ETFs Without a Hardware Subsidy and No Data-Only Plans Have Me Flustered

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Over the weekend, I did a bit of research into my crazy new idea. As my Palm Pre was put on notice back in November, I’m looking at dropping it for an fast, new Android device in the first quarter of 2010. I have an iPhone 3GS as my primary cell and I’m an advocate of using Google Voice to manage my incoming calls — it’s especially handy with more than one handset. So I really don’t need two or more voice lines with my current setup. Using the Nokia N900 for both Google Talk and Skype voice calls actually sheds the spotlight on this fact — with fantastic Google Voice or voice over IP integration, a second “handset” could easily be a data-only device for me. That’s where my research for a data-only SIM card started… and quickly ended due to the dreaded ETF, or Early Termination Fee.

Since the new Google Nexus One offers known specifications that will meet my needs, I decided to look at T-Mobile for data. The carrier recently introduced some contract-free voice / text / data plans, so I figured there might be a plan for my new strategy. Sure enough, I found the T-Mobile Total Internet plan, which is $39.99 a month and offers up to 10 GB of data per month. With the plan, you can make voice calls, but you’ll be paying by the minute. That’s a chance I’m willing to take, since I have another dedicated handset for voice and because I’m thinking that a Skype phone number ought to provide cheap insurance. And most of the folks that I talk to on a regular basis are all on Google Talk already, which works just fine over 3G or Wi-Fi. So I added the plan to my cart.

The next step was to choose a device, but since I’ll be providing the hardware, I simply chose the first option, which was for a free SIM card. Thinking I was good to go, I went to checkout and then the dreaded two-year commitment and $200 Early Termination Fee information popped up. Here’s the burning question: if ETFs are meant to protect carriers against early losses of subsidized hardware, why would there be an ETF associated with a data-only plan? The fact is — there shouldn’t be one and it’s tragic that the FCC allows for this to happen in the U.S. Ironically, after tweeting about this over the weekend, T-Mobile has updated it’s site and I currently can’t choose just a SIM card for this plan.

While it may appear that I’m bashing T-Mobile over this, I’m simply using this situation as an example. The fact is: I want to give T-Mobile $40 a month to use unlocked phones as data-driven devices. But I won’t do that if there’s an illogical fee that I could end up paying for. What if I have a career change in the next two years and don’t need to review phones any longer, for example?

This is part of the reason that unlocked phones simply don’t do well here in the U.S. In other countries, carriers often use the same voice and data frequencies, so you simply shop around for the plan and SIM card that suits you best, pop it in your phone(s) or your data device and you’re good to go. Here a SIM card for an unlocked phone works with either T-Mobile or AT&T for voice, but unless the device supports quad-band HSPA (most, if not all, don’t), you only get fast 3G data on one network or the other. There’s simply little to no incentive to buy an unlocked phone like the Google Nexus One.

Let’s say for a second that the Nexus One will be unlocked — which is all but officially confirmed. It won’t support AT&T’s 3G network, so very few people will even consider an AT&T SIM or plan. Why would you when the primary use case of the device is for apps and the web, which are data-driven services. These days, the voice component of a smartphone is more of a necessary add-on rather than the primary function. So that brings you to T-Mobile, which does offer contract-free plans with the Even More Plus Plans. The cheapest one offers 500 voice minutes along with unlimited text and web for $59.99 a month. That’s $20 more per month than the Total Internet Plan because it offers the voice and text component — that I don’t need. Texting through Google Voice on an Android phone — or via the web on any other platform — is just fine.

In fairness to T-Mobile, let me look at the situation with AT&T — you can add just the data component to a smartphone or PDA for $35 a month. OK, that’s reasonable, but what if I don’t need the voice component? No can do — this is an add-on for existing voice plans. For data only , you need a SIM card tied to the $60 a month DataConnect plan, which nets you the same 5 GB of monthly bandwidth for almost double the price of the add-on. There is a $35 plan, but that’s limited to a paltry 200 MB, so it’s a non-option for me. So let’s say I was willing to go with the $60 a month data plan — you can’t do that with just a SIM card, at least not on AT&T’s website. Instead you have to pick a device and we all know what that means. Yup, this is where the ETF comes in again. Either that, or I can buy a device I don’t need at full retail price, which is often higher than the ETF in the first place.

Simply put, this whole experience is like running on a treadmill — I keep going and going to find a solution, but essentially, I’m stuck in place. It’s time for a real shakeup in the U.S. cellular market because data, not voice is where it’s at. I don’t know who will cause this shift — the FCC, Google, or someone else entirely — but it’s long overdue. I know I’m a bit ahead of the curve on the need for data-only plans without ETFs, but these territorial cellular fences need to be torn down.

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