T-Mobile Is on a Tear. What’s the Catch?

Yesterday, I had the extremely entertaining job of interviewing John Legere, CEO of T-Mobile. You can watch the 30-minute interview above.

Now, Legere is not your ordinary CEO. He wears T-shirts and bright-pink sneakers to business events. He swears a lot. And the CEOs of the other cellular carriers despise him, a point he notes with pride.

Legere calls them “greedy,” “arrogant,” and “fat cats.”

He’s kind of right.

The cellular business is filled with scams, which I’ve been railing against for 15 years. Millions of people hate their cell carriers, as Consumer Reports’ annual surveys make clear.

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Legere hates all those cons, too — but he can actually do something about it. And that’s what makes his “Uncarrier” crusade so compelling.

Here, in case you missed it, are the various ripoffs and scams that T-Mobile has exposed and abandoned:

• The two-year contract. In almost any other industry, you can cancel your service if you’re not happy with it. But not in cellphones; if you leave before two years is up, you pay hundreds of dollars in penalties. Except at T-Mobile; you can leave whenever you like without penalty. 

And if you break your current contract to join T-Mobile, T-Mo will pay your early-termination penalty. Sprint offers to do the same, but only until January. T-Mobile’s offer will continue, Legere says, “Until there’s not a single contract left on earth.”

• The subsidy con. That hot new smartphone may say “$200 with contract” — but the phone’s actual price is more like $600. Verizon, AT&T, and Sprint have traditionally subsidized your initial purchase of the phone. That’s why the two-year contract exists: so that they’re sure you repay the remaining $400.

Then why doesn’t your monthly bill drop once you’ve finished paying for your handset? At T-Mobile, it does. The phone price and service price aren’t muddled together. You can pay off the phone all at once, over two years, or whenever you feel flush.

The other big carriers are finally following suit—but only because T-Mobile embarrassed them into it.

• The overseas calling scam. We’ve all heard those horror stories about people coming back from Europe to find a $6,000 cellular bill thanks to insane international roaming fees. According to Legere, those are the most bald-faced cons of all; there’s no reason why data should cost 50 times more in France than it does here. So when you travel overseas with a T-Mobile phone, texts are free, slowish Internet is free, and calls to other countries are usually 20 cents a minute (not $3).

• The tethering scam. Tethering means using your phone as a kind of wireless Internet antenna for your laptop or tablet to get online. Why should this data cost any more than the phone’s own data? Why shouldn’t you be able to use your cellphone’s data however you like? T-Mobile doesn’t charge anything extra for tethering. (On its unlimited data plans, you get 5 gigabytes a month to use for tethering.)

• The voicemail scam. Don’t you hate those 15 seconds of idiotic, pointless, recorded instructions that play when you try to leave a voicemail? (“To page this person, press 5 … When you have finished recording, you may hang up.”) They’re designed to eat up your airtime minutes, of course. T-Mobile is the only carrier to eliminate those stupid instructions.

• The data overage charge scam. Last year, T-Mobile says, we paid the U.S. cellphone industry $1.5 billion in penalties for going over our monthly data allotments. We live in terror of going over. We sternly instruct our kids to stop going on YouTube as the month’s end nears.

Well, not on T-Mobile. If you exceed your monthly data allotment, your Internet speed drops (or you can pay for more high-speed data). But you’re never assessed a charge for going over.

• The unused-data scam. OK, so if you use too much data, you’re penalized. But if you use too little each month — if you have some left over — you lose it. You’ve paid for it, but it’s gone. So you’re damned if you do and damned if you don’t.

That’s what T-Mobile’s big announcement was about yesterday (see the video): Starting in January, T-Mobile will no longer play that game. Any unused data rolls over into the next month. And to start you off, T-Mobile will put 10 gigabytes of free data into your account.

(This new policy doesn’t affect people with unlimited data plans, of course, or the under-3-gigabyte-a-month plans.)

Other customer-friendly features: T-Mobile lets you listen to as much streaming music as you want, without using up any of your monthly data: Pandora, Spotify, iTunes Radio, iHeartRadio, Xbox Music, and so on. All of its phones can make free, unlimited calls in WiFi hotspots. T-Mobile now offers the nation’s only unlimited-data family plan.

Oh, and on airplanes with Gogo WiFi service, you can send texts for free.

The payoff
That is all very good stuff. Stuff that must drive Verizon, AT&T, and Sprint right out of their corporate gourds.

So far, it seems to be working. Since Legere started his programs a year and a half ago, T-Mobile has signed up 38 million subscribers. It’s still the fourth-place carrier, but it’s on a tear; in the last quarter, Legere says, T-Mobile wound up with a greater net increase in new subscribers than all the other carriers combined.

The new subscribers seem enthusiastic, too; in Consumer Reports’ latest cellphone carrier faceoff, T-Mobile ties at No. 1 in satisfaction with Verizon. That, says the magazine, “is a result of a jump in T-Mobile’s overall satisfaction from last year, and a drop in Verizon’s overall score.”

So, yes, it’s easy to become a T-Mobile cheerleader. Who doesn’t love a good David-vs.-Goliath story? Who doesn’t love to see the scrappy upstart stick it to the entrenched greedy fat cats?

The dark side
But nothing comes for free. Surely, I kept thinking, there’s a dark side to all of this. If it’s so easy to grow and make money by charging customers less, and making your policies more transparent, then surely the other carriers would follow suit.

Here’s an edited transcript of some of the questions I asked Legere in yesterday’s interview — and his replies.

Pogue: But when I tell people about these great moves, I hear, “Yeah, but T-Mobile’s coverage stinks … Isn’t it mainly in big cities?”

Legere: Those days are gone. People think what you need is “a tower next to my house.” The issue for us is more the deployment of low-band spectrum. Low-band spectrum has a longer propagation, so it goes further; towers can extend further into rural areas. We bought 700 band, which is the first lowband spectrum that we have.

Secondly, where we previously had 2G or EDGE speeds, we’re migrating that to 4G. By mid-next year, all of that will be 4G. By the end of 2015, we’ll cover 300 million POPS [people]. It’s getting to the point where we’re not just on par, we have a superior network advantage. If I was A and B [Verizon and AT&T], I’d be [expletiving] myself right now.

(He also said that if there’s lousy T-Mobile coverage where you live, he wants to hear about it. Feel free to tweet your ZIP code to him, @JohnLegere. Finally, he pointed out that it’s very easy to find out if T-Mobile’s network is good enough where you live; the company will lend you a phone for a week to use and play with.)

Pogue: But here’s your coverage map, and another map with Verizon’s depiction of your coverage. They’re nothing alike! So what’s the truth in there?

Legere: You mean the one on the right that the National Advertising Board told them they can’t use anymore? It’s a crock. Lawyers? Get ’em!

(And you know what’s wild? By the end of the live interview, Verizon had removed its map of T-Mobile’s coverage from its site!)

Pogue: All these Uncarrier moves essentially boil down to saving your subscribers money. You’re taking money out of your profits. Aren’t those other carriers using that money? To buy spectrum and build towers?

(Legere didn’t actually answer this one.)

Pogue: What if you become a big boy? Remember when the iPhone came out, it sank AT&T’s network? It’s great when you’re small, but…

Legere: Yeah, but they weren’t ready. We build our network ahead. We have twice as much capacity per subscriber as they do.

Pogue: You enjoy antagonizing Verizon and AT&T. But aren’t there times when you guys need to band together? Like going to the FCC, where you’re going to regret making them furious at you?

Legere: No. Randall Stephenson is the chairman of the Business Roundtable. That’s like a bunch of guys with those microphones, where they cut back-room deals. I’m not playing that game. It’s not personal. It’s just I detest the industry they set up.

Giving ’em hell
Now, not everybody is on the cheerleading squad. T-Mobile’s stock is at its lowest point in a year. Plenty of people still complain about T-Mobile’s coverage, especially inside buildings and in rural areas. And if it’s so wrong to take away data you’ve paid for, then why does unused data, even in the new Data Stash rollover plan, expire after a year?

But Legere is unafraid to shake things up, he enjoys chomping on the hand that feeds him — and he’s not done yet. He’s unleashing a lot of change on the way things have always been done in the cell biz, and even his rivals are reluctantly adopting some of those ideas.

In other words, even if you don’t become a T-Mobile subscriber, you’ll probably benefit from the Uncarrier crusade. In the meantime, this battle will be a blast to watch.

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