T-Mobile's third act: A push to end industry overage fees

The "Uncarrier" is out with a campaign to get its competitors to eliminate the fees charged when customers go over their allotted voice minutes, text messages, or data.

T-Mobile CEO John Legere
T-Mobile CEO John Legere. T-Mobile

T-Mobile wants the industry to drop the practice of overage fees, it believes cost 20 million US consumers $1 billion last year.

Capping off a flurry of news, T-Mobile CEO John Legere said he is kicking off a campaign to abolish the fees that are charged when a customers go over their allotted voice minutes, data, or text messages. T-Mobile largely eliminated them with its Simple Choice plans, which offered unlimited voice and text messages, and data that was throttled.

T-Mobile is up and roaring after a relatively quiet few months, unveiling a series of new programs designed to entice consumers to make the switch and needling its competitors along the way. As the No. 4 nationwide carrier, the company has had to put on a brash face to garner attention and combat its larger competitors' more extensive marketing reach.

Legere said he was committing to ending overage fees to all of its customers on consumer plans.

"The Uncarrier is eliminating one of the most widely despised wireless industry practices for all of our T-Mobile customers on consumer plans," he said in his blog post. "And I'm also laying down a challenge to my counterparts at AT&T, Verizon and Sprint, to do the same."

It's much easier for T-Mobile to make this move because of its switch to Simple Choice plan, but Legere said that there are some customers still on older plans who would be affected by the change. Legere said the number of customers affected are likely small, but declined to give a solid figure.

"I had to take current and future revenue and write it off," Legere said in a follow-up interview with CNET on Monday.

Chief Marketing Officer Mike Sievert confirmed that those customers would be getting unlimited text messages and calling minutes, and high-speed data at their previous allotment, with a throttle down to 2G speeds after they hit their limit, essentially moving them into a Simple Choice-like plan.

This latest move is a direct call to action to its three rivals, with Legere calling overage fees "a historical marketing practice" designed to trick people. The campaign includes a petition at Change.org.

AT&T and Verizon spokesmen declined to comment.

Sprint offered an alternative.

"Customers can sign T-Mobile's petition or they and their friends and family can sign-up for the Sprint Framily Plan with unlimited data and not have to worry about overages or running out of data and having to purchase more during the month," said a Sprint spokesman. He added current customers can switch to the Framily plan.

As Legere sees it, however the rest of the carriers go, T-Mobile wins. If AT&T, Verizon, and Sprint completely abolish overage fees, then consumers are better off. If not, then T-Mobile has a key marketing edge and a reason for customers to switch, he added.

t-mobile-overage.jpg
T-Mobile

AT&T and Verizon have largely eliminated overage fee on voice calls and text messages because they're offered as part of an unlimited bundle in its family plans.

But customers will pay extra if they go over their data allotment at Verizon and AT&T. The carriers offer alerts for customers approaching their limits, so they'll know to limit or cease using their phones.

Sprint likewise already offered unlimited plans that have largely eliminated overage fees.

T-Mobile's moves are a reaction to some of the pricing moves made by the carriers, particularly the more budget-friendly plans offered by AT&T and Verizon.

T-Mobile kicked things off on Wednesday with its $40 Simple Starter plan, a budget offering for people with basic phones or who use limited data. The main selling point was a plan that capped off at 500 megabytes, with no overage fees (a customer has the option to buy more data). A customer would have to pay more to get additional data service.

On Thursday, it added a free 1 gigabyte of data each month 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).

Despite teasing three consecutive days of announcements, T-Mobile took a break on Friday for the launch of the Samsung Galaxy S5.

"It's a strong statement not to f*** around with our market," Legere said in an interview with CNET on Wednesday.

Updated at 7:34 a.m. and 8:57 a.m. PT: To include comments from T-Mobile, and a response from Sprint, AT&T and Verizon.

 

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