T-Mobile moving heavily into cheap, no-contract plans

With its smallish and relatively slow network, T-Mobile has had a tough time keeping competitive with the three major U.S. networks. But don't count lil' T-Mo out. This past weekend the company fired the first shots of what could become a real price war, with deep discounts on plans that allow users access to the network without a contract.

T-Mobile has already been reliant on the prepaid cell phone market -- 80 percent of its customer additions in the second quarter came from no-contract consumers -- for some time, but larger carriers and small, regional players have been horning in on T-Mobile's turf in recent months.

T-Mobile's response is to slash prices: It's now offering a trio of plans called Even More Plus, with its cheapest option available with 500 minutes for $30 a month, all with no contract. If you have a smartphone you can add a data plan to the service for an extra $10 a month.

The pricing is roughly in line or slightly more expensive than plans from the likes of Boost and StraightTalk, both considered to be comparably minor players in the market.

RCR Wireless notes that T-Mobile does offer one new spin on its prepaid plan, and that involves customers buying new hardware. Cell phones are invariably subsidized in the U.S., with steep discounts offered for customers who sign a new (usually two-year) plan when they purchase the phone. That doesn't work for prepaid/no-contract customers, so T-Mobile is launching a plan that lets customers spread payments for unsubsidized handsets over a period of up to 20 months, interest-free -- layaway while you use the phone, in a sense.

How will the big guns respond? So far they seem not to be fazed by the new, cheap options from T-Mobile. Verizon says it feels "no need to respond," but T-Mobile's plan is a new one and its ultimate impact remains to be seen. The proof will be in the pudding: If T-Mobile really starts cranking up the customers, we might see a furrow of nervousness spreading across the faces of a telco executive or two....