Desperation is not attractive. So when I say that Deutsche Telekom's (NYSE:DT) T-Mobile is playing a desperate, dangerous game by offering customers unlimited services without a corresponding contract, you know that things are looking ugly.
Reuters yesterday reported that the U.S. cousin of this German-born carrier is about to begin offering its customers unlimited talk, text, and Web surfing for $79.99 a month, no strings attached.
What's that? Yes, the expletives you're hearing in the background are executives at AT&T (NYSE:T), Verizon (NYSE:VZ), Sprint Nextel (NYSE:S), and even MetroPCS (NYSE:PCS) cursing T-Mobile's existence.
But, really, it's T-Mobile that has cursed itself. Offering unlimited service without a contract is the nuclear option, the we-don't-have-an-iPhone-just-this-silly-MyTouch strategy for winning back subscribers, and everyone in the industry is going to pay.
Why? Telco is a commodity business. And like all commodity businesses -- think retail and airlines -- when one provider changes the game, the others follow. Expect every carrier to eventually follow suit here, as well.
T-Mobile and its fans will argue that it had no choice, and that those who choose not to live with a contract will pay more for their phones. Balderdash.
Once you decouple the phone from the contract, you allow electronics retailers to compete on handset prices, and that hands control to customers. They'll shop Best Buy (NYSE:BBY), RadioShack (NYSE:RSH), and elsewhere for the best deals, and then pick the carrier that best suits their price point and location.
Exclusive handset deals and contracts were the two remaining competitive advantages carriers had. One is under attack by Congress, T-Mobile just shed the other. No one wants to see what's underneath, least of all the carriers.
But that's my take. What do you think? Is T-Mobile desperate, brilliant, or simply a realist? Please take a moment to vote in the poll below, and then leave a comment explaining your rationale.
