T-Mobile Abolishes Wireless Service Contracts
Developing mobile technology has caused mobile devices to age in dog years. Nearly every month there’s another more “advanced” model of the same phone available on the market. Regardless, people everywhere sign and renew constrictive two-year contracts. Earlier today, T-Mobile announced their plans to do away with cell phone contracts, replacing them with installment plans in an effort to stay competitive in the U.S. marketplace.
As an alternative to offering customers a phone with a two-year contract, T-Mobile will offer it for a fixed upfront price plus a monthly fee for unlimited calls and data. The additional fee will include the cost of the phone, until the phone is paid off (typically after two years) the fee will be reduced, in contrast with traditional two-year contracts where monthly payments typically stay the same after two years. T-Mobile calls the new pricing plans “Simple Choice”.
To the average consumer, the continued existence of contracts is frustrating for a number of different reasons. The rapid evolution of wireless devices and outrageous consumer demand is essentially causing dissatisfaction, and in many ways is becoming somewhat of an antiquated notion. For example, there are a number of early adopters who are motivated to consistently have the latest and greatest device. Instead, people are essentially locked in to the same phone for the duration of the contract, unless they want to pay the full retail price of the new device. While this type of frustration may describe some of the downfalls of consumer behavior, it becomes problematic from a technical standpoint as well.
In some cases, mobile software updates are not supported by devices that are only a year or so old. As a result, the device is likely prone to more performance issues ranging from reduced speeds and battery life or even viruses.
These various types of consumer concerns are creating opportunities for the wireless providers to become more competitive and continue to seek flexible service options. In the end, consumers win with a variety of different options, allowing them to choose based on their specific needs and preferences.
While pay-as-you-go options have obvious benefits, there are a few potential consumer concerns. Some users may be opposed to paying the retail value of a phone (whether up-front or in the long run). Also, no-contract providers such as Virgin Mobile tend to take longer to receive brand new devices. Overall, users can be granted contract freedom, yet selection and up-front cost are important considerations.
Regardless, wireless providers will likely continue to explore diverse payment and no-contract solutions to gain favor against the competition. Additionally, there’s a good chance that their success can be amplified by the quick availability of high-demand devices, and evolving competitive pricing options.
T-Mobile is currently the fourth biggest U.S. mobile carrier (behind AT&T, Verizon and Sprint). On April 12, the company will hold a special “Uncarrier” event, where they will reveal the availability of Apple’s iPhone in its stores. The release is a major step in the right direction for T-Mobile.