T-Mobile Drops Data Plans, Offers Unlimited for All

By Markets Fool.com

T-Mobile(NASDAQ: TMUS) continues to shock its wireless competitors by breaking industry conventions.

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The company has done that today by going "all in on unlimited," according to CEO John Legere. In avideo blog,the outspoken executive broke the news that his company was getting rid of data plans andlaid out its latest "Un-carrier" move -- that's the term the wireless carrier uses to describe its efforts to not follow industry norms.

"The era of the data plan is over," Legere declared. "After Un-carrier 12, the wireless industry will never be the same again."

Legere released a video blog revealing the new plan in advance of the call with media. Image source: T-Mobile.

What is T-Mobile doing?

Called T-Mobile ONE, the new program offers unlimitedtalk, text, andhigh-speed smartphone data with video offered at standard definition (a $25 add-on package is available for people who want HD video).

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"Data plans are by far the single biggest pain points in wireless plans," Legere said during a call with media. "T-Mobile is now all-unlimited."

The CEO said his company has been purposely building its network to "power this radical change," and he challengedAT&T(NYSE: T) andVerizon(NYSE: VZ) to try to do the same. He added that he did not think they could because of their "outdated networks."

T-Mobile One has a simple pricing plan designed to encourage families to join together. The company touts it as $40 a line, but that actually breaks down to $70 a month for the first line, $50 a month for the the second, and $20 for each additional one (up to 8 lines), meaning that you would need a family of four to hit the $40-per-line number.

The deal includes unlimited 2G data for customers who want to use their phones as a hot spot.

"This is our plan," Legere said during the call. "It changes the whole concept of how you deal with T-Mobile."The company pointed out that Verizon does not even offer an unlimited LTE plan and that on its biggest plan, a family of four would pay $530 each month."Only T-Mobile's network can handle something as huge as destroying data limits," said Legere.

For existing T-Mobile customers, this may not actually be that big a change since T-Mobile already offered unlimited access to many popular music and video streaming services through its Binge On and Music Freedom programs. In addition, the company will continue to slow down data for customers who use more than 26GB of data in a billing period, which it said in its press release accounts for only the top 3% of its users by data volume.

Those high-volume users will see their speeds "prioritized behind other users once they cross that threshold during their billing month," according to the company, "but only at specific times and places that may experience high network demand or congestion."

Overall, the new ONE plan clearly builds on Binge On and Music Freedom, taking off some of the previous limitations where the unlimited data only applied to partners.

What does this mean?

Legere not only tweaked Verizon and AT&T, but he also went afterSprint(NYSE: S), taunting that the fourth-place carrier would be working on whatever T-Mobile announced, only six months later. Legere was wrong that Sprint would wait six months to respond. The company followed his announcement by releasing its own deal offering people two lines with unlimited talk, text, and data for $100 a month, noting that's $20 less than what T-Mobile is offering. Lines 3 through 10 can be added for $30 a month each. "Unlimited Freedom" launches tomorrow.

Legere had said that his company hoped to push the industry toward change. "It truly is our goal to get everyone to do things the way we do things," he said.

Existing T-Mobile customers can switch to the new program, which launches Sept. 6, or they can elect to keep their current plan.

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Daniel Kline has no position in any stocks mentioned. He has three phones with T-Mobile. The Motley Fool owns shares of and recommends Verizon Communications. The Motley Fool recommends T-Mobile US. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.