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Alexander: T-Mobile customer was counting on discounted phone

  • Article by: STEVE ALEXANDER
  • Star Tribune
  • April 16, 2013 - 4:41 PM

When T-Mobile abruptly changed its cellphone plans last month, eliminating contracts and the subsidies that had kept cellphone prices low, it portrayed itself as a maverick among wireless providers.

But Kyle McCauley of Burnsville asked me a troubling question: What about current T-Mobile customers who were under contracts and previously were led to believe they would qualify for a discounted new phone?

“I was given no advance notice of the change, but I’ve lost one of the benefits of my existing contract,” McCauley said in an interview. “Now I can’t get the discount on a new phone that I could have gotten a month ago.”

What’s going on? T-Mobile is attempting to create a major shift in the way people buy cellphones and service, but in the process it may be tripping over its own legal obligations.

Major cellphone companies have long used discounted cellphone prices as a carrot to get customers to sign up for one- or two-year contracts, because the contracts lowered customer turnover. The cellular companies made up for the phone discounts by charging high enough rates that they recouped the cost of the phones over the duration of the contracts.

T-Mobile’s new plan was to abandon contracts, and entice people to stay by offering them lower rates (how much lower depended on which cell plan was selected). But, in order to make that financially practical, T-Mobile decided to require its customers to buy their phones at full price (about $240 to $780 for smartphones) in 24 monthly installments.

But can T-Mobile force that new strategy on customers such as McCauley, who have contracts in which a discounted phone was part of the deal? I asked a T-Mobile spokesman whether McCauley had a point. But before I got a response from the company, McCauley was contacted by “a representative of the executive office of the president of T-Mobile.”

McCauley said he told her why he thought his T-Mobile contract entitled him to a discounted phone, but he said she dodged the question of his contractual rights and instead offered him a compromise: He could get out of his existing T-Mobile contract early ($100 value) or he could get a free down payment on a T-Mobile iPhone ($100 value, but he’d still have to pay the remaining $480 of the phone’s full price).

McCauley opted to get out of his T-Mobile contract early, and said he plans to change cellular companies.

“Just the idea of having to pay full retail price for a new phone kind of stinks,” he said. “And I thought it was stupid that it took a media inquiry before someone from T-Mobile called me and tried to make something work.”

What does T-Mobile say?

“We believe there is no issue,” said Scott Goldberg, a T-Mobile spokesman in Chicago, noting that McCauley had agreed to a resolution. “We have not received any other similar complaints.”

 

E-mail tech questions to steve.j.alexander@

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