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Wi-Fi and New Data Plans Challenge Wireless Carriers

04/20/2015 | 04:09pm US/Eastern
By Ryan Knutson 

U.S. wireless carriers in the middle of a price war have been able to take refuge in one fact: Subscribers are often paying for more data than they use. Now that bulwark is under attack as well.

Republic Wireless, an upstart carrier based in North Carolina, said Monday it is working on plans that only charge customers for the exact amount of data they actually use. On another front, a company called Karma sells mobile Wi-Fi hot spots that allow customers to buy data that never expires.

Those moves are at the fringe of the market, but the leading nationwide carriers are also making changes. Recently, T-Mobile US Inc. and AT&T Inc. introduced rollover data plans that let customers carry unused data into the next month.

The new offers are starting to chip away at "breakage" -- services that customers pay for but don't use. The term, which dates back to the days when counting voice minutes was the norm, is back in vogue now that unlimited data plans have given way to alternatives that offer a fixed amount of gigabytes.

While carriers have lowered the price per megabyte, they have successfully persuaded customers to spend more on larger data buckets that appear more economical. A 2013 study by Validas, a company that analyzes wireless bills to help people choose which plans to buy, says consumers typically waste $28 a month on data that goes unused.

"People aren't using the same amount every month but they're paying the same," said David Morken, co-founder of Republic Wireless.

Republic Wireless has just a few hundred thousand customers, but is at the forefront of efforts by startup wireless providers to push traffic away from cellular networks and toward cheaper Wi-Fi. American wireless subscribers already consume most of their data over Wi-Fi connections, but their bills don't reflect that.

Republic launched its service in 2011. It sells phones that route traffic over available Wi-Fi connections first, then uses Sprint Corp.'s network when Wi-Fi isn't available. Current plans start at $5 a month for service over Wi-Fi only and increase to $40 for unlimited talk, text and data, even when using the Sprint fallback connection.

A handful of other companies have launched Wi-Fi-first services in recent years, including Cablevision Systems Corp., which earlier this year started selling phones under a plan called Freewheel that works only when connected to Wi-Fi.

Mr. Morken said the company has been developing plans over the past several months that will be available to consumers this summer. Instead of offering unlimited options, the company will sell one plan, likely around $10 a month, for unlimited talk and text, even in areas when Wi-Fi is unavailable. Customers will be able to buy packs of cell data and will be reimbursed at the end of each month for the amount of data they don't use.

Write to Ryan Knutson at ryan.knutson@wsj.com

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