December 19, 2014

Figuring Project Dark

project-dark-side-copyEarlier today, I was perusing my 2nd favorite Android site, Android and Me, (my favorite is, of course, Android Guys because they have the most attractive writers).  I came across their leaked details of the much talked about “Project Dark” (or black depending on who you read).  They list that part of this highly rumored project is the addition of new plans and contract free phone purchases.  Android and Me lists all of the details concerning the new plans, but the points that caught my eye were the following:  Even More Plus plan-unlimited talk, text and data for $59.00 per month, with the option to forgo the contract and discount on a new phone and instead spread the payments out over 20 months.

Now, admittedly, I am an economics guy and required to be pessimistic or at least look for the down side.  My immediate reaction was that paying for a phone over 20 months would be the same as a contract, right?  So I decided to crunch some numbers and see how good of a deal it really was.  I compared the total cost of a MyTouch 3G currently vs what it would be with the Even More Plus plan, leaving out activation fees, taxes, surcharges and all else as I will presume that they will remain fairly constant.

Currently, the MyTouch 3G is listed as $149.99 with a 2 year contract.  Using the 1,500 anytime minutes plan for $59.99 per month and the unlimited text and data for $34.99 per month we would have reoccurring monthly charges of $94.98.  There is the unlimited plan for $99.99, but I, personally, hardly use the 1,000 minutes I have now and thought the 1,500 would be close enough for a realistic “average consumer” comparison.  The “upgrade rules” on T-Mobile’s website state that a customer with a 2 year contract is typically eligible for a full upgrade after 22 months.  So I figured $94.98/mo over 22 months plus the initial $149.99 for the phone and came up with a total of $2,240 or $102 per month.  This would be what I would consider to be the “true cost” of the phone and contract.

project_black_confidentialWith the rumored Even More Plus plan, one would have to fork out the entire $499.99 for the phone but would have the advantage of a great all inclusive plan.  The plan is anticipated to run $59 per month for everything and it is believed that the phone can be financed over 20 months.  The MyTouch 3G price of $499.99 spread out over 20 months would be $25/mo.  Add that to the Even More Plus plan and it is $84/mo and over the 20 month payment period it comes to a total of roughly $1,680.

These are awesome results.  Under the current method, by the time you would be eligible for an upgrade to get a new Android phone, you would end up paying about $560 more and it would take two months longer (assuming you don’t buy a new phone until the end of the 20 months).  Even looking at it from a per month cost, the net result is a savings of $18/mo.  Compare this to buying a new Hero from Sprint with their all inclusive plan and you are looking at an overall savings of $870 for the life of the contract (discounting the Hero’s contract price to match that of the MyTouch 3G).  These are definitely impressive figures and something to look forward to.

While a 20 month payment plan for a phone still sounds pretty similar to a contract (and I am sure you will have to sign some sort of binding financing agreement), the net gain for the customer is positive.  Furthermore, this will also be a fairer way of pricing plans.  People who don’t care about elaborate phones or who are happy to use the same phone for more than two years (crazy people is what I like to call them) aren’t stuck paying a plan rate based on recouping the cost of the phone, which is how it works now.  People who drool over new phones and are already picking out their next phone weeks after getting a new one (I would assume that is you if you are reading this site) will have more freedom to do so.

T-Mobile, meanwhile, gets the benefit of a steady monthly subscriber income at a set rate and the benefit of being a true retailer of phones.  The plan is sure to draw more customers on their network, which has a dramatic effect on their profits as it costs next to nothing to just add a subscriber.  That is, until the traffic gets to be too much for their current infrastructure, like what AT&T has experienced as a result of the iPhone boom.  The major difference here is that AT&T lured customers in by being the only one to offer a very data intensive phone while I would suspect that the new T-Mobile plans will draw in users of every variety.   Additionally, it simplifies the selling of the phones to a mere price / cost per unit analysis (for the most part anyway).

If the speculations surrounding Project Dark prove to be valid, this could be a huge win-win for T-Mobile and it’s customers.



  • http://intensedebate.com/people/chuckfalzone Chuck Falzone

    Thanks for this analysis.

  • http://codeshogun.com/blog lordhong

    awesome math! thanks!

  • http://intensedebate.com/people/AndroidNewb AndroidNewb

    no problem, sat down to figure out if it worked out in our favor and thought I would share!

  • Adam

    When I first heard about paying for your phone over 20 months I thought only a chump would do that. Looking at the math it makes a complete diffrence. Thank you!

    • http://intensedebate.com/people/AndroidNewb AndroidNewb

      I thought the same thing, reminded me of car salesmen using the ol' "but your payment would only be $XXX a month, you can afford that?!?!" Meanwhile it's for 10 years at 15% interest…

  • Miguel

    Great comparison. However, if this is T-Mobile's plan, then it will fail. While it may actually be a cost benefit t the consumer, try explaining what you wrote above in a 30 second ad spot, or at a loud mall kiosk, to consumers who typically have the attention span of a gnat.

    People will only see "$499 for a phone? Oh hell no!!!". They would rather pay less up front because it makes them believe that they are paying less every month and in the long run.

    I agree with you, it seems like a sound fiscal win for the consumer. But is it easy to explain…. we'll
    see.

    • http://intensedebate.com/people/AndroidNewb AndroidNewb

      Easy:
      buy a phone with a 2 yr contract: $2,240 and you need to pay $149 of that up front and your monthly bill will be $95/mo.
      buy a phone without a contract: $1,680 and you can walk out of here today with this phone without paying a penny and your monthly bill will be $84 for 20 months and then it will be $59/mo.

    • Ben Kahn

      Umm… I think installment plans are usually advertised as "pay only $10 per month and get the phone of your dreams!"

      I doubt T-Mobile will do anything different.

  • http://twitter.com/alitke15 @alitke15

    Miguel I think you are wrong on that analysis. T-Mobile would have breakdowns at all locations I would assume as it would mean more sales. I know that here in Ohio everyone is looking to save cash as we have been in a recession since 1993. I am an accountant though so I breakdown everything I hear. Hopefully T-Mobile has charts and excel spreadsheets ready to show people that will let them know the true breakdown of each price.

    What I am interested in knowing for sure is that what is the cost to switch from a 2year contract to a Even More Plus plan? Will they let a customer switch from a 2year contract to NO contract but add in the charges needed. I would love to be out of contract so that I can buy a new phone when I want one over the installment plan.

  • pete

    I don't see how a chart would break that down to the masses. Like the previous poster said all folks are going to see is 499 for a phone and take off. As an accountant I don't see how you could make that determination in this buy now pay later society. Why do you think credit cards are so popular? People want to get it cheap and worry about it later. Thats not a exaggeration that is how this nation is currently spending. Folks don't want to pay 499 right now they want to pay it later and say they are paying it over the course of 22 months, what happens when they want to swap phones and they are in the middle of paying off their current phone? Sounds like a fail to me.

  • http://twitter.com/alitke15 @alitke15

    You are really missing the point. You are paying the phone off over time. You do not need $400 up front or whatever the cost is of the phone. I understand your statement about credit cards but the smart people who actually know how to manage finances do not make those mistakes. I was taught from a very early age that if I did not have the cash to buy something then I was not allowed to have it. More people need to learn this and we would not be where we are today in the USA. Hopefully this new plan for T-Mobile works out as I think it will. More and more Americans DO NOT want to be in 2year contracts. Verizon is the only cell phone company that has "good" coverage in my area but i refuse to pay their rates and after this new plan launches I think many others will rethink paying it as well. T-Mobile hopefully is making a game changing addition.

  • http://intensedebate.com/people/AndroidNewb AndroidNewb

    I would say that the argument that people won't go for it because they want to "buy now and pay later" is illogical. Financing a phone over 20 months IS buy now and pay later. The consumer who is likely to charge it and worry about paying later is the type of consumer that would also look at it and just think $20 a month, I can afford that, and my monthly payment will be cheaper. The more savvy consumer can look at the deal and see that it is basically the same as before-except no contract and you get to choose the amount you are paying to finance the phone.

    This is what is key here; T-Mobile is saying to the consumer YOU choose the terms of your phone repayment. Before whether you bought a $500 phone or $50 phone, you were allowing T-Mobile to subsidize ALL phones because we all had to choose from the same pool of rate plans. These plans are padded so that you end up paying for the phone after the 2 year contract anyway. T-Mobile is cutting out all of this back-end stuff and making it way more transparent. The person who buys a $50 phone or keeps the same phone for 5 years isn't going to be helping to subsidize the guy who bought a $500 phone.

  • Jay

    In either case you are going to be locked into some kind of agreement when you pay the phone over 20 months! T-Mo isn't gonna say "well here is your phone off contract we hope you pay if off, enjoy!" That whole for people who know how to manage finances is moot because a majority of people do not know how to do that. They sure as hell better have amazing customer service because now people aren't on contrafts and if you piss them off they will take off possibly with a phone not fully paid off. Sure you can bill them but they don't care they just sell their phone they've been paying for a couple months….

    • http://intensedebate.com/people/AndroidNewb AndroidNewb

      that was kind of the point of the article; 20 month phone repayment is about the same as 2 year contract. But the positives are that it's fairer, cheaper and yeah, you can take a hike if you aren't happy. You can break your contract now and leave, but you would have to pay the termination fee. And coming from a banking background, I can tell you that a financing agreement is easier to collect on than a contract termination fee.

  • RolloC84

    We are comparing the current plan pricing to the even more plus. My understanding was that they were doing away with the current pricing plans and switching to Even More and Even More plus with Even More being slightly higher, but offering the same unlimited options for voice, text and data with contract. What would the savings be comparing the Even More to the Even More Plus plans? If Even More is $10 a month higher (again, pricing has not been released yet, but for the sake of argument) the same unlimited plan would be $69 a month. Factor in the subsidized phone pricing of $150 and the cost of a 22 month contract, and the total would be $1668.00 So you would actually save a little by signing the contract. Plus, T-mobile will let you upgrade your phone at anytime regardless of contract, you just don’t get the subsidized price if it is before the 22 months, which you don’t get with Even More Plus regardless. Based on that logic, there is no benifit to the Even More Plus over a standard Even More plan, unless you were planning on switching carriers before the end of the contract term.

    • http://intensedebate.com/people/AndroidNewb AndroidNewb

      Details like this will be hard to hash out until we know all the facts, and for that matter-this whole article could be based on faulty info, I just wanted to work it out for myself-both to see what the net gain/loss would be both for the consumer and T-Mobile, so view all of this as opinion/rumor based. The Even More plan is anticipated to be similar to what is offered now, which is why I compared it to the rate plans offered now.

      For a better breakdown on the plans' details (and what I based my quick analysis on) check out Android and Me's piece about it: http://androidandme.com/2009/10/carriers/t-mobile… this a great piece breaking down much of the other details that are thought to be included, I just wanted to work the math out and figured I would share.

  • Hiya

    Talk, Text and Web on the Even More Plus Plans is: 79.99 per month

  • http://intensedebate.com/people/AndroidNewb AndroidNewb

    yeah, I've seen some updated figures, but it's all still rumored. I am planning on doing a more thorough breakdown once it is officially announced. But still, in the above analysis it would still save you about $140 overall and $450 overall compared to Sprint's unlimited plan.

  • Miguel

    This is not a earth-shattering deal. It will only benefit a select few, and it's too convoluted to gain much traction in the marketplace.

    Besides the $20 higher price for all-you-can eat ($79.99), the latest leak suggest that T-Mobile will give consumers only 4 installments to pay off the full retail price of the handset, not the 20 months you factored in your equations. That will mean a substantially higher first 4 bills. Not to mention that they will probably charge you state sales tax on the purchase, where applicable.

    This gets worse by the minute it seems…

  • http://intensedebate.com/people/AndroidNewb AndroidNewb

    Doesn't look to be as good of a deal with the recent rumored prices, we'll have to see what the real deal is.

    But I think you are mistaken about the 4 payments, that applies to the discounted with contract payment plan from the last thing I saw. And a three tier rate plan doesn't seem like it would be too convoluted for the average consumer compared to all the options their are now. I think it simplifies it quite a bit.

  • pete

    Ha, well looks like there isnt any 20 month payment more like 4 large lump sums. if the recently announced results are true then I am not impressed all all.

  • name

    Hmm… I do not need that much minutes. I only need like 100 minutes, but I do need unlimited data. I am just hoping that there will be a cheap plan ($30) with unlimited data.

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  • http://www.jfseostudio.com get online sales

    lol sounds mysterious thanks

  • matin

    that applies to the discounted with contract payment plan  The convenience and expansive library make up for the cost for me. rip blu ray

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