T-Mobile Drops Data Pricing For Connected Devices On Go5G Next, Subsidizes Cellular Modems

At an event last week in New York, T-Mobile took the first steps in making it significantly less expensive to connect smartwatches, tablets, and laptops to its cellular network. The moves were mostly aimed at adding value to T-Mobile’s highest-end unlimited wireless plan, Go5G Next, but even so, it makes connected cellular devices easier to justify. If T-Mobile or its competitors build on this and cellular modems are adopted more widely, it will benefit carriers, device manufacturers, and customers alike. Cellular-connected laptops in particular can also improve security and should be a serious consideration for business users (the new T-Mobile offer is also available for Go5G Business Next, aimed at SMB).

Cellular connected devices are caught in a trap: they are expensive to buy, expensive to connect, and often don’t need more than Bluetooth and Wi-Fi connectivity. Adding cellular modems and antennas to devices that can be used with Bluetooth or Wi-Fi costs money and adds to inventory management. Carriers generally have not been willing to foot the bill for the added device expense (though they have subsidized relatively cheap carrier-exclusive cellular tablets whenever they want to goose subscriber numbers with Wall Street).

If the higher cost of the devices wasn’t enough to discourage adoption, carrier data pricing for smartwatches, tablets, and laptops has been quite high relative to the value that cellular data brings. Typical smartwatch data plans cost $10 - $20 per month as an add-on to wireless plans, despite the fact that watches use almost no data or voice minutes at all unless the consumer streams music to them. Typical tablet data plans cost $20 per month as an add-on to wireless plans. Tablets have spikes in cellular usage; they are mainly on Wi-Fi, but when they are taken out of the house and used for streaming, they can pull down a lot of bits. Laptops use a tremendous amount of data, and carriers have typically priced them as if they are their own separate data bucket, even when attached to a wireless phone plan that already has “unlimited” data.

T-Mobile’s announcement has three aspects:

For users on its Go5G Next* and Go5G Business Next plans, attaching a cellular connected device is just $5/month per device. That covers any device: smartwatches, tablets, cellular modems, and laptops. These are T-Mobile’s most expensive plans, but it could still make financial sense to move to them if you have more than one connected device, or if you value annual smartphone hardware upgrades or the streaming content included on this plan. The $5/month connectivity offer is is limited to just those two plans, but it does address both consumers and small business owners.
T-Mobile is covering the cost delta for the embedded cellular modem across a number of devices. For example, if a cellular iPad costs $650 and the Wi-Fi-only version is $500, T-Mobile will sell the cellular version for $500. This may be the most radical element of the plan. Removing the price penalty for the cellular version should increase demand.
Acknowledging that most laptops are not available in cellular variants, T-Mobile is selling a USB modem from TCL, the LINKPORT, for $96. A half-off holiday offer takes that down under $50. Interestingly, this is one of the first RedCap (REDuced CAPacity) modems using Qualcomm’s Snapdragon X35 Modem-RF System. RedCap caps speeds at 220 Mbps down and 100 up. While that does offer T-Mobile some limits on how its network resources are allocated, it is mostly a cost saving move on the modem hardware. If T-Mobile’s network can provide anywhere near maximum Redcap speeds, it should still more than adequate for regular laptop usage, including high definition video.

Competitive Implications

While this was not billed as an “Uncarrier” move, it should have been. T-Mobile is no longer an underdog, but it is demonstrating a willingness to try different approaches that take advantage of its strong network and spectrum position. This also shows the capacity of T-Mobile’s network; it would be one thing to offer inexpensive smartwatch data, but to include laptops shows T-Mobile’s confidence that it can handle additional traffic. T-Mobile was similarly the first in the U.S. to offer home broadband over 5G, and while there are areas where the network has reached capacity – T-Mobile has a 1 million strong waiting list – overall its FWA service has gotten faster as T-Mobile has added capacity and optimization faster than it has added users.

T-Mobile is giving up a rich revenue stream for add-on devices to make its most expensive smartphone plans more attractive. This might even be revenue positive, as consumers buy and connect more devices now that it is more affordable to do so – by expanding the market, T-Mobile could make up the difference in per-device pricing with volume. If that happens, I expect T-Mobile to expand the program to its regular Go5G plans as well, and to business plans that allow more lines.

Regardless, AT&T and Verizon will need a competitive response. On the consumer side, they can wait and see if T-Mobile is successful, though their connected tablet pricing needs to be rethought even if nobody takes up T-Mobile on its offer: see my critique of TCL’s TAB10 NXTPAPER at Verizon. However, enterprise is mostly greenfield opportunity for T-Mobile. Both rivals have been trying to sell connected laptops to their established enterprise customers, and they cannot afford to let T-Mobile in. Subsidizing modems and offering a lower-cost flexible bucket of data for both smartphones and laptops could be a way to boost enterprise smartphone and 5G laptop use alike.

To discuss the implications of this report on your business, product, or investment strategies, contact Techsponential at avi@techsponential.com.

*T-Mobile told me that it should be possible to upgrade just a single line on a multi-line plan when this goes live on Oct 17, but mixing and matching hasn’t been possible before (a fact that Verizon has used to sell its highly flexible content-centric plans). We’ll see.

T-Mobile’s press release: https://www.t-mobile.com/news/devices/t-mobile-go5g-next-upgrade-for-connected-devices