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Smartphones are no longer a luxury item. For many they will be the first computer they own and in the U.S. the only thing holding back wider adoption of the smartphone is not the cost of the device itself but rather the cost of the data plan with any of the major carriers. The major carriers, AT&T (NYSE:T), Verizon (NYSE:VZ) and Sprint (NYSE:S) all still try to sell the idea that cell phone minutes have similar value to five years ago. But, in reality, they don't. T-Mobile has finally adopted the flat-rate pricing that is common to pay-as-you-go MVNO's, moving that business model up the delivery channel and eroding the idea that cell phone minutes have value.

Most people are paying for not only too many minutes but also more data than they need. AT&'s a la carte pricing may be an MBA's dream, but it is not sustainable and needlessly complicated now that one can pick up a new smartphone on Amazon (NASDAQ:AMZN) or Ebay (NASDAQ:EBAY) without a contract for $100 or less. The major carriers have tiered their pricing the way they have simply because their data networks are abominable and cannot handle the traffic and have used punitive pricing to hold people back from adopting the technology.

But with mobile platforms - both the devices and the app infrastructure - maturing so quickly, more and more people are finding they have only the computing needs that their phone or tablet provide and just need the data. The old pricing models obfuscated the cost of the service; getting people to over pay for minutes and then charge for data on a per unit basis.

By moving to the flat-rate plans and being honest about the amount of data that the customer is getting T-Mobile is bringing much needed transparency and credibility to its data offering. Moreover, by also offering the phones at a transparent price it allows the customer to decide just how much shopping they want to do.

This is the beauty of the competition created by the MVNO's like Virgin, Boost and T-Mobile's likely partner, MetroPCS (PCS). The value proposition of going from a feature phone to even a bad smartphone is so high that it was inevitable for a solid percentage of new adopters to go off the board and work with a smaller carrier. Once that number of people reaches critical mass the old contract-binding, subsidizing model will fade nearly completely from the market. AT&T and Verizon know this and it's partly why they dragged their feet on LTE. The model will hang on for the carrier-exclusive phones like Apple's (NASDAQ:AAPL) iPhone or the Nokia (NYSE:NOK) Lumia 920. We're seeing that model exported to China as the low barrier to the latest phone is a powerful selling tool.

But, that is also something T-Mobile is effectively attacking with their new scheme, as it looks like the markup on the phones they're selling are low. The Lumia 810 is $360, payable as $15 per month for 2 years.

The biggest obstacle for T-Mobile to win new business here is its network which badly needs the LTE injection of MetroPCS and continued 3G coverage at 1900MHz. With the merger getting the approval of the FCC and the Department of Justice it is now simply down to the shareholders to make this happen. The improved value proposition for the merged company is enormous and there's no way the Deutsche Telekom (OTCQX:DTEGY) is going to let this deal fall through over a little bit of money in interest payments.

I fully expect to see the merger to happen, sooner rather than later. As we saw with the Sprint/Clearwire (CLWR) deal, an activist shareholder or two can help drive a slightly better bargain, but that's about all. If that happens, the final deal will be in the new T-Mobile's favor with lower debt load.

This move by T-Mobile is a reflection of a broader trend in the U.S. economy in which we are seeing the after-effects of credit deflation and structurally-high unemployment hitting hard at the marginal costs of things like entertainment and connectivity. It's not that people do not want to be either entertained or connected but rather are more willing to be critical of how much it is costing them to be so. We're seeing it in cable subscription rates. Everything reduces to a search for value and unlimited talk/text/data is simply not worth $100+ per month anymore for most people.

Source: T-Mobile's No-Contract Plan Is A Winner