April 26, 2013
T-Mobile’s No-Contract Ads Get Smackdown From State Attorney General
Michael Harper for redOrbit.com — Your Universe Online
T-Mobile needed something huge to match the enormity of finally being able to offer the iPhone to their customers. They were, after all, the last of the large American carriers to support Apple´s smartphone nearly five years after its debut. T-Mobile decided to brand themselves as the “UNcarrier,” offering service plans to customers sans contracts. Now, however, Washington State's Attorney General feels the Uncarrier is being dishonest with this offer and is ordering Big Pink to change their advertising and allow customers to walk out of their contract-less contracts in a huff, if they so please.
T-Mobile´s new plans aren´t technically locked down with a contract. New iPhone customers have three choices when they walk into a T-Mobile store: They can choose to bring their existing and unlocked GSM phone, buy a new T-Mo iPhone for full price, or pay just $99 up front and a monthly “equipment fee” of $20 for the next 24 months. The last option is what Washington State´s Attorney General Bob Ferguson calls a contract and therefore is ordering T-Mobile to stop referring to their plans as “contract-less” if they´re going to keep customers on the hook for $20 a month.
“My office identified that T-Mobile was failing to disclose a critical component of their new plan to consumers, and we acted quickly to stop this practice and protect consumers across the country from harm,” reads a statement from Ferguson´s office according to TmoNews.com.
T-Mobile wasn´t eager to push back. The nation´s fourth-largest mobile provider quickly cooperated with the General´s office by signing an Assurance of Discontinuation (AOD) document. Here, T-Mo agreed to the misrepresentation that customers could pick up a phone and wireless service without a contract. They also admitted to failing to disclose any charges which would occur if a customer were to leave in their middle of their “contract.” Customers who had not paid off the full price of their phone were asked to pay the remainder if they left T-Mo early.
The carrier will pick up the legal tab left by the Attorney General´s office and make a few changes to the way they pitch this deal to consumers. In essence, the carrier will have to be more upfront with their customers about the true cost of their new device and how this phone can and should be paid off. Representatives will have to be trained within 21 days of the AOD signing, and the carrier agreed to create a Frequently Asked Questions page on their website to clear things up for any confused subscribers. Any customer who switched between March 26 and April 25 and were surprised to discover their phone costs a little more than $99 will be able to take their device back for a full refund and cancel their “contract” without fear of penalty.
T-Mobile gave a statement to CNET saying while they don´t feel they´ve done anything wrong, they will play nicely in order to stay out of trouble.
"While we believe our advertising was truthful and appropriate, we voluntarily agreed to this arrangement with the Washington (Attorney General) in this spirit," said a T-Mo spokesperson.
The Attorney General says he´s just doing his job by watching out for the average consumer.
The beauty of T-Mobile´s new plans is the abandonment of the subsidiary system. The carrier is willing to sell customers a phone at cost and let them pay it off as they will. The monthly device fee is the closest thing to a contract they now offer, but as soon as the device is paid off, the customer owns it and the carrier provides coverage. It´s a simple setup. This order could suggest perhaps consumers aren´t yet ready to acknowledge the real price of their devices and prefer the subsidized model instead.