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T-Mobile kills off contracts, simplifies plans


T-Mobile is significantly changing the way it sells mobile phone services, eschewing long-term contracts entirely and offering only month-to-month plans. It could be a better deal for some, but it's not quite the "reinvention" the company calls it.

At its "Un-Carrier" event Tuesday, T-Mobile CEO John Legere disparaged the state of the mobile industry as, among other things, "smartphone hell," and pointed out that waiting out a two-year contract in order to qualify for a subsidized, new phone was unthinkable for gadget lovers.

And the contracts themselves, he said, are confusing and misleading — and he didn't mince words. "This is the biggest crock of s*** I've ever heard in my life," he told the crowd. "Do you have any idea how much you're paying?"

With that, he shared T-Mobile's new pricing structure, which is less a new idea than a new focus. All plans are monthly, with no obligation at all, following the lead of such growing pre-paid services as TracFone and Virgin Mobile.

At a starting rate of $50 for unlimited calls, text and data (with tiered limits on high-speed service), the plans undercut Verizon and AT&T significantly.

The catch is that the cost of your phone won't be subsidized or covered entirely by the carrier, as larger companies tend to do with new, high-end phones like the iPhone and Galaxy S4. T-Mobile asks customers to choose between two options: Pay the cost of the phone upfront, or put some money down toward it, and then pay $15-20 a month until you've paid the whole thing off.

As Legere points out, the other companies do this too by simply increasing the amount you pay monthly — but they don't let you choose the terms, and your bill doesn't go back down once you've paid the full cost of the device.

Does this mark the beginning of a global change in carrier strategies? Probably not, said analyst Jeff Kagan in a note:

I would say there would be absolutely no way the larger and stronger competitors will make such a dramatic shift. There is no reason. Now if T-Mobile pulls a rabbit out of the hat and starts to win incredibly strong business and takes significant share away from one or more leaders, then all bets are obviously off, but I really don’t think that will happen.

It's a gamble, but pre-paid services are on the rise: Consumers are becoming fed up with expensive contracts, and high-end phones are available on smaller carriers now instead of just the major ones.

As for whether the new T-Mobile plans are a better choice than the competition for you or your family, that's a more complicated question, depending on how much data is consumed, how many devices per person, how many people, and so on. One person buying an iPhone 5 on T-Mobile and opting for 2GB of data will pay less over two years, but The Verge's calculations show that when unlimited data and family plans enter the equation, the contest is much closer.

The new simplified plans can be checked out at T-Mobile's website, and questions might be answered by the company's FAQ.

Devin Coldewey is a contributing writer for NBC News Digital. His personal website is