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Starting in May T-Mobile (s tmus) plans to get rid of all overage charges on all of its customer bills, pushing a new marketing strategy that claims consumers should be charged only for the services they sign up for, not the extra minutes, texts or megabytes that accrue before the end of a billing cycle.
The announcement is in part a publicity stunt, as T-Mobile already eliminated automatic overage fees more than a year ago when it launched its Simple Choice plans. Displaying his characteristic bombast, T-Mobile CEO John Legere today launched a Change.org petition calling for all U.S. carriers to end overages. But there definitely is substance to this new policy change if you’re an older customer who never signed up for a Simple Choice plan.
T-Mobile is essentially turning all of its older grandfathered plans into Simple Choice plans. If you currently subscribe to a bucket of minutes or text messages, you’ll find your plan now offers unlimited voice and SMS. And if you’re still on one of T-Mobile’s old hard-capped data plans, your monthly data allotment will turn into a soft cap. That means instead of incurring data overage charges after you hit your cap, you’ll still be able to surf at no additional cost, just at throttled-back 2G speeds.
Legere is railing against overage fees as the new face of carrier evil, but there are trade-offs if you embrace T-Mobile’s no-overage model. If your primary concern is having absolute control over your monthly bill, then T-Mobile’s plans make a lot of sense. You’ll never get an additional domestic data charge unless you specifically authorize T-Mobile to make it. But it also means that you could be stuck with pokey 2G data access for a week or more if you use up your cap mid-billing cycle (in the case of its new Simple Starter plan, you’d lose mobile internet connectivity completely).
That said, Verizon and AT&T are still charging pretty punitive rates if you go over your cap, especially if you’re on a smaller data plan. For instance Verizon will charge you as much as $15 for an additional 200 MBs on its entry-level data plan, and AT&T will charge you $20 for an additional 300 MB of its baseline plan. It’s a lot cheaper to simply upgrade your plan if you’re regularly going over your cap, which is exactly what AT&T and Verizon are trying to get you to do with their overage policies.
Overages aren’t inherently bad as Legere is claiming, but the way they’re structured today is hardly consumer friendly. What we need in the U.S. mobile industry is an overage pricing structure that gives consumers leeway to occasionally go over their cap or pay for data in metered fashion. Instead we have overage fees that hold many consumers’ feet to the fire every time they stream one too many videos.