The 'Two Year Cell Phone Contract' Days Might be Numbered
Cell phone users (or at least those paying the bill) will be happy about this news. Those stupid two year contracts everybody has to sign might soon come to an end.
Keep your “glass half full” attitude for a minute. Think back to the days when your gym required a contract. Once you signed up, you worked out for about two months and then spent the remainder of the contract at the Olive Garden (courtesy of Darden Restaurants (NYSE: DRI)) wondering why you signed up.
That all changed when consumers got tired of the contract, one gym went to a no-contract model and everybody eventually followed. Today, you can make your New Year’s resolution and be out of that gym penalty-free in a matter of a few months.
That might also be happening in the cell phone space. T-Mobile, the nation’s fourth largest cell phone company, announced that it was getting rid (kind of) of those annoying two year cell phone contracts. Now, consumers can pay a flat rate that’s significantly lower than Verizon (NYSE: VZ) and AT&T (NYSE: T) and get a cool phone without the contract.
It’s supposedly “simplified” although that’s debatable. You can read more about the specifics of the plan here but hold the phone! It’s only contract free if you bring your own phone or you pay the full price of the phone you want.
Let’s say you want a shiny new Samsung Galaxy S III. (Not the new S4) Either shell out $600 up front or T-Mobile will add $20 a month for two years. (yes, it’s a contract) But that’s it. That makes your cell phone service cost as little as $70 per month or $50 if you already have a phone.
On Tuesday, T-Mobile is expected to make some announcements that could finally make it a major player in the industry. Plans to carry and support Apple’s (NASDAQ: AAPL) iPhone, an LTE network that will go online this year, and it will sell the new BlackBerry (NASDAQ: BBRY) Z10. You’ll hear the loud cheers from sea to shining sea as the couple hundred people rejoice over the BlackBerry news. (Sarcasm intentional.)
Even if cell phone customers couldn’t care less about T-Mobile, they’re undoubtedly hoping that it’s no contract model catches on. Let’s get real: We’re about as happy about the two year cell phone contract as we are about paying our cable company for four travel channels, five BBC channels and something called Palladia.
T-Mobile is a division of Deutsche Telekom which doesn’t trade in the United States so take the hard core investor hat off for a minute. What’s important here is that T-Mobile has the opportunity to be that one gym that broke with the contract model and forced all of the others to go along with it. That’s a win for the consumer who wants to see competition between providers.
So let’s do it. Even if you don’t plan to switch over to T-Mobile, cheer them on because we’re all fed up with those contracts. Talking to our friends on our new iPhone about how broke we are is the American way but contracts—those have to go.
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