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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.

11 Responses to “T-Mobile is ending subsidies and contracts, but it’s still locking phones”

  1. happybi

    They have just lost me as a customer with that new policy. I’ll be going to another carrier once my contract is over as I travel oversea and if I have to pay upfront for a phone to get it unlock, then why do I have to buy it from Tmobile? I can just get it from amazon and phone won’t be loaded with Tmobile bloatware. Dumb as dumb can be.

  2. Dan Delgado

    LycaMobile recently came to the United States. Pay as you go is 2 cents a minute, and they are an MVNO using service from T-Mobile USA.

    I wanted to get cheap service for my kids, so I bought three old Motorola flip phones at a thrift store for under $5 each. These are around ten years old. I can put a T-Mobile SIM in them and they work fine.

    T-Mobile’s own IMEI Verification web page shows the IMEIs as good (not stolen), gives me a congratulations message and offers to let me use these phones by using a T-Mobile “BYOP” SIM.

    However they refuse to unlock them when I call because I can’t provide the former owner’s name or number. With all due respect to T-Mobile USA CEO John Legere, I’m going to have to say he’s full of it.

    This is classic example of trying to lock me in to T-Mobile. They even call the password I need to unlock the phones, a “Subsidy Password”. I’m going to go out on a limb and suggest that this “subsidy” has been paid long ago.

    So the scam here is being perpetuated by T-Mobile, not by me.

  3. I Bought an old T mobile phone in Australia and its locked. They don’t have an email address to send for an unlock code or instructions on how to unlock the phone now that it is a few years out of contract which should be a basic service as it is with vodafone in Australia. Then I have to enter my customer details to get help (from other customers?) but I’m not a customer. So why would anyone buy a T Mobile phone when the second hand sell price is devalued because of a jackass policy?

  4. Manuel Bellyscar Alfaro

    I barely joined T-Mobile a month ago after getting out from Boost Mobile and went under prepaid instead of contact thinking everything was going to be unlimited, and only pay $54 including the data. End up finding out I have to pay $95 for something I didn’t know I was going over. If there is anyone that knows and thinks it was a bad idea let know. Suggestions I will take. For the Samsung Galaxy is great compare to the ZTE I had which sucked and lagged. Compare to that, Samsung don’t lag at all.

  5. I’ll believe it when it happens. I bought my phone full price and have tried to get it unlocked twice. The first time I got an email stating “T-Mobile policies and procedures state that the device must be in use on the mobile number requesting the unlock code” and that that I should wait 3 days to guarantee the IMEI is in their system. So I waited 3 days and called back and now they won’t unlock it because my account is past due (which I let get past due because I want to switch plans and they are no longer issuing refunds if you switch plans in the middle of the billing period.)

  6. keninca

    They are only protecting the mortgaged device. They are effectively loaning you money to buy the phone, and have no other avenues outside of legal means to get you to pay if you stop service. If you own the phone outright, they won’t lock it. It’s more like a lien – you can take it to another carrier as long as you don’t owe T-Mo any money. This is reasonable, as they shouldn’t be expected to finance the purchase of phones that are being used on other carriers.

    • Kevin Fitchard

      Hi Keninca, I agree with you. BTW I love your analogy “like a lien”. I think I will steal it :)

      I understand completely why T-Mo is doing it, but ultimately it doesn’t solve the unlocking problem in which you should have more freedom to use your phone the way you please while still honoring your financial commitment.

      • Craig Campbell

        Kevin, I specifically asked @tmobilehelp on Twitter about their unlocking policy. They had an existing policy as follows, on postpaid plans (prepaid is different, but also listed in the link below):
        – Any phone for which full retail was paid, or any phone for which an EIP has been fully paid off, can be unlocked by contacting customer service.
        – Any phone can be unlocked after 40 days of service (if it was a new line) and an unlock code can be requested per customer, per line, once every 90 days.

        They confirmed with me on twitter that this policy is NOT changing. Here is a link to their policy:

        In other words, if you’re a new customer buying a phone on EIP, you can request an unlock code after 40 days of service.
        If you already had the line for over 40 days, and you get a new phone on EIP, you can request an unlock immediately.
        After getting the phone unlocked, you cannot request an unlock on another device on the same line for 90 days – unless you pay full retail up front for the new device.