The Story: T-Mobile will now allow customers, both new and existing, to pay for handsets on an interest-free installment plan spread over four months.
The Definition: Using the “Equipment Installment Plan”, or “EIP”, will not incur “any additional interest charges, finance or start-up fees for those that choose to use this plan,” says T-Mobile.
The Optimist’s Outlook: Customers will now be able to more easily pay for the handsets they choose.
The Pessimist’s Outlook: The phones are already partially subsidized by the carrier. The EIP opens the door to more expensive handsets from the carrier that still require a two-year subscriber contract.
The Odds: 20/80 that T-Mobile intends to start charging more for handsets. 90/10 that T-Mobile will still not allow unlocked, unsubsidized handsets to be purchased without a contract. Update: Boy was I wrong on that. T-Mobile tells me: “T-Mobile customers have been able to purchase unsubsidized phones without contracts since October through T-Mobile’s Postpaid plans.” I am glad to be wrong on this one.
The Clincher: People are going to be buying more expensive handsets, but at least the loan is interest-free.
Previously • The Optimist/Pessimist: Apple’s iPhone Unlock Warning
Image: Slightly North
I don’t have a problem with this, even if they did want to charge interest. That’s the breaks if you don’t have cash up front.
It’s more expensive to switch carriers even if phone cost is involved. They usually want an extra $35-50 somehow for a new contract, and I could see installment plans on the handsets easing the immediate wallet pain for a customer in the process of switching carriers.
I took the pessimist’s view when I got trained on this before launch. Well, perhaps “pessimist” isn’t strong enough.
My first thought was: I am in the process of identifying no less than 3 ways that this is just reloading the foot-gun for people who already have little impulse spending control.
If applied in reason by responsible adults, it makes sense, ESPECIALLY if someone needs a new handset (due to acts of God, baby, or toilet) and doesn’t qualify for the full subsidized discount, they can get a similar or same-model replacement without killing the bank.
But, then, I’ve dealt with way too many irresponsible customers, so I take the pessimist’s view. Take, for example, an unidentified customer who wanted a certain 3G touchscreen phone for free, instead of the subsidized price of $150 (MSRP about $400) since, in his/her words, “in this economy, I can’t afford $150. In fact, to be honest, I can’t afford any upgrade fee.”
Ahem. DON’T BUY A LUXURY PHONE THEN.
I’m an Australian,I’m always amazed at how expensive mobile phones/plans are in US, and how many conditions there are for the contracts.
It’s great that they are now offering a mobile repayment option, but strange to me that it was not there before. It’s good for the company, increasing sales and convenient as a customer. I do think its a bit restrictive with a two year contract considering your paying the full cost of the handset.
As a comparison:
I work for the largest Telecommunications company here, they own the whole mobile and fixed line network and thus are the most expensive. They offer any non-prepaid phone on interest free mobile repayment, with option of doing it over 12, 24 or 36 months on any plan, including contracts with no fixed term and all handsets unlocked (except Iphone). Due to the allowance of more than one MRO with only one voice plan sales are very high, also many of the younger market, who have a lower income/students are able to afford new phones.
@Bethbot
Most carriers here charge you either full price for the handset with no contract, or some variable level of subsidized price for a contract of some length.
In fact, for at least three years (I don’t know about prior to December, 2005), T-Mobile USA has specifically allowed anyone to buy a handset at full price without a contract (as long as they otherwise qualified to buy a phone), but the whole cost was due at once–either on the next bill or at the counter.