Commentary

Succumbing To Phone Wars Reality, AT&T Axes Overage Fees

AT&T announced new rate plans yesterday that eliminate surcharges for exceeding data limits in favor of slowing speeds down to a level where users really won’t want to try viewing those new Pinterest Promoted Video ads. On the plus side, they won’t be fretting about an extra $20 charge for exceeding 300 MB of data on its cheapest plan.

And, as Chris Mills puts it on BGR, “Getting overage charges is, objectively speaking, right up there with toe-stubbing as one of the worst things that can happen in the western world.”

Called Mobile Share Advantage, the new plans will be available Aug. 21. They start at $30 for 1GB of data and go up to 30GB for $135. There’s also a new 25GB plan for $190 per month for 4 lines that would have cost $235 previously. Customers who want to stay with the plans they already have can do so.

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After customers use all of their high-speed data amounts, data usage will be reduced to a maximum of 128 kbps for the rest of their bill cycle, the company says. 

“Last month, Verizon introduced a new ‘Safety Mode’ for its own mobile plans that similarly throttles customers who go over their monthly bucket to avoid overages,” points out Chris Welch for The Verge. “However, Verizon charges customers on lower-tier plans for Safety Mode, whereas AT&T is eager to point out that it’s not tacking on anything extra. T-Mobile and its CEO, John Legere, will surely be doing a victory lap about leading this charge; the Uncarrier got rid of overages in 2014.”

“This just shows how competitive the market is with everyone reacting to another,” Recon Analytics analyst Roger Entner tellsCNET’s Roger Cheng.

“The carriers have all conceded that overage charges probably aren’t the answer,” MoffettNathanson senior analyst Craig Moffett tells the Wall Street Journal’s Drew FitzGerald. “Overage charges trigger calls in to customer service, more unhappy customers and ultimately more churn.”

T-Mobile’s and Sprint’s “aggressive plays … have worked,” reports Eli Blumenthal for USA Today. “In the most recent quarter, T-Mobile added 1.12 million phone customers, while AT&T added 185,000.”

Sprint, meanwhile, had its biggest one-day advance on the stock market in three years after CEO Marcelo Claure’s Q1 earnings presentation and conference call late last month. Its stock is down slightly — to a $6.01 close yesterday — after peaking at $6.25 on July 26.

The prices on AT&T’s cheapest plans are rising; those on the most expensive are dropping. 

“The cheapest available plan is now $10 more at $30 a month, but includes 1 GB of data (the previous low-end plan included only 300 MB). A 3 GB plan costs $40 a month, 6 GB costs $60, 10 GB costs $80 and 16 GB costs $90. Heavy data users can rejoice; the 25 GB and 30 GB plans are actually cheaper,” CNET’s Cheng reports.

And it won’t be a total blackout when users hit their data limits.

“Similar to the other carriers, AT&T will slow users' speeds to anemic, 2G-like speeds of 128kbps — on par with other carriers —until the end of the customer’s billing cycle or until the user decides to upgrade to a larger plan. With those speeds, users can check email or do light browsing on the Web, but video watching and other data-hungry tasks will be painfully slow,” USA Today’s Blumenthal tells us.

“AT&T is clearly trying to push people to buy bigger data plans, where the cost-per-gigabyte comes down the higher you go,” suggests Brian Fung, the Washington Post’s technology reporter. 

“AT&T's latest effort, coupled with Verizon's and T-Mobile's recent initiatives, serves as a reminder of how much carriers are vying for customer loyalty in an increasingly competitive space,” writes Sara Ashley O'Brien for CNN Money below a video featuring T-Mobile’s John Legere discussing the Uncarrier 11 initiative announced in June and, in his animated way, declaring that “loyalty programs are broken.” 

But with consumers no longer tethered to carriers by contracts for cut-rate phones, “loyalty” may be the wrong word for what amounted to indentured service.

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