Paying early termination fees is Ting's best shot at getting customers

By Nathaniel Mott , written on January 17, 2013

From The News Desk

The two-year contract is the best thing to happen to wireless providers and the worst thing to happen to their customers ever since "Can you hear me now?" was a genuine query instead of a pop culture reference. Ting, a wireless provider that piggybacks off of Sprint's spectrum, has announced that it has set aside a $100,000 fund to help potential customers break their contracts and give "pay for what you use" a shot.

Ting asks customers to pay for the services they use, a refreshing contrast to most carriers and their decision to charge customers for what they might use. Under most plans, it doesn't matter if you use half a gigabyte, 1.3 gigabytes, or 2 gigabytes of data -- you're paying for at least 2, just in case. And you'd better hope you don't cross that (arbitrary) line, because there will be hell -- and ridiculous overages -- to pay.

Yet customers deal with these issues, often because the upfront costs of going off-contract can be higher. Ting sells the Samsung Galaxy S III for $529, more than double what customers would pay for the same device with Verizon or AT&T. Many people will see that, look at their wallets, and then go for the "cheaper" phone. Because they don't want to do the math and see that, while the upfront costs are higher, Ting and other off-contract options will likely be cheaper in the long run.

Now, it's worth noting that Ting customers still choose a "plan" and how many voice minutes, text messages, or megabytes of data they think they will use, send, or receive, but it's more flexible than other options. If a customer goes over their voice minutes, they're knocked up a bracket with no overage fees. If they use fewer minutes than they paid for, the plan will adjust itself the next month and apply a credit to the customer's account. This isn't as granular as some may like, but it does offer flexibility that other carriers don't.

Something like Ting might be most valuable for people who want a cell phone for emergencies but don't often use it, or people who were happy with their "dumb phones" but don't really use data or smartphones' extra capabilities. This Branch thread on Android versus iOS usage theorizes that Android users often use their phones this way and would have been fine with a standard flip phone but were pushed to a smartphone by a salesman or the ever-shrinking availability of dumb phones in the US.

It's easy to see something like Ting appealing to people who don't want to be locked into messy contracts, then, or people who don't really need a data plan and are sick of paying for one. (I've heard "Why am I paying $10 for data every month if I'm not using it?" more times than I care to count.) But, because breaking a contract adds to the already-high upfront costs of ditching a larger carrier and switching, many people would likely think "Oh, I'll sign up for that once my contract is up" and then forget about it a year-and-a-half later.

Ting's $100,000 plan can change that. Most people probably won't switch just because they can get out of their contract, but for anyone toying with the idea but who didn't want to bite the bullet for fear of being out hundreds of dollars, the prospect now seems even sweeter.

The industry seems to be seeing these moves on a more regular basis. Google took advantage of the prepaid market with its Nexus 4, which offers quite the bang for its $300 off-contract price tag. T-Mobile is ending subsidies altogether in an attempt to convince customers that it's worth paying more upfront for cheaper service. Hell, even Walmart has gotten in on the game with StraightTalk, allowing potential customers to scoop up the iPhone on the cheap.

Contracts probably won't be going anywhere anytime soon. They're too good to carriers and too many people feel powerless against them in order for that kind of sweeping change to happen. But going without a contract is getting easier and becoming more attractive every month.