Senate antitrust chief demands answers on US text messaging prices

The price of text messaging in the US has doubled over the past three years, and the chairman of the US Senate Antitrust Subcommittee is now asking the heads of the the nation's four biggest wireless phone companies why.

In a letter, US Senator Herb Kohl (D-WI) has requested an explanation of the texting price hikes from the CEOs and presidents of Verizon Wireless, AT&T, Sprint, and T-Mobile, giving them a deadline of October 6, 2008 to answer his questions.

"Your four companies are the nation's leading wireless telephone companies, collectively serving more than 90% of the nation's wireless subscribers," the senator wrote.

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"Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100%. Text messages were commonly priced at 10 cents per message sent or received in 2005. As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers."

Kohl pointed out that Sprint-Nextel was the first carrier to increase the text message rate to 20 cents last fall -- and that, before the start of October, all of its three main competitors will have matched this price increase.

As previously reported in BetaNews, earlier this week, the CTIA industry wireless association released a study indicating that the use of text messaging is booming in the US -- despite the price jumps -- and that wireless services on the whole are also picking up momentum.

Although average local cell phone bills will drop to $48.54 per month this year, US wireless carriers will rake in nearly $144 billion in yearly service revenues, with about 20 percent of this total going for data services such as text messaging, games, Web browsing, and ringtones, according to the CTIA's survey of wireless carriers.

The use of SMS for texting and MMS for sending pictures and multimedia messages from phones is particularly on the upswing. For the month of June 2008 only, wireless carriers' reports showed a total of 75 billion text messages, a gain of 160% over the 28.8 billion texts reported for June 2007.

Senator Kohl, however, issued his letter to the four wireless carriers on September 9, the day before the public announcement of the CTIA's survey results.

In his letter, the Senate committee chair said he finds it particularly worrisome that the rate increases don't appear to be justified by any rise in the cost of delivering text messages, and that all four companies have raised their prices to the same level at about the same time.

"Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit. Text messaging files are a fraction of the size of e-mails or music downloads," the senator observed.

"What has changed in recent years is the level of consolidation in the wireless telephone industry. The number of major national competitors has declined from six to four. And the large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example. As Chairman of the Antitrust Subcommittee, I am concerned with whether this consolidation, and increased market power by the major carriers, has contributed to this doubling of text messaging rates over the last three years," according to Kohl.

"Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period. Please provide a comparison of prices charged for text messaging as compared to other services offered by your companies, such as prices per minute for voice calling, prices for sending e-mails, and prices charged for data services such as internet access over wireless devices, from 2005 to the present," he wrote.

"Finally, please state whether your text messaging pricing structure differs in any significant respect from the pricing of your three main competitors. Please provide this information no later than Monday, October 6, 2008."

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