The trend toward unlocked and contract-free phones will be great for businesses

thumb up

T-Mobile launched its new "uncarrier" model today, In addition to announcing that it will finally sell the iPhone and roll out its higher-speed LTE network.

The company's new model, which eliminates the two-year contracts and subsidized pricing of mobile devices, could shake up the mobile market in the U.S. on its own. Combine that with possible legislation to legalize the unlocking of devices and a resurgence of pre-paid choices in the market and a major shift in how individuals and business select, buy, and use devices seems inevitable.

Each of these three factors -- an emphasis on contract-free devices, the legal ability to unlock devices for use with multiple carriers or buy devices unlocked, and an active market for low-cost pre-paid and other flexible plan options -- represent new opportunities, particularly when it comes to telecom expense management.

Contract-free devices

T-Mobile's launch of contract-free devices and its support for unlocked GSM phones and other devices brings the carrier closer to the mobile market in Europe. Customers pay full price for a new device with the option to change or terminate their contract at any time. To make this model more palatable to American consumers, most of whom are used to new top-of-line device like the Galaxy S III or iPhone 5 starting at $199 or lower, T-Mobile is allowing customers to finance unsubsidized devices.

The iPhone 5, for example, will be available for a $99 down payment and $20 monthly payments that will be added to a customer's monthly bill. Once the loan is paid off, users will see their monthly cost drop as a result (similar to paying off a car loan). Highlighting the fact that this is a loan and not a traditional mobile contract, users can leave T-Mobile before their device is paid off and move to another carrier. If they do, they'll still be responsible for paying back the rest of the loan. Users should also be able to upgrade at any time, even if the loan for their current device hasn't been paid off. In that case, the user would essentially be responsible for paying off the loan for the original device and the new device.

While financing is intended to help consumers afford the latest devices by limiting the initial cost, anyone is welcome to pay cash for a device at the outset. That's an expensive prospect for consumers, but it may be ideal for businesses.

By purchasing a device without a contract, businesses will gain flexibility in terms of allocating devices as well as choosing or modifying service plans. That could lead to significant savings during periods where mobile demands on a workforce or light because plan options could be reduced (and plans for some devices could even be canceled temporarily). It also allows selection of plans based on actual, rather than perceived, usage. If you discover that someone is using significantly less mobile data than you expected, you can adjust the plan and recover some of the monthly cost.

Beyond managing the plan and expenses, buying phones outright will also allow a company to stockpile and create a pool of backup devices that can immediately replace a lost or stolen device. Stockpiling could also ensure that extra devices are available and ready to use should their be an influx of staff or a project/event that requires greater contact and collaboration among mobile team members.

Unlocked devices

Unlocked devices offer even more cost-saving options, particularly for companies whose employees travel internationally on a regular basis. An unlocked device can generally be used on any carrier in the world that supports it. That means that someone traveling through Europe on business could purchase a SIM card for a local carrier in each country that he or she visits. The big payoff here is that usage is billed to the local carrier, avoiding expensive voice or data roaming charges.

Even within the U.S. there are advantages to an unlocked device. Most unlocked devices are likely to be contract-free devices purchased outright with no subsidy (either from a carrier or other channels like direct from a manufacturer). That means that a business has the same flexibility I described earlier. In choosing plan options for an unlocked device, a business can consider plans from all the available carriers and pick the best based on coverage as well as cost.

There are some limitations to keep in mind about unlocked devices. First, different carriers in different global markets use wireless spectrum differently. This means that some combinations of device and network features may not be available. T-Mobile has long been a perfect example of this issue because it used different frequencies for 3G data service than other carriers. That meant that an unlocked iPhone 4 from AT&T couldn't make use of T-Mobile's 3G service, but could access phone, text, and slower 2G data service. It has taken T-Mobile years to begin to resolve that issue.

Similar issues occur when traveling abroad, and users may face the same issues with LTE access as it is rolled out in different countries. So business travelers should investigate their local carrier options when planning travel -- using a local carrier might save money, but at the cost of worse performance.

It's also important to keep in mind that while the GSM standard and use of a SIM card is the dominant cellular technology on the planet, it isn't the only one. Verizon and Sprint, for example, rely on an alternate technology called CDMA. Because the phones are technically different, you generally can't unlock a Verizon phone and use it on T-Mobile. Having said that, CDMA carriers do offer so-called "world phones" that can connect to GSM carriers as well. Those devices, which include the Verizon iPhone 5, include a SIM card that can be swapped out for a local carrier SIM card -- as long as the phone is unlocked.

Pre-paid plans and MVNOs

Pre-paid phones have and other devices carry a certain stigma, partly because they have been marketed as low-cost options for people who cannot afford higher end devices and services, or who can't pass the credit check required by most carriers for a post-paid plan and subsidized devices. Without subsidies to buffer the initial cost of pre-paid devices, pre-paid carriers and programs have traditionally included just low-cost devices -- typically limited-functionality handsets and feature phones, entry-level smartphones, and older devices running older mobile OSes.

All that is starting to change as pre-paid companies begin to offer a wider range of service options and more expensive devices.

Most pre-paid mobile options in the U.S. come from mobile virtual network operators (MVNOs) that buy wholesale access to a major carrier's network that they then resell to consumers. In most cases, MVNOs buy access from a single national carrier. StraightTalk, arguably the largest American MVNO and pre-paid option, however, works with multiple carriers to provide the best coverage possible.

While many MVNOs specialize in pre-paid coverage, some MVNOs work on a post-paid model and differentiate themselves by adding services or other incentives. CREDO Mobile for instance, markets itself as a socially responsible company that donates to specific charities. On the opposite side of the coin, many carriers offer pre-paid as well as post-paid services under their own brands.

Pre-paid plans offer an interesting mix of options for business and individuals. Since they are contract-free options, plan features and limits can be adjusted at virtually any time and service can easily be canceled and restarted as needed. This can be valuable for devices like mobile hotspots or tablets, which may not get regular usage. Having the option to activate a device for just a few days or weeks delivers powerful flexibility. For businesses, it may be worth exploring providing users pre-paid devices to users with a monthly stipend paid by the company and any additional use paid by the employee as part of a cost-sharing program.

GSM carriers like AT&T and T-Mobile (and MVNOs relying on them) will typically support unlocked devices. Pre-paid carriers typically offer data service in addition to voice, but 3G service is commonly the fastest option. This is beginning to change, however. Sprint's Virgin Mobile brand, for example, recently began offering LTE.

Pre-paid options are much more common outside the U.S., and in many countries, they're the norm rather than exception. Business travelers selecting a local carrier's SIM card for their device will almost always be selecting a pre-paid SIM.

Flexible options for BYOD and corporate devices

All these options apply to both traditional corporate-issued and BYOD approaches to enterprise mobility. Businesses stand to be able to take advantages of contract-free and unlocked devices more than individuals because of economies of scale.

The big message is flexibility. Each offers business and users an array of new choices in terms of cost, services, and how devices are used.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
View Comments
Join the discussion
Be the first to comment on this article. Our Commenting Policies