T-Mobile Ditches 'Greedy, Predatory' Overage Fees
Apr 14, 2014 12:23 PM PT
T-Mobile has decided to end overage fees for its mobile customers.
The company is abolishing overage charges for customers on every consumer plan, and its chief executive, John Legere, has laid down the gauntlet to AT&T, Verizon and Sprint to kill off such charges as well.
Twenty million Americans saw punitive overage charges on their bills in 2013. Such penalties cost AT&T, Verizon and Sprint customers more than US$1 billion last year, T-Mobile claimed.
Ending the overage charges is the right thing to do -- the fees are "flat out wrong," Legere said, urging those who would like to see an end to the practice to sign an online petition directed at the three major carriers. The petition already has collected more than 3,000 digital signatures.
"Charging overage fees is a greedy, predatory practice that needs to go. 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," Legere said.
"This is a very interesting marketing strategy," Charles King, principal at Pund-IT, told the E-Commerce Times. "T-Mobile is making a pretty significant step forward in eliminating these overage fees itself. By publicly calling on competitors to do the same thing -- if competitors feel the need to do so, T-Mobile can point to that and say 'see, they're following us. We're the market leader right now.'
"It's an interesting strategic move that's not only based on a pretty sizeable shift in your own business model, but also positioning the company to be able to claim that any company following suit is basically doing it because they're following T-Mobile," King pointed out.
The move comes as part of T-Mobile's Un-carrier campaign, in which it is attempting to position itself as an operator that is fundamentally distinct from its competitors. The firm last year killed annual service contracts and started to phase out overage fees through its Simple Choice plans.
The company recently rolled out a US$40 Simple Starter plan, offering customers unlimited texts and minutes with 500 MB of data usage. It also offered them the opportunity to buy LTE-enabled tablets for the same price as WiFi-only models, along with limited free data access through the end of the year.
T-Mobile cited an example of how overage fees could drastically add to a consumer's bill: AT&T's entry plan is advertised at $45 per month, but if a customer were to use the average amount of data consumed by U.S. smartphone users in a month -- 1.5 GB -- that monthly fee would rise to $125.
The fees often are levied against those who can least afford them, Legere suggested, and he pledged to continue fighting against the "shameful practice," positioning T-Mobile as an advocate for consumers.
Instead of allowing T-Mobile users to simply take out the entry-level plan and get as many voice minutes, texts and data as they like without having to pay extra for it, they reportedly will be presented with an option to pay for extra access. It effectively turns usage over the limits defined in one's plan into an opt-in feature.
T-Mobile did not respond to our requests for additional details.
"I applaud T-Mobile on creating another attention-getting effort," said telecom analyst Jeff Kagan.
"While from a customer point of view I am not against the idea of eliminating overage fees, I don't know whether T-Mobile has the power to make any changes happen," he added.
"The wireless industry has been continually changing over the last few decades. Over the last few years we have seen it change even more with prepaid and separately purchased phones as one example," Kagan told the E-Commerce Times.
"This is a direction the industry may be heading at some point," he acknowledged. "Customers will like it. That's why I think all the major carriers may move in this direction. While I applaud T-Mobile for coming back to life over the last year, they are still a very small player that really doesn't have an impact on what the majors do or don't do."