On Wednesday, the nation’s fourthlargest cell phone service provider, T-Mobile announced plans to merge with MetroPCS, a prepaid cell service company, in a move aimed at expanding the combined company’s nationwide coverage area while continuing to undercut higher-priced behemoths Sprint, AT&T and Verizon.
If all goes according to plan, the new company could accelerate competitive pressure on the “Big Three” and help provide greater value to customers increasingly wary of expensive contracts, hefty overage charges and restrictions like data usage caps.
Even if things fall through — especially as a recent AT&T bid for T-Mobile failed to clear regulatory hurdles — there are plenty of steps consumers can take to help shake up the market and lower their phone and internet service costs in the near term.
For one, they can support MVNOs. Competing with T-Mobile are companies like FreedomPop, Virgin Mobile and Ting, “Mobile Virtual Network Operators” that purchase wholesale access to the “Big Three’s” networks, but with new pricing and service models that compete with the market leaders in unexpected ways.
Briefly popular last decade, many customers are still unfamiliar with the concept, though the young brands surprisingly robust phone selection, flexibility, and focus on data service have already won them many converts. Unexpected sweeteners like free internet service plans and iPhone availability are powering a prepaid market that now accounts for a record high 25% of the American market and 70% in Western Europe.
T- Mobile/ MetroPCS- Two Challengers Unite
When AT&T’s hard fought bid for T-Mobile failed, consumer advocates were relieved that T-Mobile would still be around to offer low-cost phone service to customers nationwide. By contrast, many of T-Mobile’s subscribers were disappointed that the company seemed no closer to securing a distribution deal for an iPhone.
Although T-Mobile unofficially supports over 1 million iPhone owners, Apple’s smartphone largely operates on a different wireless frequency. While T-Mobile’s officially supported Android and Windows smartphones can access the company’s current “4G” voice and data service, iPhone users are relegated to T-Mobile’s older, slower networks.
The merger may change that. MetroPCS and T-Mobile’s current wireless infrastructure are incompatible ... one can’t use a MetroPCS handset on T-Mobile’s network for example- but as the networks upgrade their combined infrastructure to support newer 4G LTE wireless technologies, an iPhone distribution deal, and the ability to fully support one could come into the mix. Analysts expect the new network to come online by NEXT YEAR.
Freedom Pop- The “Free Internet Company”
Freedom Pop’s deal is simple, like NetZero before it, the company aims to offer free internet alongside dirt-cheap wireless internet plan. Launching “in beta” this week, for $49, Freedom Pop provides a “USB dongle you can plug into your laptop that provides you with 500MB of internet service per month. $89 nets you a phone-sized personal WiFi hotspot that can be shared with friends. Both devices offer a full refund should the user decide to return them and cancel the service. According to the website GigaOm, next to come online will be wireless sleeves-cases that provide internet to an iPod touch, allowing you to, among other things, place calls over the internet.
The “Freemium” service also reportedly features several cheap, contract-free plans including a 2GB data plan at $18. Although minor caveats include overage charges costing one or two cents per megabyte, possible speed limitations on some plans, and a high speed coverage area limited mostly to major cities Freedom Pop’s plans are still a steal, at worst a creative gift for a student or a handy internet supplement.
Customers can earn more data by recruiting friends to join the service or participating in promotions organized by the company. The service is set to rely on Sprint and Clearwire’s “WiMax” internet network for service.
Virgin- Cheap Smartphone Plans
Like FreedomPop, the more established Virgin Mobile, founded by billionaire Richard Branson also utilizes Sprint’s nationwide network. In fact, it’s now owned by Sprint as part of its “Sprint Prepaid Group.” On the consumer side of things, Virgin offers the iPhone 4 and 4S, and an attractive stable of Android-powered smartphones accompanied by “Beyond Talk” phone plans that are light on minutes but all include unlimited data and text messaging. For example, an entry-level 300 (total) minute plan can cost between $30 and $35 while a 1200 minute plan and one with unlimited minutes cost $45 and $55 respectively.
For $15 more, many of its phones can be used as a mobile hotspot, though Virgin also sells separate devices (for example USB dongles) with “unlimited data” starting at $35. Virgin’s plans are contract free, but can be limited to 3G speeds should a user surpass its generous data caps, which can kick in after customers use more than 2.5GB per month via phone or 3.5GB on an entry level wireless hotspot plan.
On other networks, contracts subsidize the upfront cost of the phone. Without subsidies or contracts Virgin’s phones can cost more upfront, though its roster includes $100 Android phones , $500-$600 iPhones and some compelling choices in between.
Though estimates vary, over the course of 2 years (a popular contract length on other carriers), purchasing an iPhone on Virgin could save as much as $1000.
Ting and Simple- BYOD
While Simple sells SIM Cards that you can slip into practically any phone compatible with T-Mobile’s network (and many from AT&T), Ting does something similar for Sprint. The key difference between the two is that while Simple offers straightforward unlimited talk/data/messaging plans that top out at $50 Tings plans decouples the three to offer an unsually wide range of service levels.
A person who primarily uses Facebook to send messages could purchase a plan with lots of data, a handful of text messages and an average amount of minutes for example. An individual element could cost as little as $9. Fees for laptop tethering and account sharing are pretty minimal.
Ting’s ability to work with Sprint customers’ existing phones is a standout feature that provides it with a competitive advantage that Sprint’s own prepaid carriers can’t match. Ting’s deal also grants the company quicker (unsubsidized) access to high end Android phones like the popular Samsung Galaxy IIIs and Sprint’s newest, fastest “4G LTE” network. Virgin’s coverage is slower, but for now, more extensive.
MVNO’s aren’t for everyone. Some offer great customer service, while others can be more opaque. The sometimes larger upfront costs might dissuade some consumers for whom long term saving is less of a concern.
Perhaps the best argument in favor of MVNOs may be the ease with which many customers can “try them out.” Sprint, AT&T and Verizon allow users to temporarily suspend their service. For some, the process can be as easy as swapping out a SIM card, though there are options for devices “locked” to a specific carrier.
If it meets its financial, regulatory and technological challenges, the T-Mobile-MetroPCS merger could be a boon for consumers dissatisfied with the “Big Three” but unwilling to place their faith in the hands of companies that don’t directly control their infrastructure.
Regardless of your carrier however, this recent wave of activity, from MVNOs and their competitors seems poised to offer consumers greater choice in an arena that for years seemed to suffer for lack of it.