While I wouldn’t exactly call it T-Mobile’s “boldest” move yet, the self-styled “Uncarrier” did announce a new change in strategy at its media event on Wednesday. T-Mobile(s tmus) wants to make it easier for customers to upgrade their phones, not on the typical one-year or two-year cadence common to the mobile industry, but every six months.
Technically under T-Mobile’s current no-contract plans you can upgrade whenever you want — you just have to finish paying off your current device. T-Mobile’s new Jump program, however, will forgive all of your financing payments and let you start afresh with a new device and a new financing plan. The catch? It requires a $10 a month fee and your old phone needs to be in reasonable shape so you can trade it in. If the phone’s busted, there’s a deductible — running anywhere from $20 to $70 — before you can upgrade.
So is it worth it?
It depends on what kind of mobile user you are. If you’re one of those people who absolutely must have the newest phone whenever it launches, Jump could meet your needs quite niftily. Say you buy an iPhone 5 today, but want to upgrade to whatever new iPhone Apple(s aapl) releases six months from now.
To get the initial iPhone 5 you pay $150 down and then make six months worth of $20 installment payments and six months of $10 Jump payments. That’s $330, pretty much half the cost of the 16 GB device. You can then trade in that iPhone 5 and get the newer iPhone on whatever financing plan T-Mobile then offers. You’re not getting a discount on the new phone, but T-Mobile wipes the slate clean. It’s like starting all over again as a new customer.
Of course, you’ve just put $330 toward a phone you’ll never see again. You can’t give it to your kids, your boyfriend or your mother, and you can’t sell it on eBay(s ebay) or trade it to your drinking buddy Bob for his ant farm. Assuming T-Mobile keeps the same financing plans in place, you’ll then spend $150 for the new iPhone, and at the end of another six months, when a new upgrade kicks in, you’ll have spent another $330. That’s $660 in hardware payments in one year – basically the cost of a single high-end smartphone.
Rent or own?
You can think of Jump like you would renting a home versus buying one. If you view your phone as an investment, then Jump might not sit well with you. But if you think of the phone as merely a vessel for your mobile lifestyle — as a growing number of Americans do — and always want access to the latest and greatest vessels, then Jump is right up your alley. It will cost you, but only half as much as it normally would to buy a brand new smartphone every six months.
If you don’t want to upgrade every six or eight months, though, then the returns on Jump diminish. Say you want to get the newest version of the Galaxy every year: Over 12 months, you’ll have found yourself putting $460 toward your old phone only to lose it when you upgrade. Since the total cost of a Galaxy S 4 is $580 at T-Mobile, you’ve pretty much already bought the phone, yet you don’t get any value out of trading it in or selling it. If your upgrade cycle is 18 months are longer, you’re probably just throwing money away.
Of course, you can always think of Jump as insurance, which is not a bad way to approach the program. I managed to stick my iPhone 5 in the washer within three months of buying it, and as T-Mobile CEO John Legere pointed out there are a lot of people walking around with fairly new phones they’ve managed to crack, jam or otherwise wreck. Still, if insurance is all you’re after, there are cheaper plans than $10 a month. If you’re looking for a combo of upgrade flexibility and insurance though, then Jump is worth a look.
But I can get a new iPhone for $200…
For a lot of people, these prices aren’t going to seem fair no matter how you look at them. We’ve been conditioned for so long to think of smartphones as throwaway electronics that should cost no more than $200. But that’s because we’ve all been fooled by carrier subsidies. We’re still paying the full cost — if not more — for our devices, we’re just doing it through our monthly bills, which is why we get locked down to two-year contracts.
T-Mobile charges far cheaper rates than the other carriers, and it does so because it separates out the cost of the device from the service plan. It’s a pretty revolutionary way of selling mobile devices and services, at least for the U.S., but it’s going to take some time for Americans to get used to it.
That’s what I think is most significant about Jump. The cost economics of the program can go either way depending on what kind of consumer you are, but T-Mobile is trying to shake up the subsidy-contract contract structure.
Let’s face it: any two-year old smartphone is ancient. Requiring 24 months of service before upgrading is a bit silly. We may have to change the way we think about phone pricing, but at least Jump gives us an alternative.