AT&T and Verizon deny price-fixing accusations
Executives from the nation's largest phone companies went to Capitol Hill Tuesday to defend themselves against allegations that they've been fixing prices on text messaging.
Executives from AT&T and Verizon Communications testified before the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, saying their companies have not been involved in a conspiracy to hike text messaging rates. And they argued that competition is alive and well in the wireless market.
The hearing was called in response to a letter sent in September from Sen. Herb Kohl (D-Wis.) to the four major U.S. operators--Verizon, AT&T, Sprint Nextel, and T-Mobile USA--asking them to explain why their text rates had all increased to 20 cents per message. Kohl noted in his letter that these rates marked a 100 percent increase since 2005.
Shortly after the letter was sent, about 37 separate class action lawsuits were filed against wireless operators alleging price-fixing on text-messaging services.
Both AT&T and Verizon have denied these claims. And the companies came to Capitol Hill to clear their names.
"Especially in light of this litigation firestorm, we want to make it perfectly clear that AT&T sets the prices for all of its products on a unilateral basis," said Wayne Watts, general counsel for AT&T, in his written testimony. "There is no evidence to support an accusation that anyone at AT&T engaged in any inappropriate, much less illegal, behavior as alleged in these lawsuits."
Watts also noted that none of the lawsuits name a time, place, or person involved in the collusion, and all but one of the suits filed cite Kohl's letter as the basis for its allegations.
Plaintiffs in the lawsuits point to the fact that all four major U.S. carriers now charge customers 20 cents to send and receive a text message if they don't have a monthly texting plan. In his September letter, Kohl pointed to the 20 cent per text price tag and asked if this price hike really justified the cost of the service.
In his letter, Kohl also suggested that the wireless industry is not competitive enough. He noted that the four carriers combined currently serve more than 90 percent of wireless subscribers in the U.S.
AT&T and Verizon executives dispute that they have colluded to fix prices on texts, but they also deny that texting rates have increased. Instead, they claim that prices have fallen for text messaging as a result of robust competition.
Verizon's general counsel, Randal Milch, said in his written testimony that there are more differences in text-messaging prices among wireless competitors than there are similarities. And he noted that most Verizon Wireless customers subscribe to a texting plan, and as a result they "pay less than a penny per message," a reduction of almost two-thirds since 2006.
"As the result of the price cuts, usage has grown six-fold," he said.
Milch also called claims that the wireless companies were improperly setting rates "absolutely false." And he said that "market evidence shows fierce competition, not collusion, in text messaging and wireless generally."
The CTIA, the trade association representing wireless carriers, also said that competition in the wireless market is thriving.
"The U.S. wireless industry is the most competitive and innovative in the world. Third-party organizations and influentials--from Consumer Reports Magazine to former Vice President Al Gore--have echoed this statement," Steve Largent, head of the CTIA, said in statement.
Despite these claims, Kohl said he is still concerned about the state of competition in the wireless market, according to a report from the Dow Jones Newswire. Specifically, he pointed out exclusivity deals for popular cell phones, such as the Apple iPhone or the Palm Pre, that limit some consumers' ability to have access to those devices.
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
Now, while I rarely use text messaging, I think the cost is ludicrous and the fact that the cost doubled for those of us that do not adopt a plan is damning proof that they are milking the system for every penny (no pun intended) they can.
The other area that the wireless providers are ripping users off is roaming fees. While most of us never see them because the national networks, when you do run into them, they are insane and can be as much as 400% higher than regular rates.
That said, I can somewhat understand the reasoning for the non-plan rate increases. From a billing perspecitive, there's probably a lot more overhead for billing somebody who gets charged individually for each text than there is for somebody who gets charged one flat rate for all texts. Therefore, they're hiking the individual rate to get you to pay for a flat rate plan, thus simplifying their lives, and yours as well.
I think overall, the people affected by this arrangement are going to be few and far between. If you're like me, you seldom ever text, so twenty cents a pop is definitely not going to break the bank. On the other hand, if you text enough to where the dollars really start adding up, then you should be subscribing to a texting plan anyway, which will definitely save you money.
Ivory: The (older) culture in the US tends not to be SMS-oriented while the younger does. In Europe they are much heavier users and, in APAC, SMS seems to be the de facto where people will ignore calls and e-mail yet they'll respond to a text.
In their defense, some subscribers have started/are taking texting to an extreme with recent net & news articles about people doing 200-500 per day(!)
Next you'll tell me the airlines and oil companies don't price-fix either, right?
1) To begin with, SMS uses bandwidth that voice calls cannot use and hence gone waste. Doesn't cost the telcos practically anything
2) Everywhere in the world, SMS rates are falling. In many countries in Asia and Europe, the rates to send are typically about 1c/msg and free to receive. Contrast that with US rates.
3) My SMS rate (without a monthly text plan) has gone up from 5c/msg in 2004 to 20c/msg in 2008. Ditto for other carriers. 400% increase in 4 years, this is outrageous and doubly so when costs keep coming down!
They are in collusion with one another, either directly or indirectly and deserve to be whacked. I eagerly await what eventually happens to the class action lawsuits.
1) To begin with, SMS uses bandwidth that voice calls cannot use and hence gone waste. Doesn't cost the telcos practically anything
2) Everywhere in the world, SMS rates are falling. In many countries in Asia and Europe, the rates to send are typically about 1c/msg and free to receive. Contrast that with US rates.
3) My SMS rate (without a monthly text plan) has gone up from 5c/msg in 2004 to 20c/msg in 2008. Ditto for other carriers. 400% increase in 4 years, this is outrageous and doubly so when costs keep coming down!
They are in collusion with one another, either directly or indirectly and deserve to be whacked. I eagerly await what eventually happens to the class action lawsuits.
And as for the price fixing in other professions that you talk of, I can say from personal family experience that doctors aren't among them. The payment that they get from the insurance providers and Medicare for the exact same service has gone down over the years while our health insurance premiums have continued rising. Any normal person can understand that the insurance companies are pocketing the difference and ever greedy about it.
So before you make any outrageous comments, grow a brain.
When txting becomes free, there's going to be free reign on txting and people will pay to block unwanted txt.
You can't have it both ways folks!
LOL..do you really believe that? You do realize that it's trivial to send spam *FOR FREE* to SMS customers via the email gateways, right? Next theory!
Sounds like they share their math skills with our politicians. I remember paying $.02 a msg when I first subscribed, now it's $.20? That's a pretty large increase if you ask me.
Either way, the government needs to keep their noses out of business. People can chose not to use the service. This is the biggest reason I don't use the service and I've blocked messaging on 2 of my 3 lines, because of the extra charges or inability to unblock a select few sources. I was tired of paying for spam or wrong numbers. At $.02, I could let it slide.
--yeah if we were living on mars. obviously no one from the CTIA has ever been to japan or europe for that matter. Text messages are sent on the same carrier signal that your cell phone HAS to send out just to stay on the network and triangulate your location. it costs them nearly nothing, definately not more than it costs to provide Plain old wireless service, and definately not some 20 cents a text!! all of the overhead probably comes from billing services, not from the service itself. I put this in the same boat as cable operators who triple charge people for Television, internet, and phone. there's one line coming into the house-- not three. they are simply taking advantage of their position to offer services that once had to be offered by seperate providers. Imagine if the water company charged for how you used the water, 30 bucks per unit to cook,40 to drink, and 20 to clean, oh yeah and 60 bucks per unit to carry the sewage away. Predatory companies such as these are sucking our economy dry, and I for one am waiting for the day when someone starts a combined wireless/ fiber based network that offers people bandwidth without differentiating between how you use it. mp3's taking over the music delivery system is a function of bandwith, crappy frequency response of telephony is a function of bandwith, crappy picture on digital television SD is a function of bandwith (CSPAN looks like ass in digital!). there is a difference between differentiating your product in order to compete and bleeding the consumer by making false differentiations in a monolithic product line.
Just to prove you wrong, though: I just signed up for a prepaid plan from Tracfone, called StraightTalk. Now this plan gives me 1000 minutes of talk, 1000 texts and 30mb of data for $30. You could break it down to 2c per minute talk, 1c per text and free data if you like. But they're NOT charging what the telcos mentioned above are charging, so you argument falls flat. You don't have to overcharge like that. Especially not if your network is already mostly built and it's costing you less than a penny to actually send a text.
When asking people around me, what's the point of texting, when there's already email, cell phones, etc., they usually respond: "There are some situations when you can't use the phone, like in school, or in theaters."
Seriously? Should anyone be texting during school? Or in a movie theater?
If keeping in minute-to-minute touch with someone is that important to you, don't go in movie theaters. In school, I thought cell phones were required to be turned off.
Again, easy answer: don't text.
20 cents to send 160 bytes in this day and age is unadulterated monopolistic pricing. Actual marginal costs to send an SMS are *well below* 1 cent.
The fact that the carriers can get away with this pricing (which is used to force people onto monthly texting plans) is an abomination, and it evidences a complete lack of oversight by the various state PUCs and "our" representatives in Congress.
- by gladman9 June 17, 2009 8:14 PM PDT
- i think everyone is getting a little fed up with text messages being so expensive. I use http://www.smstextnow.com to send text messages for free. I also can set it up to send to groups which is handy for work, group meetings and for sports teams. this way I don't have to worry about the cost of sending these messages and it's much easier to manage. I will continue to use sites such as this until the pricing gets back in line with what's fair.
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