Mobile Carriers Throw Down With Contract-Free Plans

Is it any surprise that Americans hate getting locked into two-year contracts with mobile carriers? Only to the carriers themselves and even they're answering the clue phone. 

In reaction to nearly a third of Americans switching to prepaid phones and perhaps even smartphone market fatigue, major carriers like T-Mobile, AT&T and Verizon are offering more flexible options: JUMP, Next and Edge.

As recently as a year ago, consumers were content to lock into two-year contracts with mobile carriers in exchange for the best coverage, fastest wireless and newest smartphone models. The other option is a prepaid phone plan, which sells you a phone at the start and provides contract-free coverage on a month-to-month basis. No contract is nice, but at the beginning prepaid carriers didn’t offer competitive coverage. 

Now prepaid phone carriers are upping their games, with cheaper rates beating indentured servitude contracts with the major carriers. In the first quarter of 2013, nearly one third of smart phones were prepaid

Last week T-Mobile’s JUMP, short for Just Upgrade My Phone, was announced: the first no-contract phone plan to come from one of the Big Four. JUMP allows customers to upgrade their phones twice a year rather than getting locked into a 24-month contract. Through JUMP, you can choose to be charged an extra $10 per month to lease the phone in exchange for this freedom. 

Today, AT&T announced Next, a clear echo of Jump. Next will allow consumers to pay for their phones in a monthly installment plan before upgrading once a year. With monthly installments in lieu of a down payment, customers can buy their digital freedom. 

Rumor has it Big Red may not be far behind. A leaked Verizon training slide hints about Edge, an offering that will compete with JUMP and Next. Instead of making a down payment and staying locked in for 24-months, Edge could let customers make monthly payments, and upgrade as soon as the device is paid 50% off. 

Too Little, Too Late?

All of this news from the carriers leave many questions unanswered. It doesn't look like improved coverage is part of the deal, for one. But in the end, these programs aren't about offering better coverage, or even better value. The goal is to ostensibly offer the consumer more freedom. 

“We are going to redefine a stupid, broken and arrogant industry,” T-Mobile CEO John Legere told the audience at the JUMP announcement event in New York City last week. 

Arrogant is right. People no longer want to put up with mobile carriers who put limits on how they can or can't use their phones. That may be enough of a draw to pull people in.

Without lowered prices, though, there's no temptation yet for people already on prepaid plans to switch over to a major mobile carrier (though I can guess it's only a matter of time before they sweeten the deal). The rest of us drones under contract might want to keep an eye out to see if these will really deliver some phone freedom and perhaps some savings, too.

Updated at 11 p.m. EDT: Corrected inaccuracies in the story that made the major carrier plans directly comparable to existing pre-paid plans. While all three plans have a common feature of prepaid plans—the ability to toss and acquire new phones as often as possible—they differ from prepaid plans in one major way: customers don't have to buy the phone up front.

Photo by Clean Wal-Mart on Flickr.