T-Mobile's iPhone is the first "cheap" smartphone to make sense in the US

By Nathaniel Mott , written on March 26, 2013

From The News Desk

Finally, some math Americans can wrap their heads around: T-Mobile announced today that it will begin selling the iPhone on April 12, making it the last of the "big four" carriers to sell the device. Customers will be able to purchase the iPhone for full price -- likely between $649 and $849, depending on the model -- or for $99 up-front and $20 per month for 24 months.

That price, combined with new wireless plans introduced over the weekend, means that T-Mobile customers can own an iPhone with unlimited talk, text, and data for just $90 per month, sans contract. Here's how that compares to purchasing the iPhone with the closest possible data package on AT&T and Verizon (neither offer unlimited data to new customers):

AT&T charges around $140 per month for a smartphone with unlimited talk and text and a 5 gigabyte data package, and a new iPhone costs $199 with a two-year contract. Verizon charges $120 per month for its Share Everything plan with unlimited talk and text and 6 gigabytes of data per month, and the iPhone costs the same $199.

"But wait!" you cry. "T-Mobile doesn't let you share data with other devices!" Good point, over-used literary device, though technically inaccurate. T-Mobile does allow customers to purchase a plan that can share data amongst devices for an extra $10 or $20 per month, depending on how much data the customer plans to share. Both Verizon and AT&T require new customers to purchase shared data plans -- even if they don't plan on sharing any data -- and then charge for each device that data is being shared with.

If new customers opt for unlimited data on T-Mobile's network and choose to pay the $99 upfront cost for the iPhone, the cost of having that device for two years is roughly $2,259. That same device with a comparable plan on Verizon and AT&T would cost $3,079 and $3,559, respectively. And those customers are stuck with those prices for the full two years, while T-Mobile customers could leave at any time.

T-Mobile offers the best option for a customer who wants to purchase an iPhone without making a two-year commitment. And by introducing the installment plan alongside the iPhone, it has done away with the sky-high upfront prices that plague prepaid devices.

T-Mobile has essentially out-Walmarted Walmart, which began selling the iPhone 5 on its StraightTalk network in January. StraightTalk customers have to pay the full $649 for the iPhone 5; T-Mobile customers can purchase the device with the installment plan for a grand total of $579. The device costs less upfront and less over the long haul, mimicking the now-retired "Layaway" pricing that allowed Walmart customers to purchase expensive products over time.

Quartz argued earlier this year that the cheap iPhone was "already here" after Walmart began selling the device, but that Americans wouldn't be able to "recognize a discount for what it is." Much of the problem lie with the steep upfront costs and the expectation that all smartphones should cost around $199.

T-Mobile has found a way to bypass that "sticker shock" and undercut the Verizon-AT&T duopoly with unlimited plans at the same time. As it continues to introduce its LTE network to new markets and gobble up spectrum, T-Mobile could become an increasingly viable alternative to other carriers. And by doing so, it could drive customers who would have otherwise chosen sub-par, "cheap" smartphones to purchase an iPhone instead, further disproving the notion that Apple has to release a cheaper smartphone to compete with Android and expand iOS' audience.

"Uncarrier" indeed.

[Illustration by Hallie Bateman]