T-Mobile has been a pioneer in getting rid of data overage charges. Image source: T-Mobile.
Both T-Mobile (NASDAQ: TMUS) and Sprint (NYSE: S) want to be seen as cheaper alternatives to industry leaders Verizon (NYSE: VZ) and AT&T (NYSE: T). To make that happen, they've been very aggressive in pricing and in offering better terms than their bigger rivals.
The latest move by the two upstarts has been offering unlimited data. T-Mobile made that move first, making all of its new plans unlimited (though current customers were allowed to keep legacy plans) while Sprint quickly followed. Though both companies had some conditions to exactly how they define the word "unlimited"(the heaviest users face possible throttling), for most people these plans mean the end of worrying about data.
T-Mobile CEO John Legere said in his 2015 year-end message that consumers paid $2.5 billion in overages, 95% of which he said was charged by AT&T and Verizon. That's not even the biggest problem, according to the CEO. At the November 2015 Uncarrier X event, Legere said he thinks over-buying -- upgrading your plan to as to not go over your data allotment -- which he estimated at $45 billion, is the real issue.
With the new unlimited plans from T-Mobile and Sprint, overages are no longer an issue. But while both companies have similar offers, they aren't the same. With the caveat that prices can change, here's what each company has to offer when it comes to unlimited data plans.
What is T-Mobile's unlimited plan?
The new T-Mobile One unlimited plan starts at $70 for a single phone, assuming the customer uses the company's automatic payment option. For multi-line family plans the first line cost $70, while the second costs $50, and the third comes in at $20. After that, the fourth line is free, though the company has marked that as a limited-time offer without giving an expiration date.
That brings the cost for a family of two to $120 a month, while families with three or four people will each pay $140 a month. Adding more lines on top of the original four costs $20 each, with a maximum of eight lines per plan.
T-Mobile does offer a qualification about its unlimited plans. It reserves that right to reduce speeds for the top 3% of data users -- people who use more than 28GB a month during times of network congestion.
What is Sprint's unlimited plan?
Sprint has a remarkably similar offer to T-Mobile's. The company calls its plan Unlimited Freedom, and like its rivals, to get the prices listed here, you need to use automatic bill pay. Sprint also slows down heavy users during peak times, but it's not as specific as T-Mobile, simply saying in a few places on its website when describing its unlimited plans that "data deprioritization applies during times of congestion."
With Unlimited Freedom, a single-line user or a two-person family pays a little bit less than a T-Mobile One user. Sprint charges $60 for the first line, $40 for the second, and $30 for each line after that, up to 10. That means a family of three pays $130 and a family of four pays $160.
Which carrier has the better unlimited deal?
This is a case where the winner depends on how many lines you need. If you need only one or two phones, then Sprint offers a better price. Once you get to three lines, T-Mobile has a better deal, and its pricing advantage grows as you add more lines.
Before T-Mobile's fourth-line-free offer, it charged $70 for the first line, $50 for the second, and $20 for each line after that, up to eight. If that offer comes back, then Sprint is cheaper for one- to three-line plans, the two companies are tied for four-line deals, and T-Mobile then becomes cheaper for plans with five to eight lines.
For now, as long at T-Mobile runs its fourth-line-free offer, the numbers are clear. Sprint wins with one or two lines, and T-Mobile has a clear advantage that gets bigger for every line you add over two.
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Daniel Kline has no position in any stocks mentioned. He has a T-Mobile unlimited plan after switching from Sprint. 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.