When finally struck a deal with Apple to bring the elusive iPhone to its network it essentially put an end to its issue with subscriber drop-off. Love it or hate it, the one thing people fail to realize is the importance of the iPhone to carriers, as it brings stability to a wireless providers’ roster of phones and plans.
I use the word stability because if you were to ask most people who don’t have T-Mobile (for a variety of reasons), usually talk about two things: bad network in small rural areas and no iPhone. It’s the no iPhone part that’s been the true thorn in the side of T-Mobile. But, starting in 2013 the company won’t have that problem anymore.
For new subscribers, the iPhone is the bait for pushing magenta’s ‘Value Plans’. And the Value Plans are the trigger to the company’s no subsidy phones agenda. To understand T-Mo’s position, you must step back for a second to fully grasp what T-Mobile has wanted to do all along, and that’s change the way subscribers in this country get their phones. Back in March, T-Mo’s CMO, Cole Brodman said the hardware subsidy model “distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields.”
He’s right. Carriers have done an excellent job of brainwashing customers, making them believe that a phone like an iPhone oronly cost $199; when it usually commands a price tag of around $650. Subsidies on that level cause users to devalue the hardware altogether. See, it’s just a bait and switch here. You get locked down for two years because you chose to take the subsidized price on that new phone.
Having no subsidies gives consumers the option of paying full price for a smartphone, or pay in monthly installments until the device is paid off. Both choices are more transparent, and doesn’t allow the carrier to sneakily add higher rates throughout the life of the contract. Another big reason for cutting the traditional subsidized model is the rising popularity of prepaid services; T-Mobile is praised for its non-contract plans and will only get better once the MetroPCS merger deal finalizes (the merger is a huge piece for this plan to work, so it must go through).
This brings us back to the iPhone. Next year Magenta has plans to sell the iPhone for $99 and a monthly installment of $15 to $20 that goes on top of your monthly plan (the cheapest prepaid plan starts at $50). T-Mobile will also apply phone trade-ins to any device with an installment plan. Not bad, huh?
Speaking as someone who has used installment payments under T-Mobile, I can honestly say it was a simple and painless process without any confusion. The great thing about these installments is there wasn’t a penalty for paying off your phone early — which essentially gives folks early updates without any commitments.
The only roadblock preventing this new strategy from truly taking off is the failure of grabbing consumer interest. T-Mobile will have to put in a crazy amount of effort in marketing and training to its foot soldiers to drive the message through to potential subscribers. This is the best way the fourth largest wireless provider can shake things up.
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