T-Mobile is ending subsidies and contracts, but it’s still locking phones

T-Mobile sounded the death knell of contracts and phone subsidies on Tuesday at its Un-carrier event in NYC, but it is maintaining another unpopular practice in the mobile industry: locking phones.

Customers who buy a device from T-Mobile through one of its financing plans (for instance, the iPhone 5 can be had for $100 up front and 24 monthly payments of $20) will still get locked devices. But T-Mobile CMO Mike Sievert said whenever a customer finishes paying off his or her financing plan, T-Mobile will unconditionally unlock the device.

Earlier this month, I wrote that the phone locking was a symptom of the broken subsidy model used by carriers. T-Mobile is now fixing the subsidy system, but it’s not ending the practice of locking. What gives?

Well, the answer is a bit nuanced. Instead of diving headlong into the murky depths of full-cost devices, where customers wind up fronting the costs of a $500 or $600 smartphones on day one, T-Mobile is easing customers into the model with interest-free financing plans.

Though it’s separating the device from service plan – and eliminating the contract in the process – T-Mobile is still on hook for the device cost, and it wants ensure that its customers won’t take their new iPhone or Galaxy S 4 and then bolt to another carrier. As with any loan, customers are still bound by financing contract, but T-Mobile wants extra insurance that they won’t renege.

T-Mobile USA CEO John Legere
T-Mobile USA CEO John Legere

At the event on Tuesday, T-Mobile went to lengths to explain that it is against the idea of locking all phones for the mere sake of binding customers to a specific carrier. In fact, T-Mobile hopes to benefit enormously from an unlocked device market, said T-Mobile USA CEO John Legere. He’s hoping AT&T(s t) customers will take their out-of-contract and unlocked devices over to T-Mobile, giving them a second life on T-Mobile’s network.

Legere also said that T-Mobile is a strong advocate of device portability — Customers can take an unlocked phone to T-Mobile for a month, and if they’re not happy they can move on to the next carrier. T-Mobile expects to win out in any head-to-head contest with a major carrier over unlocked devices because it won’t be factoring contract subsidies into its pricing plans. “The rate plan is just going to be about the service,” Legere said.

With that philosophy in mind, T-Mobile will unlock any device as soon as the customer’s financial obligation for it is over. If a customer buys a phone up front, T-Mobile will unlock it, Sievert said. If they accelerate their financing agreement and pay the phone off early, then T-Mobile will unlock it, Sievert said. If they return the phone to T-Mobile before the contract ends, T-Mobile will credit their financing agreement with the current market value of the device, Sievert said.

It’s not an ideal situation. There are uses for unlocked phone even if you’re sticking with your service provider – traveling overseas for instance – but I can understand why T-Mobile is imposing the locking practice. Ultimately it seems that if we want to be free of the carrier yoke entirely, we’ll have to start buying our devices outright.