T-Mobile 'Unleashed': Carrier Goes Contract-Free, Introduces iPhone 5 on April 12

As expected, T-Mobile announced today that it is jettisoning the traditional two-year contract structure used by the other major carriers and switching solely to contract-free wireless plans.

"Customers love smartphones. Everybody hates contracts. This is called smartphone purgatory, or smartphone hell," T-Mobile CEO John Legere said at the mobile company's UnCarrier event in New York City on Tuesday. "If you come to T-Mobile, you have signed your last contract. They're dead, gone, no more."

Instead, all plans have been replaced with Simple Choice, a unified billing system that greatly simplifies the convoluted options offered by competitors, options Legere called a "shell game."

"Everybody hates the high cost and the complexity of rate plans. How else can you hide, it's kind of like the shell game. We're announcing that when you choose a T-Mobile rate plan you get unlimited everything: talk, text and web, no caps, no overages, no bill shock, and only one rate plan.  We call it the Simple Choice, and it's obvious. More transparency, more certainty, unlimited everything."

While that's not quite all there is to it, Legere explained the central pricing scheme. "It kind of goes like this, here's the simple choice: how many lines do you want? How much data do you want? Unlimited everything, no caps or penalties. Here's the pricing structure: 50, 60 70. 500 megs, 2 gigs, unlimited. Want another line? $30. Next one? $10. That's it."

A $50 monthly plan gets unlimited talk and text and 500 megabytes of data. A $60 plan increases the data cap to 2 gigabytes. And for $70 per month, you get unlimited data.

So "unlimited everything" is slightly misleading. That's only true with the $70 plan. However, most other carriers charge that much for any data at all, usually capped at 2 gigabytes, with expensive overage charges that kick in once the cap is hit.

T-Mobile's data plans aren't capped, at least not in the traditional way. Once a customer reaches their data limit, their data speeds will be throttled. They'll still be able to use mobile internet to surf the web, download files or watch videos, but they'll notice a marked decrease in the speed of their data service.

However, they won't be charged any more, and they'll have the option to jump to a more expensive plan for that month. That means that if you don't care about fast internet on your phone, you really can get unlimited data for $50 a month.

Of course, overage charges and two-year contracts are the price consumers pay for access to cheap smartphones. How much will a new phone cost if there's no contract?

"Oh yes, woe is me, you're going to have to pay for your phone, we're just not lying to you," Legere said. In fact, T-Mobile is still offering subsidized phones. For example, the BlackBerry Z10 is now available on T-Mobile for $99 upfront.

Each month, $20 is added to the mobile bill, which is applied to the cost of the phone (determined by "fair market rates," according to T-Mobile Chief Marketing Officer Mike Sievert.)

Once the $20 payments and the initial outlay, equal the price of the phone, it's yours, free and clear, and T-Mobile will unlock it for you to use on another carrier if you want.

Customers who prefer to pay for the phone in its entirety upfront can do that as well. And customers who want to upgrade to a new phone before their current one is paid off will be able to trade in their phone toward the cost of a new one.

The cost of the phone increases the cost of the plan. A $70 unlimited plan and a phone charge come to $90, which is comparable to many all-inclusive plans on other carriers, if not a bit cheaper. And it's much cheaper for customers who have multiple lines.

Legere and T-Mobile are betting customers who try their new plans will like them, since without a contract there's nothing keeping them with T-Mobile other than loyalty and satisfaction with the service.

"Here's the best part: if we suck this month, drop us," Legere said. Take your phone plan, go somewhere else. But if we're good, come stay with us."

And they're hoping to snag customers from other carriers who whose contracts have expired. "By the way, if you're somewhere else, and you want to go and try T-Mobile before you go and lock yourself in, what's the damage? You paid for that Cadillac of a phone, walk over, try T-Mobile. We're not going to lock you in and say, 'Hey, see you in 23 months,'" Legere said, referring to the special offers most carriers roll out once a customer's two-year contract is about to expire.

In addition, T-Mobile is offering pretty much every high-end phone on the market. The Z10 is available now, and the HTC One is coming this spring. The Galaxy S4 hits May 1. And finally, the Apple iPhone 5 will be available on Apr. 12. T-Mobile also hopes to see plenty of existing iPhone customers make to jump to their new no-contract plans, and they've increased their bandwidth to accommodate the influx.

This is a gamble for T-Mobile, but it's one that may pay off. And if it does, it could force AT&T, Verizon and Sprint to rethink their own business models, the the benefit of consumers.