Now what: AT&T Next and Verizon Edge

Wireless carriers know that the average relationship between a smartphone and its owner is becoming shorter every day. Sometimes the relationship is over when a customer drops or loses their phone and needs a replacement. Others simply covet the next best thing. When a large enough contingent of customers is willing to open their wallets and let their money fall out, what’s a poor wireless company to do? Ignore the pile of twenties falling to the floor? Not on your life.

AT&T last month announced it was dumping its 20-month early upgrade offer, following Verizon (again) which announced it was pulling the rug out on a similar plan in April. ‘Customers should wait a full 24 months before expecting a new subsidized phone,’ said both companies.

Then came scrappy T-Mobile, the company AT&T originally wanted to put out of business. TMO decided to apply some European competitive logic in the U.S. market. No more two-year contracts with nasty termination fees, declared CEO John Legere. But no more “phone subsidy” either. In return for the end of contracts, customers should expect to pay retail price for their smartphone, but at least they can finance it through T-Mobile and have the somewhat affordable monthly installments added to their bill.

Now, in a remarkable about-face for Verizon Wireless and AT&T, the features and promotions diet imposed on customers that has eroded discounts, ended early upgrades, and slapped on early termination fees and opaque junk bill charges might be coming to an end. Early upgrades are back… for a price.

It is the first step in a major shift away from the North American wireless business model which traditionally offers customers cheap devices at massive discounts known as “device subsidies.” Since the early days of cell phones, wireless companies in the U.S. and Canada typically grant customers up to $350 off their phone purchase in return for a 24 month contract (until recently, 36 months in Canada). But wireless providers don’t just give away free money. Carriers get back every penny of this subsidy over the life of a cell phone contract by setting their plan rates artificially high.

T-Mobile isn’t giving away the store either, but at least everything is on sale. By jettisoning the subsidy, T-Mobile’s plan rates are dramatically lower than those offered by its competitors. That is no surprise because TMO no longer has to worry about recouping device subsidies.

When a customer walks into a T-Mobile store, they can buy the latest iPhone for $650 or agree to finance it at the retail price through the carrier. They can even buy it somewhere else. But T-Mobile’s new Jump plan also offers customers a chance to “jump” to a newer phone every 6-9 months with its trade-in program. For avid phone upgraders, the end effect is like leasing your phone. You will always have a device newer than the next guy, and you will always be paying a monthly fee for the phone itself. That looks a lot more attractive than trying to wait 24 months with AT&T or Verizon or frequently buying a new phone for north of $500 and trying to recoup part of the cost by selling your old phone on eBay or Craigslist.

Wall Street would normally punish carriers that do anything to shorten the 24-month traditional upgrade cycle because investors generally hate the whole concept of the phone subsidy. It costs companies liquidity to tie up money fronting that $350 discount and waiting up to two years to get the money back. But since T-Mobile can immediately book the full purchase price of a phone for accounting purposes and does not need to show the amount of money dedicated towards phone subsidies, analysts are not pummeling the stock into the ground.

As Stop the Cap! has written for more than a year, the wireless Golden Calf Wall Street really wants to worship is a cell phone plan priced artificially high to recover a subsidy providers no longer give. That’s a plan only Ma Bell and its shareholders could love. But nobody thought AT&T and Verizon Wireless could get away with it.

Silly people.

Introducing The Wireless Trojan Horses: AT&T Next from AT&T and VZ Edge from Verizon

Yay!: No more expensive subsidies and extra free money

AT&T yesterday introduced AT&T Next — the company’s response to T-Mobile’s Jump with AT&T’s usual gouging touch.

The highlights of the plan include:

• No membership, activation or upgrade fees;
• Buying a new phone under AT&T Next does not require a down payment, any finance charges, or early payoff penalty;
• Customers can trade-in for an upgrade after one year or keep the device for 20 months and own it.

VZ Edge is still a rumor, but leaked promotional material indicates it is nearly identical to AT&T Next, with some important exceptions:

• VZ Edge appears to be an extension of Verizon’s existing 12-month financing plan, limited to two devices at a time with a combined financed balance not to exceed $1,000;
• First payment due at time of purchase with a recurring finance charge of $2 for each month there is a remaining balance;
• No upgrade fees, no contracts, no pre-payment/payoff penalty;
• Customer qualifies for their next upgrade after 50 percent of their current phone’s retail price is paid;

The leaked document does not include details about the disposition of your device when beginning an upgrade. Presumably, Verizon will accept it for trade-in or the customer can pay the remaining balance off immediately and own it.

What sets Verizon and AT&T far apart from T-Mobile are the prices of their service plans. Both AT&T and Verizon are effectively ending their subsidy program for those participating in these early upgrade plans. Customers must purchase (or finance) their next device at the regular retail price, which will range between $500-650 for most top-of-the-line smartphones.

Bunco

But neither Verizon or AT&T are lowering their service plan pricing, which was specifically designed to recoup a subsidy they are no longer providing. T-Mobile has appropriately lowered their plan pricing because the company no longer needs to win back that $350 subsidy they might have given you for the newest Apple iPhone or Galaxy device. That means you are effectively paying AT&T and Verizon twice for the same phone. It’s Wall Street’s dream come true: kill the subsidy and keep the money still being charged to recoup it. That amounts to as much as $29 a month out of your bank account and into theirs.

For now, only those itching for fast upgrades will get the pinch, at least until AT&T and Verizon decide this is the new and improved way to sell phones to everyone without a two-year contract. Now if we can only get AT&T and Verizon to rescind the contract taken out on our wallets….

[Image: The Verge]

Details remain sketchy, but The Verge and TMONews report the new plan will continue T-Mobile’s efforts to break free from the traditional 24-month upgrade cycle for phones offered by other carriers.

Although new by North American standards, providing an “equipment plan” is not unprecedented in Europe. O2 offers a “Refresh” plan specifically targeting likely early upgraders who want the latest devices and do not want to wait through a two-year upgrade cycle.

In North America, customers buy the phone at a subsidized price and then pay back that discount subsidy over the life of the traditional two-year contract (through artificially higher cell phone plan rates).

When one buys a phone on the O2 Refresh plan in Europe, the customer signs up for a 24-month equipment plan which covers both the cost of the phone, the Refresh feature and an airtime plan which covers everything else.

Customers who want to upgrade early simply pay off the remaining balance on their equipment plan (at a rate lower than the usual penalty fee) and upgrade the device at a discounted, new customer price.

T-Mobile has done away with the two-year contract most North Americans are familiar with, so the Jump plan will be different from O2’s Refresh Plan.

The Verge suggests T-Mobile will introduce a type of lease-to-own financing with Jump.

Customers will presumably pay a monthly fee to join the Jump “club” offering early upgrades. When a customer wants a newer phone, they might pay the same upfront fee a new customer would, but instead of being forced to pay off the full remaining balance due on their old phone, they would return it to T-Mobile and start a new financing arrangement for their next phone. If a customer keeps the phone until it is paid off, the customer would presumably own it.

CNET reports customers will also be provided with handset insurance, important if T-Mobile intends to keep an ownership interest in the phone until it is returned or paid off.

The details are forthcoming, but such a “lease-to-own” arrangement would still leave plenty of room for T-Mobile to recoup their costs, depending on how much they charge for the “upgrade anytime” feature.

The downside is that some customers may decide it is easier to pay off the remaining owed balance on a traditional T-Mobile financing contract and sell the phone to a third-party instead of sending it back to T-Mobile.

AT&T and Verizon Wireless have the largest share of wireless customers. (Wall Street Journal)

The Department of Justice has recommended the Federal Communications Commission promote competition by setting aside certain future low-frequency wireless spectrum for auctions open exclusively to smaller wireless carriers including Sprint and T-Mobile USA.

“Today, the two leading carriers have the vast majority of low-frequency spectrum whereas the two other nationwide carriers have virtually none,” the Department of Justice wrote in comments to the FCC. “This results in the two smaller nationwide carriers having a somewhat diminished ability to compete, particularly in rural areas where the cost to build out coverage is higher with high-frequency spectrum.”

The Justice Department’s antitrust division has monitored the wireless industry with increasing concern consumers are not getting benefits from a robustly competitive marketplace increasingly concentrated in the hands of two wireless giants: AT&T and Verizon Wireless.

That dominance is made possible, in part, from the control of lower frequency spectrum, particularly in the 600-800MHz range that easily penetrates buildings and delivers a more reliable signal over longer distances than frequencies counted in the gigahertz. Verizon and AT&T control large swaths of these lower frequencies that work well indoors and provide longer distance coverage in rural areas. Conversely, Sprint and T-Mobile, among other smaller carriers, rely heavily on higher frequencies that need a larger network of cell towers to support good signal levels.

It often means rural customers may find reception with AT&T or Verizon Wireless but end up with a roaming indicator or no service at all with smaller providers.

The Justice Department worries that auctioning off future prime 600MHz spectrum carved out of the UHF television band reallocated for wireless services will end up in the hands of the deepest pocketed providers — AT&T and Verizon Wireless, and further hamper the ability of Sprint, T-Mobile and other small carriers to compete.

“Due to the scarcity of spectrum, the Department is concerned that carriers may have incentives to acquire spectrum for purposes other than efficiently expanding their own capacity or services,” writes the DoJ. “Namely, the more concentrated a wireless market is, the more likely a carrier will find it profitable to acquire spectrum with the aim of raising competitors’ costs. This could take the shape, for example, of pursuing spectrum in order to prevent its use by a competitor, independent of how efficiently the carrier uses the spectrum. Indeed, a carrier may even have incentives to acquire spectrum and not use it at all.”

The Justice Department echoes critics’ contentions that given a chance, large wireless carriers will “warehouse” acquired spectrum, unused, denying it from the competition. Carriers object to that claim, calling it baseless. But incentives remain for providers to drag their feet: spectrum warehousing forces competitors to pay even higher prices for other scarce spectrum, the necessity of constructing a larger network of costly cell towers to offer robust coverage, and fighting customers’ perceptions of inferior quality indoor phone reception.

In response, AT&T sent a multi-page, thinly veiled threat to sue if the Commission adopted the recommendations of the Justice Department.

“The Department is quite candid about its motive for this blatant favoritism: it hopes that reducing competition for the spectrum may enable Sprint and T-Mobile ‘to mount stronger challenges’ to AT&T and Verizon,” AT&T wrote in response. “Picking winners and losers in this fashion would be patently unlawful.”

AT&T also claimed the Justice Department’s recommendations were specifically tailored to help the two competitors, despite the fact neither company has shown much interest in acquiring low-frequency wireless spectrum, much less further expand the reach of their wireless networks:

“It is especially puzzling that the Department feels the need to help Sprint and T-Mobile in particular. Sprint already has by far the largest nationwide portfolio of spectrum, and holds vastly more spectrum than either AT&T or Verizon. It will also have ample financial resources at its disposal, as the Department has already approved Sprint’s purchase by Softbank, a financially strong Japanese company, and Dish Network has now made a competing offer for Sprint, citing the financial and strategic advantages of its own proposed combination.

Regardless of how this bidding war turns out, Sprint will receive a sizable infusion of cash, spectrum or both. T-Mobile, which is owned by Deutsche Telekom, one of the largest telecommunications companies in the world, just recently acquired substantial amounts of spectrum from both AT&T and Verizon, and is on the verge of completing a merger with MetroPCS that will add another trove of spectrum. So it is surely not for a lack of spectrum resources or financial backing that the Department needs to propose a financial giveaway to these companies.

Moreover, neither company even chose to bid at the Commission’s last auction of low-frequency spectrum, nor have they availed themselves of opportunities to acquire such spectrum in secondary markets. If low-frequency spectrum was critical to their business plans, as the Department simply assumes, someone should have informed their management, which has, instead chosen to acquire deep holdings in [higher frequency] PCS, AWS, and BRS/EBS spectrum.”

The Justice Department filing did not name Sprint or T-Mobile directly, but both companies are the only remaining national competitors to both AT&T and Verizon Wireless.

Spectrum set-asides are not unusual in telecommunications regulation. The Canadian Radio-television and Telecommunications Commission set aside significant wireless spectrum exclusively for new entrants to promote competition. Ultimately, the new competitors had little impact with less than a 10 percent market share and all three are now considered up for sale. That spectrum may eventually end up in the hands of the largest Canadian wireless companies regardless of the CRTC’s original intentions when license transfer restrictions expire in 2014. All three could be acquired by one or more of the major providers.

Wheeler

Note to Readers: Tom Wheeler’s blog (mobilemusings.net) was taken offline in late November, 2014. You might still find it archived at archive.org. Because the blog has been taken down, we have removed all of the original links that were originally contained in this piece.

Tom Wheeler has had a blog.

The presumptive leading candidate for America’s next chairman of the Federal Communications Commission also has a major conflict of interest problem, with at least 30 years of working directly for the business interests of the cable and telephone companies he may soon be asked to oversee in the public interest. Wheeler is the former president of the National Cable & Telecommunications Association (NCTA) — the nation’s largest cable industry lobbying group and past CEO of the Cellular Telecommunications & Internet Association (CTIA) — the AT&T and Verizon-dominated wireless trade association. Today Wheeler serves as a managing director at Core Capital Partners, a Washington, D.C.-based venture capital firm that invests in these and other industries.

In more than 60 articles in the last six years, Wheeler has written of his trials and tribulations with federal regulators who simply refuse to see telecom industry wisdom on spectrum management, the legacy telephone network, obstinate broadcasters, outdated regulations, mergers and acquisitions, and the amazing story of private Wall Street investment and its wisdom to naturally shape America’s telecommunications landscape by “letting the marketplace work” unfettered by oversight and consumer protection laws.

Almost entirely absent in Wheeler’s writings is any interest in the plight of ordinary consumers that do business, often unhappily, with the companies Wheeler used to represent. America’s love of many-things Apple and Google, two runaway success stories heavily invested in the digital economy and well-regarded by more than a few consumers, are scorned by Wheeler as part of the “Silicon Valley mafia.”

Wheeler is the consummate Washington beltway insider, a lifelong lobbyist well-positioned to walk through the perpetually revolving door between the public and private sector. Even worse, he has maintained warm regards for not one, but two telecom industry lobbying giants — the cable and wireless industry trade associations that have daily business before the FCC. Whether Wheeler can stand up to his former best friends is open for debate. Wheeler wrote in one blog entry he remains in awe of AT&T’s chief lobbyist, Jim Ciccioni, who he called “one of the smartest and shrewdest policy mavens in the capital.”

Wheeler’s blog makes it clear he would have supported the 2011 attempted merger between AT&T and T-Mobile, with a few temporary token pre-conditions. He heaped scorn on antitrust regulators for missing an opportunity the merger approval could have had on reshaping the American wireless marketplace. Less is more in Wheeler World.

D.C.’s perpetually revolving door keeps on spinning.

Like outgoing FCC chairman Julius Genachowski, Wheeler is a longtime Obama loyalist and was involved in Obama’s 2008 election campaign.

Wheeler relays to C-SPAN’s Brian Lamb in a 2009 interview that who you know in Washington can mean a lot. After Obama entered the 2008 race, Wheeler connected to Obama through a friend — Peter Rouse, who had recently accepted the position of Obama’s chief of staff.

“I picked up the phone one day and there was a message from Barack Obama that he wanted to talk about some issues related to technology,” Wheeler described. “Things began to develop. We got really interested in the potential of this person and the opportunity that he represented for a transformational moment in American history, and we decided that Iowa was the place.”

Wheeler and his wife Carol (employed by the National Association of Broadcasters, itself a lobbying group) had the financial resources in place to put their D.C. jobs on hold and spend six weeks in the Region 2 Obama election office in Ames, Iowa.

After Obama won the election, Lamb predicted Wheeler might find himself at the FCC. Instead, Obama’s college friend and money-bundler Julius Genachowski won the position.

Wheeler’s chances of succeeding Genachowski improved dramatically in mid-April after receiving the written support of several public policy advocates. One of them was Susan Crawford, whose recent book, Captive Audience: The Telecom Industry and Monopoly in the New Guilded Age, railed against many of the policies supported by the largest telecommunications companies Wheeler professionally represented in his roles at the NCTA and CTIA. Some consumer groups wrote President Obama directly, strongly recommended a change from the ‘business as usual’ revolving door:

During his election campaign, President Obama pledged “to tell the corporate lobbyists that their days of setting the agenda in Washington are over.” Yet the president is reportedly considering a candidate for the next FCC chair who was the head of not one but two major industry lobbying groups. After decades of industry-backed chairmen, we need a strong consumer advocate and public interest representative at the helm. It’s time to end regulatory capture at the FCC and restore balance to government oversight.

Those consumer groups have plenty to worry about if Tom Wheeler becomes the next head of the FCC. Stop the Cap! has found several quotes from his blog which paint a picture of a potential FCC chairman devoted to industry interests:

Close Wireless Retail Stores to Save Money and Kill Jobs: “Sprint announced plans to close eight percent of its over 1,500 company-owned retail outlets. Why stop there? Why does it make sense for wireless carriers to operate more stores than Sears and Macy’s combined?”

Wireless network redundancy is a waste of money — an interesting sentiment in light of major wireless network failures during Hurricane Sandy and insufficient capacity during the terrorist attack on the Boston Marathon last week: “The history of the U.S. wireless industry is a network-centric history that wasted untold billions of dollars building duplicative networks and advertising ‘mine is better than yours.’”

The failed merger of AT&T and T-Mobile represented a missed opportunity in Wheeler’s view.

WiMAX is King of the World?: “Back in the mid-1990s new digital technology called Personal Communications Service (PCS) was forecast to be the death knell of the cellular industry. It seemed all anyone could talk about was the “smaller, cheaper, lighter” handsets that would perform feats beyond the capabilities of analog cellular. Now in the mid-2000s the differentiator is speed and throughput and WiMAX is the new hot technology.”

Who needs free over the air television when only 10-15 percent of the country watches?: “What is the purpose of continuing the local TV broadcasting model when between 85 and 90 percent of American homes are connected to cable or satellite services?”

AT&T and Verizon will save us from the Great Recession, except for the fact they laid off “redundant” workers: “In the midst of the first shrinking of global economic growth in almost 70 years, the wireless industry represents what must be the largest non-governmental stimulus program in the world. Wireless is an economic recovery triple play.”

Those mooching broadcasters got their spectrum for free when Verizon and AT&T had to pay real money: “The setting for these theatrics is the digital conversion for which broadcasters lobbied so hard for. Yes, they won new spectrum – which they got for free while all other were paying billions – but getting what they asked for also brought something no one ever imagined. Broadcasting ceased to be broadcasting. Going digital meant that what used to be about moving atoms is now about moving bits.”

We need to verify broadcasters use their spectrum the way we define it or we might take it away: “But threatening a shootout at the OK Corral in order to ‘hang on to every last hertz of spectrum’ is an invitation to irrelevance and proof that the spectrum needs to be assigned to parties that think digitally and see themselves as a part of the solution to the spectrum crisis. Opportunity is knocking for the broadcasters; we’ll see if anyone is at home.”

Cicconi

Reduced quality of service is worth it, even if it means shutting down wired telephone service or increasing interference for wireless users: “It is time to abandon the concept of perfection in spectrum allocation. The rules for 21st century spectrum allocation need to evolve from the avoidance of interference to interference tolerance. We’ve seen this evolution in the wired network; it’s now time to bring the chaotic efficiency of Internet Protocol to wireless spectrum policy. What the FCC’s TAC is proposing is that we officially wean ourselves from the old wireline switched circuit world to embrace the reality of IP and its benefits. It’s time to start down the same road with spectrum allocation.”

Did you know your mobile bill is lower than ever and sending data wirelessly costs next to nothing? How much is your limited data plan costing you again?: “As wireless rates have plunged for both voice and data such regulation has less impact than it did in the wireline era anyway. When each connection required an analog circuit, the cost of such a connection, and the return on that investment was a more logical nexus than today’s digital networks where the incremental cost of a packet of information approaches zero.”

AT&T’s propaganda supporting its attempted merger with T-Mobile was brilliant. Those pesky consumer groups and their meddling, truth-telling agenda ruined everything. When Americans think of rural wireless broadband, the first company that comes to mind is T-Mobile, right?: “The most important times in any merger approval process are the first two weeks when the acquiring company gets to define the discussion and the last four weeks when the concerns raised by others and the analysis by the government congeals to define the issues to be negotiated in the final outcome. AT&T shot out of the blocks brilliantly, framing their action in terms of the spectrum shortage and President Obama’s desire to provide wireless broadband to rural areas. Over the coming months those who were caught by surprise, as well as those who would use the review process to gain their own advantages, will have organized to present their messages.”

Wheeler sends a Hallmark card to AT&T’s most powerful lobbyist: “AT&T’s recent negotiations with the FCC on the Net Neutrality/Open Internet issue provide an insight into how the company deals with such a complex issue. Jim Cicconi, AT&T’s Senior Executive Vice President, is one of the smartest and shrewdest policy mavens in the capital.”

What do they know about it?

AT&T’s Jim Cicconi is the go-to-guy for determining future wireless policy, not the FCC: “Randall Stephenson may be channeling Theodore Vail, but Jim Cicconi sits astride a process that could determine the future of wireless policy, first for AT&T and then by extension for everyone else. Quite possibly the result of this merger decision will be far wider than the merger itself. At the end of the day we may be talking about a new era of wireless policy based on the Cicconi Commitment.”

The Justice Department just proved it does not understand regulatory concepts governing relentless corporate telecom mergers because it decided Americans should have at least four wireless companies to choose from, not three: “Thus, the long-term impact of the Justice Department’s decision would appear to be the growing irrelevance of traditional telecommunications regulatory concepts on mobile broadband providers.”

Wheeler lacks the realization wireless providers are moving to usage pricing for fun and profit, not because of spectrum shortages: “Having walked away from taking the easy money, will the Congress remain as committed as they were to selling spectrum? What will be the light at the end of the tunnel for wireless carriers who see their spectrum capacity being consumed by huge increases in demand? Will the resulting shortage mean that usage based mobile pricing becomes a demand dampening and profit increasing tool?”

We don’t need free over the air television. Just tell free viewers to subscribe to cable like everyone else: “I’ve been mystified why broadcasters have declared jihad against the voluntary spectrum auction. Getting big dollars for an asset for which you paid nothing while still being able to run your traditional business over cable (the vast majority of its reach anyway) and maintain a broadcast signal at another point on the dial seems a pretty good business proposition – unless you really are serious about providing new and innovative services and need all that spectrum.”

You don’t deserve free Internet access either, because it hurts the corporate business plans of other providers: “Competition among networks for customers has put the consumer in the enviable position of being told they won’t have to pay for access to Internet services. “Free It,” the advertisements of British network operator “3” proclaim to promote their unlimited data plan, for instance. The policies that created wireless network competition have trapped operators between holding market share and giving away capacity for ever-increasing data demands. So long as there is one carrier willing to offer its capacity at a low price (or for free), the other carriers must play along thus bringing those who run networks to loggerheads with those who use the networks.”

(Image courtesy: FCC.com)

Google and Apple are privacy invaders that collect your personal data as part of a great Silicon Valley mafia: “If wireless carriers are truly going to become “operators” participating in the broader ecosystem their focus needs to shift from running networks to managing the information created by the 21^st Century’s digital networks. The Silicon Valley mafia hijacked that information, but they could quite possibly be in the process of blowing their escape with the goods by exposing what they were really up to.”

We need a “voluntary” auction of the public airwaves with a subjective standard for what represents their “best use” (ie. the way the wireless industry defines it): “For almost four decades I have listened to businesspeople tell government policy makers to “let the marketplace work.” There is no more effective marketplace than a voluntary auction where everyone is free to decide whether to sell, how much to sell, and at what price to sell. The marketplace for wireless spectrum has spoken through its explosion; now it’s time for the marketplace to be able to decide the best use of spectrum. There is no doubt that some broadcasters will opt to use their spectrum in innovative ways [my firm, Core Capital Partners, has invested in such a belief]. Bully for the broadcast entrepreneurs! The FCC should be encouraging and rewarding of entrepreneurial initiative. Just as clearly, however, some broadcasters will choose other options. It is essential that we get on with offering that option quickly so we can nip the spectrum crunch in the bud, spur innovation, stimulate investment, create jobs, and continue American leadership in wireless services.”

Coming Clean: Wheeler ran astroturf operations that pretended to represent the interests of consumers but actually were little more than corporate sock-puppetry: “In the early days of cable television a cabal of Hollywood and broadcast interests combined to convince the Federal government to deny cable its competitive advantage of more channel choices for consumers. Corporate lobbyists told Congressmen and Senators how cable would mean the end of “free TV” unless it was stopped or controlled. Then these same groups recruited real people – the so-called “grassroots” – to back up their claims. Such lobbyist-organized grassroots efforts were the Standard Operating Procedure (SOP) of political organizing – I know because I used to do it.”

The alliance between Verizon and a cabal of cable companies selling each others’ products is pro-competition: “A TV subscription service like the one Apple is proposing is the heart of what cable is all about. And whatever Google is doing, they aren’t in every TV just for the heck of it. The Mongols of Silicon Valley have been behaving just like their 13^th and 14^th century predecessors. Using new technology to their advantage, the Mongols of the Middle Ages sent invasions in every direction. Soon they had the largest contiguous empire the world has ever seen.  Sound familiar? It may be a case of “my enemy’s enemy is my friend,” but a cable-wireless alliance is an exceedingly logical response to the impending attack. Cable operators have program distribution rights (or leveraged access to them) and Verizon has the high-speed wireless network to deliver to the growing number of mobile devices. Both these players can help each other confront the coming onslaught.”

T-Mobile has scrapped the traditional two-year cell phone contract.

T-Mobile’s shift away from subsidized smartphones and standard two-year contracts could be a game-changer for American wireless consumers, but does the scrappy carrier have a good deal for you or mostly for itself?

T-Mobile is and has been America’s fourth largest carrier — the smallest among those offering nationwide home coverage. The provider has lost contract customers for years. T-Mobile’s coverage has been less than great in many areas and it often did not offer the latest and most popular smartphones. After its merger effort with AT&T was shot down by the Department of Justice for anti-competitive reasons, T-Mobile has attempted to remake itself by changing the rules under which most of us buy mobile service.

The biggest change of all is the end of the subsidized phone. For years, cell phone companies have offered free or low-cost phones to customers, earning back that subsidy by charging higher monthly rates and locking customers to two-year contracts with early termination fees. T-Mobile will still give you an affordable phone, only now you will pay it off in small installments over a two-year financing agreement.

What difference does this make? Customers who bounce from one two-year contract to the next may not see much difference. But if you keep your phone longer than two years or buy one elsewhere, your monthly rate with T-Mobile will no longer include an artificially higher price designed to recover the phone subsidy you no longer receive.

It also means nothing traps you with T-Mobile. If after six months you find their service unbecoming, you can leave without hundreds of dollars in termination fees. But customers on financing agreements will continue to make their payments for equipment purchases, and those phones will not be unlocked for use on another carrier until the remaining balance is paid off.

A typical T-Mobile customer looking for the latest iPhone will pay a $100 down payment and then finance the remaining balance, paying $20 a month for 24 months. Your monthly rate will start at $50 a month, which includes unlimited talk and texting, and a 500MB data allowance. If that is insufficient, an extra $10 a month will buy you an extra 2GB of data. If you want unlimited data, that plan is available for an extra $20 a month.

T-Mobile says their plans will save you $1,000 over the life of a two-year contract with AT&T or Verizon. We think they are exaggerating a bit.

Like their competition, T-Mobile is moving away from budget-minded “minute plans” that bundle calling, text and data. Instead, T-Mobile charges at least $50 a month for unlimited talk/text and a small data plan whether you want those features or not.

The Associated Press found that although T-Mobile ends up being the cheapest, the savings over its rivals is closer to $700 on average. The price over two years for a 16-gigabyte iPhone 5 with unlimited calling, unlimited texting and 2.5 gigabytes of data usage per month, excluding taxes, is:

• T-Mobile: $2,020
• AT&T/Verizon: $2,635 (2-3GB data plan)
• Sprint: $2,840 (unlimited data plan included)

Some other things to consider:

• Once your phone is paid off, your ongoing T-Mobile bill will no longer show a phone subsidy payback built into prices charged by other carriers;
• You can pay your phone off early, with no penalty;
• T-Mobile’s 4G network is a mix of HSPA+ and LTE. The more commonly encountered HSPA+ network gets good marks for speed, but a number of densely populated T-Mobile coverage areas surprisingly often default to their older 2G network, which is painfully slow. LTE is only available in about seven cities at the moment, so it is still a rarity;
• T-Mobile’s unlimited service is free from tricks and traps like soft caps and speed throttles. It also performs better than Sprint’s unlimited service on its overloaded 3G and spotty Clearwire 4G WiMAX network. Sprint’s LTE network is on the way… slowly. It seems to be rolling out first in small cities you have never heard of;
• T-Mobile’s coverage in rural and exurban areas is frankly terrible. Travelers on main highways may not encounter many signal gaps, but those living in small towns or off the beaten path may get a roaming signal or poor or no reception from T-Mobile’s own towers at all. The frequencies used for its data service also do not work as well indoors as its larger rivals.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/T-Mobile Ad 4-2-13.flv[/flv]

T-Mobile channels Oprah in this new ad as the big four wireless cowboys get in touch with their feelings. But only one is ready to don a pink hat and ride off on his own. (1 minute)