How U.S. Cellphone Plans Evolved Over the Past Year

By Anick Jesdanun

BARCELONA, Spain -- In the old days, U.S. wireless customers typically paid $100 or $200 for a phone and agreed to a two-year service contract. Although the phone actually cost hundreds of dollars more, wireless companies made up for it through the monthly service fees for voice, text and data.

T-Mobile (TMUS) decided last spring to stop subsidizing phones and padding the service fees. Instead, it lowered those fees for everyone and charged for phones separately. A few months later, T-Mobile shook up the phone industry again by allowing customers to upgrade before the phone is fully paid off.

Rivals followed with subsidy-free, no-contract phone plans that also allow frequent upgrades, though they continued to offer subsidized plans as well.

Here's a look at how wireless plans have evolved over the past year:

T-Mobile US

T-Mobile eliminated both subsidies and contracts last March. Instead, customers buy phones outright and pay for them in installments over two years. Monthly fees for voice, text and data service have been reduced accordingly, as they no longer include the costs of phone subsidies.

So instead of a single monthly charge, customers get separate ones for the service and the phone. The total monthly charges don't change all that much while the phone is being paid off. But after the two years, charges drop as customers pay the service portion only.

In July, T-Mobile introduced a $10-a-month program that allows people to upgrade phones up to twice a year instead of every other year. Customers turn in their old phone and pay a down payment with each upgrade. The program, called Jump, gets expensive for those who want to upgrade frequently, given the down payment and monthly fees. But customers get flexibility to keep up with the pace of new phone releases.

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