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T-Mobile's "radical" changes double-down on flat-rate data plan

John Cox | March 28, 2013
In a profane, foul-mouthed, ad-libbed presentation, T-Mobile CEO John Legere Tuesday trumpeted his company's previously announced "unlimited" data plans, scrapped its cellular contracts, launched its belated LTE network, and revealed that T-Mobile, finally, would offer the iPhone.

Legere didn't explain whether this price applies to all three iPhone 5 models. Currently, on Apple's website, full prices for an unlocked iPhone 5 are $649 for the 16GB model, $749 for 32GB, and $849 for 64GB. For the lowest priced model, T-Mobile in effect offers a $70 discount on the phone's price. (The carrier will also offer iPhone 4 and 4S.)

Legere said T-Mobile had worked out a deal with Apple, but didn't elaborate on what that means. Apple could be selling the iPhone to T-Mobile at a lower price, as an act of charity. Apple isn't known for acts of charity. By convincing customers to pay most of the actual price for the phone, T-Mobile offers "savings" by, simply, offering a discount. If the price that Apple charges the carrier is unchanged, then T-Mobile is making up the difference, but still paying less than its rivals who stick with the traditional subsidies. With a subsidy, customers pay the carrier much less for the phone, accept the two-year contract with early-cancellation penalties, and the carrier pays Apple hundreds of dollars for each phone.

If the same T-Mobile pricing applies to all three models, its value rises dramatically: for the 64GB phone, your total discount would amount to $270, over 30%, and everyone would buy it because there would be no difference in what the consumer finally pays for 16G-, 32G- or 64-GB models.

Legere trumpeted the fact that buying an iPhone at T-Mobile would save $1,060 over two years compared to the same device on rival AT&T. But those savings are found almost entirely in the cheaper rate plans, not cheaper phone prices.

The price contract remains an "obligation." In response to a reporter's questions, T-Mobile executives said a customer can leave T-Mobile after a month and take the iPhone with them. But the customer still has to pay off the balance due on the phone; and T-Mobile won't unlock the phone until the balance is paid.

Legere said the company will introduce other changes to make upgrades to new phones "really simple." One change will be offering a "fair-market" trade-in credit for the existing phone, to offset the price of the new phone.

* Cheaper, and simpler, rate plans

According to Legere, T-Mobile's new Simple Choice Plan is simple. Here's the breakdown:

You start with a base rate for one line of $50 per month for "unlimited talk, text and Web with 500MB [Megabytes] of 4G data." In other words, there is a limit: 500 MB on data. Pay another $10 per month, and the data limit rises to 2GB. To get completely unlimited data, you choose the $70 per month option. Whichever one you choose, you can add a second line to that package for another $20 per month; and each additional line after that is another $10 per month.

 

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