T-Mobile Calling Plans Run Afoul of Washington State's Attorney General

By Wayne Rash  |  Posted 2013-04-28

T-Mobile Calling Plans Run Afoul of Washington State's Attorney General

Washington state Attorney General Bob Ferguson took T-Mobile to court because he believed the wireless service provider's calling plans that are clearly different from standard practices of the biggest wireless service providers in the United States were somehow "deceptive."

On April 25, Ferguson entered into a court-ordered agreement with T-Mobile that requires the wireless carrier to tell people that they have to actually pay for the cell phones they buy from the company.

Ferguson took T-Mobile to court after it introduced new mobile phone plans in late March that offer to sell customers phones at a substantial discount, let its customers pay over 24 months at no interest and give them wireless plans that are cheaper than competing plans. In Washington, D.C., we refer to this as proof that no good deed goes unpunished.

What upset Ferguson was the fact that T-Mobile insists that if you buy a phone from the company and then cancel your wireless contract, you still have to pay for the phone. Apparently the AG thinks that if you cancel your T-Mobile wireless service, you get to keep the phone for free. He calls the fact that T-Mobile wants you to pay for the phone you buy a "two-year sentence."

But Ferguson also appears to be engaging in another time-honored Washington tradition, which is to keep his friends close and his contributors even closer. Could it be that his crusade against T-Mobile has more to do with money in his campaign coffers than in protecting consumers?

If the AG is going to complain about T-Mobile's practices, how about the practices of the rest of the industry? Why isn't Ferguson going after Verizon Wireless, AT&T and Sprint when they keep charging you for a phone you've paid off long before? I can think of three things, all of which could be true.

First, T-Mobile doesn't talk about having to pay Apple for your phone if you terminate your contract on its Website. Despite the fact that it seems obvious, probably it should.

Second, Ferguson just got elected in November of last year. If he's going to make a name for himself as a crusading politician so he can run for governor, then he has to go after somebody, and it's clearly not going to be Microsoft. After all, he used to work for Bill Gates' dad.

And third, there's always the question of campaign money. And guess what, Ferguson's fourth largest campaign contributor, right behind the state Democratic Party and a couple of big labor organizations, is AT&T. Do you think maybe Ferguson listens closely to what his biggest contributors want? Of course he does. He'll need them again in the next election, so why not keep them happy now?

I contacted Ferguson's office in Spokane, Wash., to ask whether his decision to take T-Mobile to court was influenced by the campaign contribution he received from AT&T.

"I don't think the contribution had any role. There's been no contact from AT&T that I'm aware of," said Janelle Guthrie, communications director at the state attorney general's office.

T-Mobile Calling Plans Run Afoul of Washington State's Attorney General

Her office also released a statement that the "Attorney General's Office is charged with protecting consumers, ensuring truth in advertising and making sure all businesses are playing by the rules. Attorneys in our consumer protection division identified that T-Mobile was failing to disclose a critical component of its new plan in its advertising to consumers, and we acted quickly to work with T-Mobile to stop this practice."

T-Mobile, for its part, isn't arguing the point, preferring to get on with business. "Our goal is to increase transparency with our customers, unleashing them from restrictive long-term service contracts," according to a T-Mobile spokesperson responding in an email to eWEEK. "While we believe our advertising was truthful and appropriate, we voluntarily agreed to this arrangement with the Washington AG in this spirit."

However, Ferguson seems to have misunderstood the concept of what T-Mobile is actually doing. Here's how T-Mobile's plan works:

With T-Mobile, the wireless plan isn't tied to the phone. You can buy a phone from T-Mobile or not. If you have a compatible phone that's not locked, you can get a SIM from T-Mobile, put it into your phone, and you're ready to go.

If you want to buy a phone and use it on T-Mobile's network, you can. If you want an iPhone, for example, you can buy it from Apple, an Apple retailer or T-Mobile. If you buy it from Apple, as I did a few months ago, you'll pay $70 more than if you buy it from T-Mobile. T-Mobile, meanwhile, will also finance it if you pay $99 down and $20 a month for 24 months. The company is not charging you interest on the purchase or the financing. This is a very good deal.

What's happening is that T-Mobile is making you an interest-free loan as long as you're a T-Mobile customer. Once you've paid for the phone, you own it. If you've been paying for it monthly, then your costs drop by $20 per month.

Contrast this with the practice by the other major carriers. With them you'll pay $199 for the iPhone 5 you want. Then you'll pay approximately $30 per month more than T-Mobile for your monthly plan. Part of that monthly plan goes to pay for the phone, since Apple doesn't give these things away. But you'll keep paying the same amount long after the phone is paid for. In fact, you'll be paying that charge basically forever. Over the course of a two-year contract, that iPhone 5 can cost more than $1,000 over the cost of the same phone and the same service with T-Mobile.

So what's going on there? Ferguson wants T-Mobile to tell consumers that if they drop their T-Mobile service that they still have to pay for their phones. T-Mobile has been requiring that those phones be paid for in full, as is stated in the purchase contract. They're apparently not interested in giving interest-free loans to non-customers. But before T-Mobile offered its plan, you still had to pay for that phone up front. It just cost more with the other carriers.

Does any of this sound more deceptive than what's buried in the service agreements of any of the other mobile carriers?

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