Are Overage Charges in Jeopardy?

In today’s customer-centric world, should the consumer really be charged if they download a few too many megabytes or send more text messages than allotted by their cell phone contract?

T-Mobile doesn’t seem to think so.

Claiming that 20 million customers across the United States were stuck with such fees last year (with the three biggest cell phone providers raking in $1 billion off of them), T-Mobile recently announced that it was doing away with talk, text and data overage fees.

“Charging overage fees is a greedy, predatory practice that needs to go,” says John Legere, T-Mobile’s CEO, in a press release. “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.”

With this statement, T-Mobile is setting off an alarm for service providers. Legere went so far as to challenge AT&T, Verizon and Sprint to follow suit regarding the elimination of such fees. But due to the rise of over-the-top (OTT) content and the fact that such content is increasingly utilized on smartphones, those providers  will have one less way to make money if T-Mobile gets its way.

In the press release, T-Mobile, which famously shed annual service contracts last year, claims that traditional carriers lure unsuspecting customers in with low monthly fees associated with a fixed amount of usage allotment. Once those thresholds are passed, however, the customers are hit with “often drastically higher” rates.

“These plans are purpose-built to drive customers over that invisible line into massive overage charges,” the statement reads. “The result has been a culture of fear, worry and surprise every time the wireless bill arrives. For example, an individual on AT&T’s entry-level plan, advertised at $45 per month, will pay $125 if he uses just the average amount of data for a U.S. smartphone user.”

As a carrier, T-Mobile’s move is an audacious one. But even though the company is banking on it to bring in more business, it’s a move that customers will certainly appreciate.