T-Mobile, the last of the four major carriers not to carry Apple’s iPhone, finally has it. You’ll be able to buy an iPhone 5 on April 12 for $99 down and you won’t have to sign a contract to buy it. Sound great? Not so fast. T-Mobile’s offer has more gotchas than a box of fish hooks.
Here’s a lowdown on the good (yes, there is some) and the bad.
Once you shell out your $99 for the iPhone you’re ready to go. There’s no contract that binds you to the company for two years.
Although you don’t have a service contract, you do have to agree to repay the unsubsidized cost of the phone. That means you’ll send T-Mobile $20 a month for 24 months, which brings the total cost of the phone to $579. The same 16GB phone costs $199 when you buy from the other carriers at a subsidized price and sign up for two years, a difference of $380.
You can leave T-Mobile any time you want and take your iPhone to another carrier that has compatible GSM technology. You simply change the SIM card. AT&T has compatible technology; Verizon does not.
Of course, you’ll still have to make those $20 a month payments until you’ve paid the full cost of the smartphone. Still, that does give you the freedom to choose another carrier or upgrade your phone on your own schedule. T-Mobile will unlock the phone and let you take it elsewhere as long as you’ve paid for the phone via a one-time payment or agreed to pay via monthly installments.
Here are the data plans. For $50 a month, a competitive price, you’ll get 500 megabytes of 4G LTE data. Or you can opt for a $60 plan with 2.5 gigabytes of 4G LTE data and a $70 plan with unlimited 4G LTE data.
If you go over that cap, T-Mobile won’t do what the other carriers do — hit you with an overage fee. But here comes another gotcha.
Once you hit the data ceiling, T-Mobile will throttle you down to 2G speeds, which means your phone will feel like an old-style dial-up connection. Probably OK for email, but surfing the Web or using many common apps will be excruciating. (You can see details of T-Mobile’s data plans here, and be sure to read the fine print.)
Until this week, T-Mobile was the only major carrier not to offer 4G LTE. It’s finally rolling out that fast service, but only in six cities so far: Baltimore, Houston, Kansas City, Phoenix, San Jose, and Washington, D.C. More will follow. On the other hand, T-Mobile’s HPSA+42 network, which is really a souped-up 3G, is very fast, according to RootMetrics, a performance testing company that measured speeds for all the major wireless carriers.
You can save some money by buying older models of the iPhone: iPhone 4S costs $70 down, plus $20 per month for 24 months; the iPhone 4 will cost $15 down, plus $15 per month for 24 months. However, the two older models won’t be available everywhere, just in “select markets.”
Over the course of a couple of years, the total cost of T-Mobile’s iPhone is equal to $579 plus the monthly data and voice charges. To see if it makes economic sense, you’d have to compare that with the cost of the subsidized phone plus the monthly voice and data charges for another carrier.
San Francisco journalist Bill Snyder writes frequently about business and technology. His work appears regularly in CIO.com and the publications of Stanford's Graduate School of Business and the Haas School of Business at the University of California at Berkeley. He welcomes your comments and suggestions.