Talk is Cheap

A new phone company tries to corner the growing low end of the cell phone market.


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Published: Jul 30, 2008

A few weeks ago, MetroPCS, the country's seventh-largest cellular phone service provider, set up shop in Philadelphia. There was surprisingly little hoopla — a new downtown location stuck some balloons in its doorway, and the Philadelphia Business Journal heralded the occasion with a five-sentence article.

But if you haven't heard about MetroPCS yet, odds are you will soon. The Dallas-based company first launched its service in Atlanta in 2002, and now boasts 4.4 million subscribers nationally.

There are a few reasons MetroPCS stands out among phone companies. While most major providers try to rope their customers into yearlong — or, increasingly, two-year — contracts, MetroPCS charges on a month-to-month basis for unlimited minutes. Moreover, MetroPCS offers its monthly service at a lower cost than most other providers (long-distance plans start at $35 a month). That means not only can customers talk during every waking minute of their lives, they can't go into debt doing so.

Before MetroPCS, customers who couldn't afford a high monthly bill could turn to companies like Tracfone and Virgin Mobile, which offer no-contract, pay-as-you-go plans, but the rates were high — as much as 20 cents a minute or more.

Recently, MetroPCS unveiled yet another interesting policy: Last June, the company announced that it would "unlock" phones sold by competing companies and reprogram them for MetroPCS service for a $30 fee. It's the first major U.S. carrier to adopt such a policy.

If this all seems too good to be true, there is one pretty big catch: The service works only in a relatively small handful of cities around the country. Take your phone to Los Angeles, Detroit, Miami, and you're good to go; hop on the Chinatown Bus to NYC, and just about the only thing your phone will be good for is calculating the tip.

Still, with the economy tanking and cell phone companies asking for ever-longer pledges from customers, MetroPCS may be sitting on a gold mine in Philadelphia.

"Cell phone contracts remain one of the largest complaints that we receive," says Philadelphia consumer advocate Lance Haver.

Most consumer products, Haver points out, don't involve a legally binding contract. "You buy a television, you know what it is. You know what it looks like, and it comes with some kind of warranty. You buy a cell phone service, you don't know what it's going to be, whether it will work for you, whether you might be moving. And if it doesn't work, or you don't like it, you really have no remedy."

Joel Kelsey, a policy analyst with the Consumers Union, which publishes the magazine Consumer Reports, agrees that Americans are getting fed up with restrictive phone plans.

"When it comes to cell phone services," he says, "the biggest issue that we hear is [people] are sick and tired of being locked into contracts with early termination fees; they're sick and tired of having their phones locked to a particular carrier; and they're sick and tired of contracts that last two years or more." Kelsey is unfamiliar with MetroPCS, but he's intrigued. "It sounds like what they're doing is taking every single one of those complaints and creating a business model to undercut the ways that big carriers are mistreating their subscribers," he observes.

MetroPCS will likely remain below the radar for Philadelphians with places to go and money to burn. But as the economy slows and wallets gets thinner, two subsets of Philadelphians may find the service attractive: young people — a growing demographic in the city — and blue-collar people. Both groups have subscribed in high numbers in other cities, according to Jaimee Minney of ComScore M:Metrics, a data research firm.

About one-third of MetroPCS' customers nationwide make $25,000 or less, Minney's research shows. That's about twice as many as other companies.

John Shelton, a vice president at MetroPCS, says Philadelphians are already subscribing.

"It is really going extremely well," he says, adding that the company recently added Puerto Rico to its plan in the hopes of attracting customers with relatives there. It remains to be seen, of course, how MetroPCS will fare in the region. But it's possible the company has caught the big fish with their pants down. "In this economy, customers are looking for a bargain," says Shelton, "and I think they're tired of being ripped off."

(isaiah.thompson@citypaper.net)