As of April this year T-Mobile offered the best deal on the iPhone for just $99 up front and no tyrannical two-year contract, and yet the company hasn’t sold enough to save itself from third place. In fact, the company’s share of the wireless market has dropped since it announced its deal, reports Bits Blog’s Brian X. Chen. And while the company has sold a bunch of iPhones, most buyers are upgrading to smartphones for the first time, meaning it hasn’t really lured fancy phone owners from the competition. When T-Mobile made its “bold” move, the tech pundits argued it was the best deal around: T-Mobile still offers unlimited data, users aren’t locked into two-year contracts that subsidize the price of the phone, and certain prices can come out cheaper than competitors. (Though that last part is up for debate.) So, then, why hasn’t T-Mobile lapped up the market?
Unlocked Is Pretty Useless Right Now. The whole idea of an unlocked contract means you can take that cell phone and bring it over to another carrier before two years is over. That idea only really benefits the consumer if every company played along, though. If you don’t like T-Mobile service you could bring it over to AT&T, Verizon or Sprint, but then you’d have to lock back into another two-year contract. Also, the T-Mobile iPhone isn’t compatible with the Verizon and Sprint networks, meaning your contract freedom is pretty limited.
Phone Payments Are the New Contract. To take the $99 iPhone to another carrier requires fully paying off the set in $20 installments over two years, which just so happens to be the exact length of a contract. After that, the real deal starts to kick in: Verizon and AT&T customers still have to pay high monthly payments subsidizing the cost of a phone that has already been paid off in two years, while T-Mobile iPhone owners don’t. But, for anyone who either wants a new phone before two years or who wants out of T-Mobile before then, freedom requires paying $580 for the iPhone first. Someone looking for a cheaper option probably doesn’t want to pony up that much money up front.
The True Costs of a T-Mobile iPhone. Depending on what kind of plan you want and how much data you use, the T-Mobile iPhone is not always the cheaper option. But, Chen thinks the real reason T-Mobile hasn’t attracted many customers comes down to its weaker network. “When it comes to choosing a carrier, customers care about the coverage and speed of their service,” he writes. “T-Mobile only recently started turning on its fourth-generation network, called LTE, in a small number of cities, whereas AT&T has deployed 4G LTE in about 300 markets, and Verizon Wireless has LTE in about 500 markets.”
That should change, though, at a press event this coming Wednesday when T-Mobile announces its “boldest moves yet.”