T-Mobile has finally done the unthinkable—it’s killed off its contracts entirely.

The German-owned carrier has historically struggled as America’s number four provider. Since its merger with number five carrier MetroPCS (whose entire business model is prepaid), the newly resurgent T-Mobile said it planned on eliminating carrier subsidies. This initiative does exactly that.

T-Mobile's offering, dubbed “Simple Choice,” makes the company the first of the big four US-based carriers to drop one-year or two-year contracts in favor of purely month-to-month-based arrangements. T-Mobile outlined the new plan on its website Monday. Customers can now sign up for a month-to-month package with unlimited texting and voice, plus 500MB of data for $50 per month. (The price increases to $60 for 2GB and higher.)

Customers can bring their own device or can pay an additional fee to buy a new phone—essentially shifting the carrier subsidy entirely to the consumer. For example, a new Samsung Galaxy S III requires a purchase price of $110 (but retails for $550) with an additional $16 fee for two years.

Presumably, on a month-to-month contract, if a customer wanted to switch carriers before the two years, she would have to either buyout the remainder of the contract or return the phone. (Update: Indeed, as Ars reader Mitch Brown points out, that's correct as stated in company policy.) T-Mobile spokesperson Heidi Merz said that the company was “unable to accommodate [Ars’] request today but will be in touch when we can.”

It’s likely the company is staying mum in light of its New York launch event planned for Tuesday. Earlier this year, T-Mobile began declaring itself the “uncarrier.” It gave customers the option of going to a purely prepaid model or sticking with an old-school contract. In early 2013, T-Mobile had nearly two million iPhones using its network.

Prepaid quickly rising

As Ars reported last year, prepaid customers are rapidly growing across America, and the country is starting to look more and more like foreign mobile markets. In May 2012, 25 percent of US mobile phone users (including this author) were prepaid customers, a record high.

Analysts remain skeptical that T-Mobile can lure new users over to its network. As a former T-Mobile customer, I’d be an ideal customer—but I still only pay $45 per month for unlimited text/voice and 2GB of data on Straight Talk, a mobile virtual network operator (MVNO) of AT&T. For now, T-Mobile’s new plan isn’t quite competitive with that.

“Consumers are used to key price points on hardware: free, $99, and $199,” Hugues De La Verne, an analyst with Gartner Research, told Ars. “T-Mobile does not have the advertising budgets nor marketing muscle to completely change consumer behavior overnight. Such an abrupt change will result in confusion by many users unless it is accompanied by a significant consumer education plan along with a significant savings versus more traditional subsidized operator models.”

Similarly, other analysts felt that while such a move will eventually come to the rest of the American mobile market, the two large traditional carriers (Verizon and AT&T) would be slow to respond. Simply put, they don’t need to—they’re already on top.

“Being in last place, [T-Mobile] has nothing to lose so they have the freedom to experiment like this,” said Chris Silva, an analyst with the Altimeter Group. “Now having MetroPCS and foreign ownership, they don't look like a traditional American-owned company. There's no doubt that the rest of the US will catch up with this model as we have more devices per person. It's getting messy for the multi-device user. I'd love to see more of this, but I don't expect to see more of this in the next 18 to 24 months. Beyond that we can dream.”