

The idea of not having a contract eludes me. Regardless of the rumor, the idea is now implanted in my mind. I've been locked into one contract or another for a really, really long time. First it was AT&T and their unlimited data. That lasted for the better part of ten years, and my parents are still with them. Then I divorced that carrier for a younger, flashier one: Sprint. I've been with them for less than a year and a half, and I've had six devices: the Samsung Epic 4G Touch, HTC EVO 4G LTE, LG Optimus G, another EVO 4G LTE, a Samsung Galaxy S III, and finally, my Samsung Galaxy Nexus.

In hindsight, this would have been so much easier without a contract.

Aside from the implications a no-contract approach holds for the uncarrier (T-Mobile), I'm expecting the prices of second-hand smartphones to tank in the process. The average consumer would choose $99 over $699 ten days a week, but I'm no cardiologist, so test it yourself.

If you're a customer of T-Mobile, and you want to get rid of your smartphone, but have already paid the $99 up-front and 10-months of $30 payments, your smartphone is no longer worth any more than $399 regardless of it's condition or popularity. As a frequent buyer and seller of smartphones, this is almost a good enough reason for me to avoid T-Mobile like the Plague. Never lock yourself into a product that has a set value at the end of it's life. There's no room for profit.

I can hear it already. "I have had the phone for 6-months and I've paid $400, but I'll take $200 because that's how much I need to pay off the phone." "You've had your phone for 5-months and want $550 to pay it off? But the Galaxy S IV just came out and Galaxy S III's are selling for $250 now. How about $200?"

That's a big no, with a side of no.

The second-hand market is about to get really silly. I worry how the no-contract and monthly commitment pricing will be enforced, and what it will do to people who frequently switch between smartphones.

All these rumors and questions aside, I'd pay to hear how T-Mobile's CEO John Legere announces this. T-Mobile has the disadvantage in coverage and subscribers. Normally, this would mean trouble, but the Magenta-colored network has never had the upper-hand. They've practically invented the underdog mentality. And their new CEO John Legere doesn't give a damn about the politics and tactics of his competitors. Maybe that's why he calls other networks "crap" and shrugs off the severity of insults as simply "swagger" and "fun." There's just something about Legere's casual and cool mentality that engages you. Here's to hoping he can sell us a $99 Samsung Galaxy S IV without sketching us out in the process.

We've all been there. It's that moment when the next device comes out and you have to have it, but can't without breaking your 2-year commitment. Sometimes, you'll pay to have that device at the subsidized rate. Other times, you wait out the rest of your contract. Do you think T-Mobile is doing right by eliminating contracts altogether? What could it mean for new customers? Are you interested? Let me know what you think in the comments below!

Image via TmoNews.

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