T-Mobile Kills Overage Fees—but not Without a Price

For many of us, overage fees are an annoying part of owning a smartphone. Bust your data cap or allotment of voice minutes and your bill for that month goes up. No one, except the carriers, likes overage fees. So in its latest move to steal business from its larger rivals, T-Mobile on Monday said it is killing overage fees for its customers.

That’s a good thing for most of us, but there is a catch. Customers who do go over won’t pay more, but their data will be slowed to 2G speeds for the rest of the month, making it useless for some of the things you do every day.

T-Mobile’s pugnacious and bombastic CEO John Legere challenged AT&T, Sprint and Verizon to do the same, and launched a petition on Change.org, saying in a blog post:

“The Uncarrier is eliminating one of the most widely despised wireless industry practices for all of our T-Mobile customers on consumer plans. And I’m also laying down a challenge to my counterparts at AT&T, Verizon and Sprint, to do the same…Take one minute to sign the petition and be a part of this consumer movement.”

The signature drive is off to a relatively slow start; by lunch time on the West Coast only 2500 people had signed.

In a press release announcing the move, T-Mobile said: “More than 20 million Americans were hit with punitive overage charges in 2013. And these penalties from the three largest U.S. carriers take more than an incredible $1 billion out of consumers’ pockets every year.”

I have no idea if that number is accurate, and I asked T-Mobile to explain it and their spokesman said the company works with a market research firm that scanned the bills of 20,000 wireless subscribers and extrapolated from those results.

I don’t mean to sound sour about this. But I have to admit that while I applaud T-Mobile’s competitive moves, I find Legere’s constant grandstanding rather obnoxious and the company’s exaggerations don’t put it in the best light.

In the press release (which apparently isn’t available online) T-Mobile said that “an individual on AT&Ts entry-level plan, advertised at $45 per month, will pay $125 if he uses just the average amount of data for a U.S. smartphone user (1.5 GB per person).”

That entry level plan includes just 300MB of data, so to reach 1.5GB, about five times the allotted data, you would have to be really careless. AT&T also sends warnings to your phone when you get close to your allotment. More realistically, a customer who went over would be charged $20 for each additional 200MB of data, and so on. Yes, that’s annoying, but not nearly as expensive as Legere would have you believe.

It’s also worth noting that Sprint already eliminated overage charges for customers on its Framily plans that include unlimited data.

As for the details of the new T-Mobile offer, Legere said: “Starting in May for bills arriving in June – regardless of whether you’re on Simple Choice, Simple Starter or an older plan, we’re abolishing overages for good. Period.” That includes voice and text quotas, but because many customers on other carriers’ networks already have unlimited voice and text it’s not much of an issue.

T-Mobile has been busy lately, and it’s only fair to say that its aggressive tactics have been good for consumers. Its rivals have been forced to respond.  On Wednesday, T-Mobile introduced the Simple Starter option, a $40-per-month plan that includes unlimited talk and text along with 500MB of high-speed data. On Thursday, it added one free GB of monthly data to tablet customers for one year. (Customers who are also on a voice plan pay $10 a month after 12 months, while customers who aren’t on a plan pay $20).

Image: T-Mobile