T-Mobile ditches overage charges, challenges other wireless carriers to do the same

T-Mobile has been making a lot of announcements lately as the fourth largest wireless carrier in the U.S. tries to steal customers from Verizon Wireless, AT&T and Sprint. A few days ago, it announced that all of its tablet users would get free data until the end of 2014.

Today, T-Mobile launched what may be the biggest volley yet against its three biggest competitors. It announced today that, beginning in May for bills that are issued to its customers in June, it will ditch all overage charges for current and older plans.

John Legere hopes getting rid of overage fees at T-Mobile will be mirrored by the company's bigger competitors.

John Legere, the outspoken president and CEO of T-Mobile, said in the company's press release that overage charges were "flat out wrong". In fact, he has challenged Verizon, AT&T and Sprint to join his company and get rid of their own overage policies. He added, "Charging overage fees is a greedy, predatory practice that needs to go."

T-Mobile has even launched an online petition at Change.org asking the "Big Three" wireless carriers to do away with overage charges. While this is obviously an attempt to get more customers to switch to T-Mobile, the sentiment that overage fees are no longer needed is certainly one that most wireless smartphone customers, who are using more and more data on their devices, would agree with.

Source: T-Mobile | Images via T-Mobile

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20 Comments

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ACTIONpack said,
Sorry but when you throttle down to 2G it becomes no data. Its that bad. It maybe okay when the internet was only 5kbp for page buts not like it anymore.

so pay for higher cap plan or go to different carrier so they can overage charges when you went over, simple.

I use GoSmart wireless which runs on T-Mobiles network. Gets way better service than my old plan with AT&T, plus GoSmart has an unlimited plan for $35. But AT&T sucks in South Carolina.

Sorry but when you throttle down to 2G it becomes no data. Its that bad. It maybe okay when the internet was only 5kbp for page buts not like it anymore.

The sooner the USA have decent cap plans like many other countries, the better you'll all be. You currently get ripped off to the extreme.

The day I see this happen north of the border - other large providers ditching overage charges - is when I get to own my own yacht.

We have one small provider (Wind Mobile) that sorta does this - up to a certain point is full speeds, then they throttle down past that unless you pay for a higher tier. The downside is their coverage is severely limited to two or three major cities, and even in said cities there are problems with signal quality. So on that point, the "Big Three" still have a strong advantage of possessing the infrastructure to support a decent signal nationwide, and of course the high prices to go with that.

It's severely frustrating to pick between paying $50+ a month for 1 GB of data and decent signal (and that's after haggling with customer support for retention deals), versus a base $39 per month for "unlimited" data use (the soft cap is something like 5 GB or 6) with spotty reception.

to think that at one time AT&T was going to buy T-mo...so glad that didn't happen otherwise we'd probably paying more for less.

Competition is such a wonderful thing. I wish Windows had some "serious" competition. I can only imagine what we'd have today.

Now if only you also abolish the nonsense of getting charged for receiving messages.... (*insert thought here*)

Cyplex said,
Now if only you also abolish the nonsense of getting charged for receiving messages.... (*insert thought here*)

I think most do unlimited messages now? The exception will be older plans of course.

So this would essentially make every plan "unlimited", right? That's great and all for us consumers, but then everybody will switch to the cheapest plan, which would then bring in less money for the company. I won't complain about that, but from a business stand-point, they are basically reducing their profits. Cue the fine print!

I must be missing something here because there's no way a publicly traded company would intentionally reduce their profit future like this.

First, the cost per gigabyte (according to filings by all ISPs and carriers) is roughly 1 cent, so it's never been an issue of cost only pure profit.

Second, when you go over they throttle your speed down to 2g (or 3g?) speeds, so what you are paying for is how much data you get per month at maximum bandwidth (4g/LTE).

Third, because of the first and second point, it is FAR more profitable to sign up new customers (the goal of these new policies) than to worry about overage charges, including the customer service costs of reversing them, handling customers, etc. That labor cost is a huge hit to the bottom line.

I hope that helps.

Astra.Xtreme said,
So this would essentially make every plan "unlimited", right? That's great and all for us consumers, but then everybody will switch to the cheapest plan, which would then bring in less money for the company. I won't complain about that, but from a business stand-point, they are basically reducing their profits. Cue the fine print!

I must be missing something here because there's no way a publicly traded company would intentionally reduce their profit future like this.

Well there is a trade-off. As mentioned above, you do get throttled down to 2G if you hit your cap with T-Mobile. Might still be enough to push people to higher tiers depending on usage.

excalpius said,
First, the cost per gigabyte (according to filings by all ISPs and carriers) is roughly 1 cent, so it's never been an issue of cost only pure profit.

Second, when you go over they throttle your speed down to 2g (or 3g?) speeds, so what you are paying for is how much data you get per month at maximum bandwidth (4g/LTE).

Third, because of the first and second point, it is FAR more profitable to sign up new customers (the goal of these new policies) than to worry about overage charges, including the customer service costs of reversing them, handling customers, etc. That labor cost is a huge hit to the bottom line.

I hope that helps.

That's a good point on the throttling thing.

What I was trying to say though is that many people might downgrade their plans to lower limits if they know they won't get charged for overages. That's kind of how I am with AT&T. I pay for the 3GB plan, but rarely ever go over 1GB. But if I did downgrade, and happened to go over, those overage charges rack up quick. If AT&T adopted this no charge thing, I'd downgrade my plan the second I could. Thus losing AT&T money.

The CEO of T-Mobile shouldn't be encouraging others to do the same thing either. If they all do, then it closes that advantage that have. I'm sure he's trying to make the point that the others won't change, but it could backfire on him.

So what do they do when you hit the paid for cap? throttle it back? i mean, why not just offer unlimited data if there's no hit for going over the cap?

T-Mobile has an unlimited data plan. I believe if you go over your allowance you're simply throttled down to 2G speeds (which is fine for me since I don't really get much better than 2G around here).

It looks like Tmobile is taking the kind of aggressive and disruptive business model to the US that 3 brought to the uk.

It's great for consumers and can be applauded.