Handset Manufacturers Discuss T-Mobile’s “Killing” Of The Subsidy

T-Mobile’s dynamic shift away from the subsidy model of the US wireless industry is definitely raising eyebrows. We’ve already heard from the heads of AT&T and Verizon, both of whom have stated they are closely watching the reaction to T-Mobile’s efforts. AT&T’s CEO feelings have been shared by the likes of Telefonica and Vodafone in Spain lending more credit to the idea that T-Mobile’s move may offer more risk than reward.

Still, while the heads of the other carriers may be throwing up caution warnings, handset makers and platforms are not worried about their relationship with T-Mobile. RIM CMO Frank Boulben, told Fierce Wireless that he isn’t worried about the company’s move.

“We can live with all the models because fundamentally it’s driven by what the end user wants,” he said.

For its part, Microsoft’s senior product manager of Windows Phone, Greg Sullivan says the move is a reflection of a healthy industry.

“I think it’s a recognition that the market is not homogeneous and that there’s room for different business models and approaches, and we’re encouraged that they are exploring these new models…It’s a reflection that this is a really healthy, dynamic industry.”

In fact, as Fierce Wireless editor Phil Goldstein points out, the subsidy model is actually a reflection of the unhealthy state of the industry. Unfortunately, as Zhao Wei, vice president of ZTE’s US handset business points out, while T-Mobile’s move may be “brave,” US wireless customers “are familiar with subsidies.”

There’s little doubt T-Mobile has an uphill marketing battle ahead of them to drive home their point that the subsidy model is bad for the consumer, bad for the company and bad for the industry. Thankfully, T-Mobile’s CEO John Legere seems more than up to the challenge.

Fierce Wireless

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  • ceegii63

    people should realize Subsidies actually make the phones more expensive than they cost full price

    • TBN27

      That’s where they have their work cut out for them. People only see the short term or instant savings on the handset. But with the subsidies shrinking accross all carriers, i believe that they won’t have a tough time getting their message across. People are bitching and moaning about the prices as is. As an example when my sister under my family plan saw that she was paying 500 for her LG myTouch, she balked at the price. But when i showed her the math and that how she id paying less than at&t in 2 years plus the comfort of eip, she then realized the savings.

      • vit137

        If they lowered the initial down payment on phones they would go a step further. It may cost more to buy an unsubsidized phone, but with an initial upfront cost of $300 for a good phone it immediately throws up a barrier that stops a lot of people from making the jump. Lazy, greedy people like me who can’t save a dime.

        • chris

          If saving is something you really want to do, then also check out phones from amazon, newegg, etc.

          Just sayin

  • Richard Yarrell

    Tmobile is heading in the proper direction in my mind. By this time Next year 2014 people will see the EXPLOSION of the tmobile network. The overall merger with Metropcs will be like 9 months strong andiit’s advance 10 Lte network will be like 5/6 months old brand new and vibrant. 2013 will always be a that it all changed these changes are ground breaking.

  • tomarone

    Silliness. First of all the no-subsidy is actually subsidized by T-Mobile in the form of a $400 per customer interest free loan over 20 months. They have just reduced the subsidy, that’s all. The customer needs to be credit-worthy (not hard here) to get this “loan” (subsidy).

    In return for their getting less of a subsidy the customer gets something: namely a non-subsidized cheaper plan after 20 months. Once the $20 is paid the cost is effective. There is less of an incentive to buy a new phone, however.
    Being a long-time value plan customer having done this on 3 phones so far, (at least) this is my take (4 family members) the other problem is any one customer can only do this to 1 phone. T-Mobile does not offer multiple phone loans per single customer (it only offers to do this to a max. $400)

    Any other insights anybody?

    • tomarone

      Two additions 1) I believe the ‘value’ plan is cheaper than a subsidized classic plan even after adding the $20 a month however you have to pay a deposit on the price difference between $400 and the cost of the phone (usually around 599 or so)
      2) TMobile offers frequent rebates so the phone price is often cheaper and your ‘deposit’ is covered. Rebates they offer are up to $200 usually.

    • valzho

      We have had 3 phones (the total number of lines on our plan) being paid off at a time… so I don’t think the 1 phone financing thing is correct. Probably has more to do with credit, history with T-mo (I’ve been a customer since ’06), and total cost being financed.

      I have a habit of checking prices across all phone vendors about every 6 months (gotta make sure I’m getting the best deal). Even when you factor phone payments on top of normal rates, I have yet to have a single time that T-Mo didn’t completely obliterate the competition on price. Note: AT&T has consistently been the very worst for price–by far, which is why I hate that they keep getting all these exclusive phones (I really wanted a Lumia 920–settled for the 810… which is still a great phone… I digress).

      • tomarone

        have you ‘financed’ over $400 at a time? just curious.

        • Whiskers

          I Have….
          I have three lines and each phone was over $400 each new and T-Mobile financed all three on my VP lines 14 months ago all on my account.

          So the one phone per customer financing idea could not be correct.
          T-Mobile also told me i could have up to 5 VP lines with financing if i wanted .

        • tomarone

          guess i had bad credit or something!

        • guest

          program just auto calculates the maximum that they will get you borrow. It does have something to do with credit (though that is never seen by reps)

  • Corvette Morales

    Does the elimination of subsidies have an impact on contracts? Or would 2 year contracts still exist?

    • Mirad77

      Giving the model they are trying to use, there will still need a contract. You will pit down a portion of the cost and finance the balance interest free for usually 22 months. Contract is the only way they can guarantee you pay them the balance.

  • me

    This is all about T-Mobile not being able to afford taking an up front loss on the phones in the current model. They can tout it as being about the consumer all they want, but this is about basic survival. When T-Mobile signs up a new customer on a 2 year contract while subsidizing even a basic smartphone, they don’t see any profit form that consumer for the first 13 months vs. seeing profit in just a few months on the unsubsidized model.

    When a company tells their consumers to go on ebay or craigslist to get their own phone, you know its not about whats best for the customer. Problem is that its not just the consumer that likes the subsidized model overall, the manufacturers do to as they get paid up front. I see this move helping T-Mobiles bottom line but hurting their ability to lure exclusives away from the 2 big guns.

    • actually manufacturers get their money regardless of how the carrier decides to offer their phones to customers .. there are no separate prices for them. manufacturers couldn’t care any less about how TMO, Cricket, ATT etc decides to offer their phones .. they’ve already been paid or contracted etc.


      How do you figure they are not being able to afford the loss upfront? They still are by lending you the credit to finance the phone while you take up to 20 months to pay it off at 20 bucks a month. The benefit is to the consumer to have the ability to either pay up front or pay off early and reduce their cost on their monthly bill. Not everyone runs out and has to have the latest phone every 6 months, but if you do you can pay off your EIP and then T-Mobile will turn around and finance another phone for you.

    • Its not like your going to see this response since you not logged in but I’m going to rant intyway! Wait… nope thought I had the energy to tell you how obnoxious you are but… nope tried again. I just dont have it in me.

  • Mirad77

    I’ve been a value customer for a while now since I can’t seem to hold onto a device for a long time. Personally I think it’s better for consumers like me as it holds one down with the restrictions of when to upgrade your phone and all. Like David rightly said it will be an uphill battle but one that T-Mobile can prevail depending on how well they market the idea.
    I still think T-Mobile should put it’s network in a better position first before taking on a project like this as in Network-iPhone-Value only. Too much too soon might lead to an end they don’t want. Just saying.

    • Mr Tibs

      My thoughts exactly. Fix the network first.

  • Jordan Williams

    Now all I can hope is that they stop loading down the phones with so much crapware. That probably won’t happen though…

    • Herb

      Nex. Us.

      • ^what he said, NEXUS, best smartphone ive ever used, and i work there and switch phones on a regular basis.

        • Jordan Williams

          It’s funny that the two of you are talking to someone who OWNS a Nexus 4. I’m saying for all the other poor saps who don’t know any better.

  • I’m a huge fan of the non-subsidy model. Mostly because I feel people don’t fully understand the cost of smartphones, it’s all “hidden.” I also am tired of contracts. I want to be able to switch when I want to without having to ditch my phone. Ok, this has its limits in the US… tmobile or att, but at least its a start.

    Unfortunately, the flip side of this is if phones were subsidized, I’m guessing smartphone adoption would never have been this fast? I’d be curious about the rates in the US vs Europe (where I’m under the impression they don’t have the same subsidies?).

    Ultimately, I’m in favor of a pre-paid push because Google has pushed a $300-$400 off contract phone that isn’t 1yr old. Ideally, they’d have kept older phones in to hit a $200-300 price point as well. This is going to be the hardest part about it since they are the only ones doing it.

  • bob

    Why isn’t it being brought up that T-Mobile allows people to fiance their phones? Put x amount down and pay $20/month for 20 months. If you look this pretty much puts them on par with the other carriers but once you pay off the device you start to save money with the carriers you don’t. So really aren’t you paying more than full price of the phone with other carriers? Am I missing something?

    • valzho

      Came here to say this same thing. The NO interest NO finance charge financing of the phone is why it is going to wildly succeed, and why (I would guess it wasn’t an option) that Spain failed.

      • 21stNow

        I heard that Telefonica had a financing plan.

        • philyew

          Where did you hear that? I’ve been looking for an answer to whether that was the case.

          Also did they have any prior evidence from a parallel pricing period, such as TM have with VP v. CP that encouraged them to proceed?

          My biggest concern about the change is that after CP is removed the Value Plan becomes simply “the plan” with no simple comparison remaining to demonstrate the enduring value.

        • 21stNow

          I heard that in a comment on this board, as a response to my question about it. I tried to use Google translate on the Telefonica website, but could only translate some of the pages. I couldn’t translate the plan pages.

    • 21stNow

      They probably will in the near future. The problem is that once people start thinking that if they need to break the contract, they will owe the balance of the phone price and the ETF, this may turn people away.

  • gwhyte01

    Moving away from subsidy is a bad idea…sure its good for tmobile but it aint good for us…we end up paying more for the handset if we’re paying full price…person like me with a family plan paying 235 a month, if i upgrade my phone i have to keep paying my 235, i have no upgrade and i have to pay FULL PRICE over the course of two years. so if i want a galaxy note i have to pay a extra 30 dollars a month for TWO YEARS.. What if i upgrade two of my phones. Either have to pay 600-700 dollars twice of do a friggin eip.I dont know about you ppl, but i’d rather be doing something else with my money than giving it to tmobile or verizon or any of these rich bastards who just sit there and find ways to take money from consumers and find a shitty way to justify it. Now i love my cellphones…i love using them, but the idea of getting a discount for having a contact for two years (btw these guys didnt say they were getting rid of contracts.) is a great idea, and i’m not ready for legeres new scheme.

    • Adam

      Please do some fact checking before you write something that you are totally wrong about.

    • ivanovich

      You are a classic example of a person who just spews what ever fecal matter is in their mouth at the time. Get your facts right and take some math classes while you’re at it.

      • wmd

        OMG! take a pill, rather than ram your opinion of him up his ass why don’t you just try & explain it a little better than some of the other on here. Freaking juvenile. Obviously he needs some help understanding, offer it.

    • valzho

      Actually, your ideas of what the pricing is are completely wrong. On a subsidy plan your rates are noticeably higher for all of your services–you are *subsidizing* the cost of the phone by paying higher rates on everything else. Those higher rates don’t go away either–they are always there–which benefits the phone companies NOT the consumers. You really do, over time, end up paying MUCH more on a subsidized plan.

      On an unsubsidized plan, all of your rates are much much lower to begin with, so tacking the cost of a phone/phone payment ends up break-even (better actually). This is good, not for T-mo, but for customers. On top of that, T-Mo lets you spread the cost of that phone out into payments over time with NO finance charges and NO interest. Further, once the phone is paid off, that extra payment goes away leaving you with a much lower phone bill. This is a no-brainer.

      For comparison, we have a 3-line family plan with 1000 shared minutes/mo, insurance, data, and unlimited texting on all lines plus extra parental controls and are paying on 2 phones that we just bought. We pay about $150/mo. When our phones are paid off in less than a year (out of our 2-year contract) our bill will drop to $120/mo.

      A couple of weeks ago I helped my friend price out a 5-line family plan on T-mo with unlimited data on all lines–$180/mo. He could easily tack the cost of 5 new phone payments and still be paying in the same ballpark as your plan.

      You tell me. Who is screwing whom here.

      • 21stNow

        If T-Mobile charges $50 more for the phone to a Value plan customer than a non-Value plan customer, it has the same effect as interest or a finance charge.

        • valzho

          I don’t know that I’m following you… I don’t think that T-mo charges a different price for the phones…

          A little experiment; let’s price out options for an individual with unlimited minutes, texting, and data using the phone I just got (a good example of an averagely priced smart phone). I’m using pricing from T-Mo’s website right now (ignoring service taxes and fees).

          Lumia 810: $499.99 MSRP

          CLASSIC PLAN:
          Phone: $499.99 – $300 instant discount – $50 mail in rebate = $149.99*
          Unlimited 4G Plan: $89.99/mo.
          Activation Fee: $35
          Total “Out the Door” Cost: $199.99
          Total Cost over 2 years: $149.99 + ($89.99 * 24mo) + $35 = $2,344.75
          *(In store may still pay sales tax on $199.99 phone cost, not factored in)

          VALUE PLAN:
          (For the phone payment I will have to use what I paid for mine in-store… to get the financing option):
          $99 down payment + $41.25 sales tax on full cost of phone = $140.25
          Unlimited Value Plan: $69.99/mo
          Activation Fee: Waived
          Total “Out the Door” Cost: $140.25
          Total Cost over 2 years: $499.99 + $41.25 + ($69.99 * 24mo) = $2,221.00

          So, over the course of a 2-year contract, you would be paying an additional $123.75 on the subsidized plan. If you factor in the increased amount of sales / rate tax on the higher-priced value plan, you will be paying even more than that. This multiplies out further with multiple lines.

          It *is* cost effective to go with the value plan.

          EDIT: I forgot to subtract that mail-in rebate from the Value plan… that brings the difference to $173.75 over two years.

        • 21stNow

          I wasn’t addressing the MRCs of any of the plans. My post was in response to your comment about the Value plan having no finance charges and no interest. The phone that I am familiar with in this situation is the Galaxy Note II. The price is $699.99 for Value Plan customers and $649.99 for Monthly 4G customers. Usually, high-end devices had been the same price whether the customer was prepaid or postpaid. I had seen price differences in mid-range devices but usually after a couple of months, the postpaid device price would drop to what the prepaid device price was.

          I have heard that T-Mobile was going to increase the Value plan device prices across the board by $50 to make up for the defaults on payments that they have had. However, I haven’t read this anywhere officially.

        • You’re incorrect about the Note 2 Monthly 4G pricing.
          It’s $649.99 with a “qualifying Monthly 4G plan activation”. Meaning you have to pay the $50/60/70 for your plan at the same time that you buy the phone to get it at that price. So you can’t walk out with the phone for any less than $699.99.
          The prepaid users actually get discounts for activating on certain smartphones. For example the L9 is only $199 when activating on Prepaid. $369.99 on Value + EIP.

        • 21stNow

          Unless something has changed since I bought mine, the first paragraph isn’t true. I bought the Galaxy Note II on my Monthly 4G line that was already active and paid $649.99 + tax out the door.

          I would classify the L9 as a mid-range phone, and I addressed price differences on mid-range phones in my post.

          As I stated in my previous post, the Value plan customers are charged a higher price than Monthly 4G customers for the Galaxy Note II.

        • archerian

          This has been done several times before, if the Classic Plan is activated at a 3rd party retailer, the price is lesser, and the activation fee is usually waived and there are free accessory offers too. Additionally, not everyone needs unlimited talk/text and data. The differences are lesser when a combination of signing up for the Classic Plan from the cheapest source and getting a plan that provides the optimal required service is done. If you are an existing customer, the prices for devices are even better. Does that mean Classic is better? No of course not, it depends on usage, number of lines, device selected etc. And if I’m not wrong, terminating a Value Plan would imply paying back the remaining EIP and a termination fee.

    • chris

      Dude, your monthly would not be 235 as it is right now if you move to Value Plan. I have 3 lines and currently paying 155 for unlimited everything. If I used an EIP, I would be at 215 for each phone. I don’t have insurance on my phone because in my experience I never claimed anything anyways. Ill just save up the 7.99 per month.

  • gto5830

    T-Mobile is starting to go like Metro PCS and have people buy their phones…..maybe getting ready for the merger?

    • As far as I know, this was planned well before the merger.

  • I would think that manufacturers would love to see the death of subsidies because it would allow them to take control of the pricing of their devices.

  • Mr Tibs

    How am i saving? if i have to pay an extra $20 to $60 a month towards paying the phone off.

    • you actually save very little (short term) if you do decide to buy a new phone .. however, the “value” in value plans are for those that bring their own device or somehow refrain from upgrading all the time …
      because as you pointed out .. Classic plan is $90 vs a Value plan equivalent at $70 BUT when you buy a phone and add the $20 on it it’s back to $90 albeit for a limited time .. so at some point you’ll go back down to $70 whereas on a Classic you’d be $90 no matter what ..
      so it’s two sides to look at it .. you do save .. just depends on how you as a customer enjoy your plan .. do you upgrade? do you keep a phone for a while etc.

  • Hopefully Tmobile works this out, but they have a large increase in price on phones bought through payments on the value plans. Buy a Nexus 4 for high end or a prepaid LG L9 for mid range and don’t extend the contract. Those are the price points that will get positive attention. $300 for high end and $200 for mid range, full price, no contract extension.

    • UncleFan

      This is a really good point. T-Mobile is charging the FULL retail price of these phones, regardless of whether they’re purchased outright or with an EIP. Even AT&T and Verizon give you a discount off full retail – typically $50 for a nice smartphone. Even at resellers the price of AT&T phones is cheaper than the identical T-Mobile model.

      T-Moblie should start selling un-subsidized phones at or near COST if they want their new model to work!

      • Its easy to scam people though, what if instead of giving customers a price drop on an s3 from $600-$550, they just said, you know what, pay full price up front and you get $50 off….people would complain that it is unfair for tmobile to charge a “finance charge”, you see what im saying?

        • UncleFan

          That’s not even a hypothetical scenario… it’s *already* happening. People have been complaining since the day the Nexus 4 was launched that T-Moblie was jacking up their retail price for this phone by hundreds of dollars. That’s T-Mo’s fault for bungling what should have been a great opportunity to win customers. Google basically *gave* T-Mo this huge opportunity to offer something no other carrier had, but they just threw it away… My local T-Mobile store doesn’t even carry the N4!

        • philyew

          There is enough evidence from distributors’ disputes with LG in Europe to show that TM are not jacking up the price of the Nexus 4, but rather are working with higher prices direct from LG.

    • purenupe1

      But you will get a contract extension unless you opt for prepaid. Using the eip does get you a 2 year contract everytime

  • tjTj

    tmo value plans only offer value AFTER the phone is paid off to put it plain and simple… when paying the first 20 months on EIP yes monthly service charges are lower but after adding the $20 for your smartphone your bill is about the same as if u had a 2 year subsidy. you only technically see the lower bill AFTER you’ve paid off the phone because then you won’t have an extra $20 charge every month

    • Anonymous

      exactly! but the average person doesn’t see that. they just see that the galaxy or iphone they wanted went from costing 199 to 599.. then they get scared. they don’t even care that their value plan cost almost half of their classic plan

      • purenupe1

        What you aren’t seeing is that after 20 months the average will want a new phone and they will start the eip process all over again and never realize the savings. Furthermore the up front costs like down payments and or after rebate deals pose a time value of money risk

        • Chris

          I don’t get people who says they want to save but never really look at other phone retailers for deals on Tmobile compatible GSM phones. One that they can pay unlock for $300 bucks and never ever see the $20 on EIP.

          Whatever. I like the new value plan because I can save money.

    • Cris Abreu

      but in 2 years when you want a new phone you’re still going to have to sign a 2 year contract anyway.

    • Actually/technically, youre wrong, and heres why (unless there is a classic plan sale)…. Lets take an S3 for example. same plan, one costs 60 and the other 80. (valueXclassic). If you do the math, the 20 month cost for the value plan is (60×20= $1200) and the classic is (80×20= $1600). Great, now what about the devices? on a value plan the device is the full retail $600, so you end up spending $1800…BUT WAIT…on classic the PHONE IS NOT FREE, usually. so unless you paid less than $200 on the classic plan (which it is not, the S3 is $330-$50MIR=$270, so classic plan price for the first 20 months is actually=$1870), the first 20 months of the classic plan will STILL be more than value, and after the 20 months, value will continue being cheaper, so your savings will increase over time at a linear rate. Its all math people!

      Cliff notes- S3, unlimited TTxt+W value vs classic 2 year costs- Value-$2040, Classic- $2190….at exactly 24 months, you will have spent $150 on a classic plan, and then you will be spending an extra $20 per month thereafter.

      • UncleFan

        The math you’ve laid out, while correct, is not a such a great argument in favor of the Value plan. For one thing, the “$330-$50MIR=$270” price for the GS3 is an aberration. T-Mobile has deliberately gimped the pricing for subsidized phones on Classic plans because they want to make the Value plans *look* better. But… there’s a *huge* problem: they can’t make AT&T, Sprint and Verizon lower the price of their subsidized GS3s just to make T-Mo’s “Value” plan look more appealing to comparison shoppers. Furthermore, potential customers are also accustomed to seeing competitively priced Classic plan phones from 3rd party resellers. I can go into Walmart today and walk out with a T-Mobile GS3 on a Classic plan for $98. That throws a pretty big wrench in the Value plan “math”.

        There’s something else you left out of your equation: what is the cost to *cancel* the plans mid-contract? What if you decide to switch carriers 1 year after signing the contract – what will the cost of canceling a Value plan be versus canceling a Classic plan? With the Classic plan, you would only need to pay the ETF. With the Value plan, you would need to pay off the balance on the Equipment Installment Plan AND pay an ETF!!! I’d like to see the math on *that* scenario…

        • UofM2005

          I have a loyalty plan through tmobile. It is cheaper than the classic plan, but still can get subsidized phones. I have 2 lines and share 600 minutes, we RARELY go over 400. I have a smartphone and the other line is a regular phone w/no data and text. I have no limit on my data and use it a lot more than minutes. This loyalty plan costs $49.99 (2-lines) + $24.99 data/text (for my smartphone) = $74.98. I also have a corporate discount of 12% on top of that which works out to $66 per month. The value plan (w/400 more minutes which i do not need) w/my discount (if they allow it) is exactly the same ($49.99 + $20 data + $5 text = $74.98 -12% = $66). I can also get discounts on phones as well. Right now, they are offering the S3 for $150 w/2 year contract. If I wait for the iphone for another 4 months and subsidies will be gone forever, how is paying full price for a phone with monthly EIP on a value plan going to benefit me?

        • UncleFan

          “how is paying full price for a phone with monthly EIP on a value plan going to benefit me?”

          It’s not, obviously! You should hang on to your loyalty plan as long as you can.

        • what your nut… self is not understanding is… everything! -__- You say that tmobile hikes up the price on the subsidies for the classic plan but tmobile cant make the other carriers do the same. ***** who cares? Your comparing TMO’s classic vs TMO’s value. You need to be comparing verizon and at&t’s plan vs TMO’s value. I dare you to argue that the value plan is not better then. I DOUBLE DOG DARE YOU!

        • and yes im aware my previous post may get deleted and that I may get some thumbs down, but that unclefanny McCrazy wore my nerves out. Im sorry guys. Back to the regularly schedule… whatever. *signs out*

        • UncleFan

          “who cares?”

          Now you’ve just proven what an IDIOT you are. The FIRST THING shoppers see when they look at phones lined up on a counter in Radio Shack or Walmart or Best Buy or wherever is the SUBSIDIZED price of the phone! If THAT PRICE for a T-Mobile phone is significantly HIGHER than the competition, the shopper may not even bother to ask about the cost of T-Mobile’s plans. Sheesh.

        • Congratulations! You are the reason the US economy is failing. You’d rather pay interest on $17 billion dollars than to reduce the deficit. But I have faith(finally) in the American people. I was in the doctors office, and the lady at the desk(ratchet enough) was calling to see how much her new bill with sprint would be. She said the dealer quoted her $140 and it ended up being $190 a month. She called her son who was excited about his lil galaxy s3(which she got for cheap). She had him on speaker phone(why? cause she ratchet) and he said it if saves money we can take them back, pay more for the phone elsewhere and save! True story. I was so proud. But UncleFanny McDoucheBreathe, I loathe you and all you stand for. Call me an idiot eh moe time and see if I dont… well just call me that again a see what happens :)

        • Tom C

          This, for People on classic plans that stuck with tmo, value plans are not a good path. I pay 116 total for 4 lines, 2 with 5gb internet, value plan saves me only $5 bucks. If i stick with my plan, i get subsidized phones for a lot cheaper. makes no sense for me to go to value plan.

        • chris

          Lol Verizon, Sprint and AT&T plans are still more expensive. So it doesn’t matter if you pay $199 upfront for a Galacy S3 on AT&T. In a long run, you’ll still be paying more because of a higher monthly.

      • mattcat03

        The math does not add up on his example of the classic plan. He mentioned the first 20 months for the classic is $1870 but than he said it’s $1200 without the device yet. The device is partially subsized so you only pay the net amount less rebate which is $270 in his example for the gs3. Now do the math $1200+270=$1470. How did he get $1870.

        • Marco

          Actually he said the Value plan was $1200 ($60*20mths) plus full price on the phone ($600) would be $1800 in 20 months. The Classic plan was $1600 ($80*20mths) plus the subsidized price of $270 would be $1870. In the first 20 months, you would pay $70 more on the Classic plan. In the next 4 months, you would pay $20 more each month than on the Value plan.

    • WW

      My 5 phone family plan (approaching but not at 20 months yet) is actually $10 lower with 2 $15 (for a total of $30) EIP phones than had I gone with the same features on a Classic plan. It’ll be over $40 (actually closer to $50 because I now have 4 data plans) lower than the same Classic plan starting on month 21.

      I haven’t priced it in well over a year but at the time, many if not all, add on features cost $5 less on Value vs Classic plans (I only had 2 phones with data at the time so this significant savings only applied twice, not 5 times). 200M data is a $5 add on rather than $10, 2Gb data is $10 rather than $15 etc…

    • techpro1993

      Technically you are correct. But You are forced to upgrade phones exactly every 2 years.

      With value plan, you can change phones every 6 months if you like. Get a shiny just released Nexus or IPhone immediately after release. No need to wait for another sad year. Then upgrade is always more pricey than new account.

      Value Plan can also help you save money a lot of money if you decide not to upgrade phone after 2 years.

      Upgrade phones at your own pace and decision is best feature of Value Plan. If you have money, upgrade any time you want. Need to save money, use the same phone until it broke.

  • Anonymous

    people don’t think of the long run, and dont understand subsidies. I hate it when websites review phones and say: “this phone will be priced at $199” Really buddy? you mean $599 before subsidies!

    we need subsidies to die and plan prices to drop. Look at the rest of the world.

    • Turo

      It irks me as well when they review/compare phones and use the subsidized price for evaluation/comparison. Last phone I bought subsidized was a Nokia 3220. Cost me $80 + 2yr contract. I hope the majority of consumers can be smart enough to actually realize the real prices of phones and the move to unsubsidized model continues. If so, there will be more competitive pricing on handsets, which benefits consumers.

  • What people don;t realize is that subsidies affect the resale value of phones since many consumers have no desire to buy a phone non-subsidized.

    Once subsidies go away you could get a good portion of the initial cost from resale which helps the purchase of a new device. I’ve literally had a phone for months without losing a dollar on it.

    • Herb

      Yeah, I cycle phones sometimes within 4 months or less. Just sell the old one and buy a new one. Smart people are willing to pay more for the phone to get service at a significantly reduced price. Whether or not I would sign a contract in that vein is another question.

      • I went with a contract (T-mo value plan) mainly because it does lock the price of the rate plan for at least two years plus the terms of service of many prepaid carriers makes me think twice especially since I use my phone for business.

        • Herb

          Yeah, I can understand. Random unreliable throttling and service suspension doesn’t sound like fun either.

      • guest

        I guess people don’t realize you can just get brand new phones from ebay/craigslist. I’ve sold a few GS3 phones brand new for $450.00 thats a huge discount picking up the phone for that price, and going to value plan

        • thepanttherlady

          Except now with T-Mobile and AT&T participating in the new IMEI database how can you be sure your phone won’t get blacklisted 6 months down the road when the seller doesn’t pay their bill or reports said phone as lost or stolen so they can scam their insurance.

          I’ll continue to sweep on craigslist but won’t be buying any longer.

  • vrm

    Tmo will need to partner with Google to sell stock android devices and google needs to find a partner for handsets as apple did with foxconn.

  • TMOnewsfan123

    go price a decent digital camera, gps, mp3 player, palm pilot (lol if you can), basic touch screen phone, hot spot device, some apps or programs you love on your phone that you would have to pay for on your computer, then think of having the convenience of being able to take all those things on the go in one small device. Then tell me if you think the price for a smart phone is too outrageous.

    • fechhelm

      When you break on down like that it sounds good, but keep in mind the cost of most top smartphones parts add up to around $200 give or take a little. So add in other costs and your able to sell a nexus 4 for $300-350 without taking a loss. Seems like nothing should really exceed $500-550.

      • Google does take a small loss on each nexus device, but make it up in marketing/play store, believe it or not, but you are mostly correct, no worries.

  • watcher45

    i was a sceptic but this seems like a great idea once you do the math

  • Brian90

    They tried this with the “Even More plans” a few years back and it failed.

  • Turo

    Reading some of the comments below, I began to wonder if the pricing of prepaid handsets would go up. I’m almost certain there is a small subsidy (or smaller margin?) factored in the price of those. If one compares the cost of a same model prepaid phone vs. a “full price”, the prepaid will usually be lower. Now, is this discount the result of only the subsidy or are “full price” really overpriced? With the removal of subsidies, will prepaid phone prices go up, or will “full price” go down?

  • purenupe1

    This can negatively affect the handset business. As consumers may start keeping phone an extra year or so as the credit crunch continues to lessen the amount of discretionary cash available to consumers.

  • The hard part for T-Mobile will be training their reps to convince the American consumer that the Value plan is a better deal than the competition. It’s going to be tough since most have “free phone” and “$0” ingrained into their short-term thinking minds. No one considers the long-term cost of these devices.

    • steffanut

      As a rep, I have this conversation daily. We don’t need to “convince” anyone of anything. We all believe the value plans are better and more cost effective for the consumer. Nobody forces you to do the eip. Get that phone where ever you want and whatever phone you want. Take a pass on the EIP. The only thing I would change about this Value plan Is this, if you are not doing EIP, then there should be no contract, if you accept EIP, you do the contract. I love working for a company that is innovative, and thinks outside the box. It may work, it may not, but at least we are not laying down and letting someone else lead the way. There is no other carrier that is looking at changing anything in the wireless industry, lets encourage free thinking.

      • Tom C

        Except, they can’t get whatever phone they want, it has to be a phone that runs on Tmo’s 4g network. You can claim anyphone because of 1900mhz refarm, but all reports indicates it is shoddy. I can’t get anyphone i want, because it wont work on tmobiles 4g. I need to get a phone from Tmobile. Oh wait, guess I’m still locked to tmobile.

  • AndTheWorldMayNeverKnow

    it’s all about choice, I just changed my data plan and hotspot plan. do what works best for you

  • mattcat03

    Tmobile is heading the wrong path. They are really rolling the dice here. This will not attract new customers. There will be high existing customer turnovers. There will be low turnover on the phones they carry. Are they in the business to cell phones too? Looks like they are really intent on risking it all.
    Subsidies are a marketing tool or expense that these carriers choose to use to attract customers. Take that away and they will not come. Unless you have other incentives like their value plan. Which really is an incentive for Tmobile rather than for the customer since the upfront cost is passed down to the customers. In the long run, the question is who will give in, the consumer or the manufacturers? Meanwhile, Tmobile will be left with an improved network but with no customers.

    • philyew

      TM claim that the vast majority of new contracts are signed up under the Value Plan rather than Classic which is why they feel confident about this move.

      What they may be missing is that it is relatively easy to convey the value in a Value Plan when you are able to compare it with the higher monthly costs of the comparable Classic Plan, but what happens when there is no longer a Classic Plan with which to compare?

      When that happens the only basis for comparison is with comparable device/plan combinations from other carriers, but do people believe what one carrier says about the pricing of its competitors?

  • Joe333x

    As long as they grandfather their current classic plans idc but the value plan is going to hurt them in the long run, they already charge more for a phone with a 2 year contract than the other carriers and now they are going to have the highest priced phones and your bill wont go down because by the time you pay off the first phone you going to want a new one. Bad idea all around.

  • 0neTw0

    Goodie Gum Drops

  • Eric Echevarria

    I paid $1 for my Galaxy S3. While that price isn’t typical, there’s no way I could save more money buy getting a non subsidized phone at that price.

  • yozo

    If TmoUSA actually plans to go though with full price mobiles ONLY plan, then expect a lot more low end mobiles in their inventory. I see them trying this for a while then going back to status quo. There are lots of peeps who still want every mobile for free. Just saying…

  • JT

    What is up with all this arguing? Our public schools not teaching math? I switched to the value plan when it first was offered and never looked back. Although, I agree T-mobile should consider reducing or getting rid of the ETF for the value plan. Then again, a higher ETF would make a customer think twice before switching to a competitor.

  • TB

    Look no further than the failure of JC Penney’s new pricing strategy for proof that this idea will fail and hurt T-Mobile badly…value plans may actually be the better plan for most people, but it’s unfamiliar and confusing to many consumers and most will not take the time to educate themselves. JCP got rid of coupons and went to a simple pricing methodology, and promptly saw massive declines in sales as consumers moved to greater perceived “value” at other retailers such as Target, Kohl’s, and Gap/Old Navy. T-Mobile is making a very dangerous move here, and in my opinion it is very likely to fail.

  • Victor John

    To those of you with legacy classic plans how would you get subsidies on new phones when certain phones such as the iPhone 5 that will only be avalible on the value plan? Tmobile wouldnt have gotten it if it was offered at subsdized pricing. I doubt custermer loyalty would be willing to give such a high profile device on discount, so how would it work for the people still on classic plans?

  • drzfr3shboialex

    They’re taking risks, unlike many other companies now a days.

  • Just hurry and lower the rate plans and then we’ll talk