There's something refreshing about T-Mobile’s new “un-carrier” strategy. The struggling No. 4 player in the U.S. wireless market has decided to ditch contracts altogether while separating the cost of the device from its new Simple Choice rate plans. Overall, consumers can save quite a bit of money versus AT&T, Sprint and Verizon. However, T-Mobile's plans aren't simple and straightforward as you might think, and there are plenty of caveats for every perk. Here’s a closer look at what subscribers are really getting — and what they’re not.
1. White Lie No. 1: You’ll Save Over $1,000 versus AT&T!
If you trust T-Mobile’s marketing department, you’ll save more than a grand versus AT&T by opting for one of its Simple Choice Plans. But if you make comparisons based on what plans most people opt for on AT&T, the savings aren’t as great.
Let’s say you signed up for 2.5GB of data on T-Mobile for an iPhone 5. The phone costs $99 up front and $20 per month for the device for 24 months, plus $70 per month for unlimited data. Total after two years: $2,259. A similar AT&T Mobile Share plan with 4GB of data costs $110 per month when you add in the device access fee. That comes out to $2,839, or a savings of $580, which is significant but not mind-blowing.
2. White Lie No. 2: No More Commitments!
T-Mobile says you “don’t have to serve a two-year sentence to get a new phone.” That’s true, but most consumers will wind up signing up for a 24-month payment plan, which is the same length of time as other carriers’ contract plans. The good news is that customers who choose the Equipment Installment Plan option can choose to pay off their device at any time and upgrade to a new device as you see fit. Plus, T-Mobile will let you trade in your old handset for “fair market credit.”
3. White Lie No. 3: It’s Unlimited Data!
It sounds too good to be true. The new base $50 plan for T-Mobile is unlimited, but it only includes 500MB of high-speed data. After that you drop down to pitiful 2G speeds. T-Mobile’s Unlimited Nationwide 4G Plan does include unlimited 4G data but only 500 MB of mobile hotspot service. An additional 2GB of hotspot service costs $10 per month. AT&T and Verizon include mobile hotspot with their shared data plans, and the cap depends on the amount of gigabytes you sign up for.
4. White Lie No. 4: You’re Paying a Lot Less for Phones!
Up front you are. The iPhone 5, for example, costs $99 down on T-Mobile but over those 24 months you’ll be paying $579 for the hardware. For not much more money you can buy an unlocked iPhone 5 ($649) and take it to AT&T or T-Mobile. Worse, T-Mobile is overcharging customers for the Nexus 4. You can pick up the 8GB version through the Google Play store for $299, while the T-Mobile version costs $49 up front but $457.99 when paid in full.
5. White Lie No. 5: Our 4G is Better Than Their 4G!
At T-Mobile’s launch event I was very impressed by the data speeds delivered by the Galaxy Note 2 and HTC One, with downloads ranging from 30 to 50 Mbps. The iPhone 5 was a little bit behind that. But this was on an unloaded network. T-Mobile says it has 50 percent more bandwidth than AT&T, which means less congestion, but seven launch cities puts T-Mobile way behind AT&T’s 161 markets and 486 for Verizon Wireless.
When you’re outside of T-Mobile’s LTE coverage, the carrier offers faster HSPA+ 42 speeds compared to AT&T’s 21 Mbps HSPA+ fall-back network. However, I’ve tested a number of T-Mobile phones in recent months that fall back to 2G in New York City and New Jersey. 2G! That never happens on Verizon and AT&T now, at least where I travel.
Correction: This piece was updated on April 5th to reflect that T-Mobile customers can pay off their phones at any time and that the unlimited data plan incudes 500MB of mobile hotspot service. In addition, T-Mobile does not throttle its unlimited plans. We regret these errors and apologize for any confusion.