How Verizon, AT&T, Sprint, and T-Mobile Handle Data Overage

By Markets

T-Mobile's CEO has been campaigning against data plans for years. Image source: T-Mobile.

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Thanks are in order for CEO John Legere and T-Mobile (NASDAQ: TMUS) for lots of changes in the wireless industry. His most notable accomplishment, however, may be getting his industry to either abandon or move away from data overage charges.

Dropping overage charges was among the first moves T-Mobile made as part of its Un-carrier efforts to shake up the wireless industry. The magenta-clad, outspoken executive has aggressively pointed out that his rivals AT&T (NYSE: T), Verizon (NYSE: VZ), and Sprint (NYSE: S) put consumers in a no-win situation where they either have to buy plans that are bigger than they need or risk going over their data allotment and incurring extra charges.

"No matter how miserable things become for 'Big Red' and 'The Death Star,' there's one bright spot that stays constant," Legere said in an October 2015 video blog. "I'm talking about overages, of course, which they are still raking in to the tune of $1.5 billion every year."

The numbers are actually much higher when you factor in people paying for plans that include more data than they need just so they don't go over their allotment. But, since Legere's 2015 blog post, social media campaign, and petition all four major carriers have made big changes.

Here's a look at how each one handles overages with most of its customers:

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T-Mobile has gone (mostly) all-unlimited

Legere's company dropped overage charges in 2014when the company went to its Simple Choice plans. Under these plans consumers got unlimited talk and text (which has become an industry standard) while paying for an allotment of high-speed data. Once they exhaust that data, the consumer can buy more, or continue to use his or her phone, but at slowed down speeds.

The number-three carrier went even further in August when it unveiled T-Mobile One, a plan that offers unlimited high-speed data for $70 for the first line, $50 for the second, and $20 for each one after that up to eight (though a special was running as this was written, which makes the fourth line free) as long as the customer uses autopay. The only caveat to the unlimited, no overage, all-high-speed offer is that "customers who use more data than 97% of our customers (currently over 26 GB per month) will have their usage prioritized below other traffic and may notice slower speeds," according to the company.

T-Mobile has let existing customers keep their previous Simple Choice plans. New users who want to be billed, however, must select an unlimited One plan or they can opt for the company's prepaid plans, which operate like Simple Choice with no overages.

What is Sprint doing?

While the company has denied that it has patterned any of its moves after T-Mobile's, Sprint has launched an unlimited plan very similar to its rivals. The fourth-place carrier offers what it calls "Unlimited Freedom," a plan offering unlimited talk, text, and data for $60 for the first line, $40 for the second, and $30 for each line after that (up to 10).

Unlike T-Mobile, Sprint still offers a variety of other plans including its "Family Plans," which come with a shared data allotment. Once that data amount has been used, the carrier slows users down to 2G speeds or lets them add more high-speed data at $15 per GB.

Basically, while there are some differences in their offers, Sprint and T-Mobile are both in agreement on not charging overages. The two companies may enjoy squabbling about which got where first, but both are basically on the same page.

What is AT&T doing?

Aside from a dwindling number of grandfathered plans AT&T only offers unlimited plans as part of a special bundle offer for people who also subscribe to its DirecTV service. The company has eliminated overages for some customers with its "Mobile Share Advantage" plans, which are offered along with its previous "Mobile Share Value" plans. It's a bit confusing, and perhaps it's meant to be, but the company laid out the following scenario in a press release:

If you have 2 smartphone lines on a current Mobile Share Value 5GB plan for $100 per month, you can now get the new Mobile Share Advantage 6GB plan 1 additional GB of data for the same price, plus no overages. If you need more data, for $20 more a month, you can get 10GB of data.

If a consumer elects Mobile Share Advantage, which seems to be the only option for new customers, he or she gets a plan where slower speeds kick in after the allotted data has been used (much like what Sprint and T-Mobile offer). The company also has a caveat for those who use the most data, which is similar to T-Mobile's.

The catch for AT&T customers is that the new plans are opt-in. Existing customers have the right to keep their old data plans (and a few low-end options have been discontinued as part of the new offerings) but to get the overage-free service the have to actively switch plans. That's true of Sprint and T-Mobile users who want to move from their current plan to an unlimited data offer, but both already offered overage protection on their legacy plans.

Is Verizon keeping pace?

Verizon seems like the wireless carrier that most wants to cling to overage charges. The company has introduced a plan to protect consumers from those charges called "Safety Mode." At first the company charged $5 a month for consumers to elect "Safety Mode," but those charges were quickly dropped.

In order to use "Safety Mode," which alerts customers that they have reached their data limit, letting them chose to buy more data or operate at slower speeds, Verizon requires customers to opt in and existing customers must move to an updated plan as the no-overage feature is not offered with legacy plans. Customers who like their previous plan can keep it, but they risk incurring overages.

This is (sort of) the end of overages

Legere can take credit for ending overages. Some Verizon and AT&T customers will still pay them -- either because they like something about their old plan or because they don't realize they can switch -- but thanks to T-Mobile's efforts, customers on all four major carriers now have the option to use plans that do not charge overage fees. That's a stunning win for consumers even if in some cases getting a new plan requires a bit more vigilance than many people pay to their wireless plan.

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Daniel Kline has no position in any stocks mentioned. He is a T-Mobile customer even though Sprint would be a little cheaper. The Motley Fool recommends T-Mobile US and Verizon Communications. 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.