Congress questions high cost of texting
The price of text messaging has doubled industry-wide in the last three years, and Congress wants to know why.
Sen Herb Kohl, chair of the Antitrust Subcommittee in the Senate Judiciary Committee, sent a letter Tuesday to the four major wireless carriers--AT&T, Verizon Wireless, Sprint, and T-Mobile--asking them to explain the dramatic price increases for text messaging services.
"Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text messaging services, but may instead be a reflection of a decrease in competition, and an increase in market power, among your four companies," Kohl said in the letter.
The cost of text messaging since 2005 has increased 100 percent from 10 cents to 20 cents for all four providers. Mobile operators have reaped huge profits from the increased prices, CNET reported in July.
Also, the number of major carriers in the United States has shrunk from six to four in recent years, while the remaining carriers continue to acquire their regionally based competitors, Kohl said in the letter. He noted that the four carriers combined currently serve more than 90 percent of wireless subscribers in the U.S.
"I am concerned with whether this market consolidation, and increased market power by the major carriers, has contributed to this doubling of text messaging rates over the last three years," Kohl said.
The senator from Wisconsin asked the companies to provide evidence of how their respective text messaging pricing structures differs from those of their competitors, along with evidence of what factors led to price increases. He also asked the wireless carriers to provide data on the utilization of text messaging from 2005 to 2008 and a price comparison of text messaging services to other services such as Internet access over wireless devices. Kohl asked for a response by October 6.
The similar price increases, coming at similar times, Kohl said, "is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace."
Stephanie Condon is a staff writer for CNET News focused on the intersection of technology and politics. She is based in Washington, D.C. E-mail Stephanie.
SMS messages can replace a 2 minute phone call. The carriers loose per minute voice revenue each time an SMS message is sent. Increasing the price offsets this.
Plus they are a fad that is being cashed in on. Every teenager I see with a mobile phone has it buzzing 10 times a minute with text messages. They would be foolish not to cash in on this.
The only technical reason I could imagine for a price increase is because of "possible" increased bandwidth consumption between the phone and the tower and "maybe" increased storage for queued up messages. But that is a major stretch though. We are talking about 160 bytes which will fit in a single packet of data. Your phone generates more traffic than that just by being switched on.
Cost of business ad Supply and Demand
The cost of text messaging can rise with everything else, supply and demand.
And the cost to support text messaging has risen. With more people sending text messages, more issues arise. I guarantee that the number of tech support calls concerning text messages has steadily risen. "Duh!"
This is asinine. Leave business to doing business, and politicians to lying, cheating, and sleeping around.
If you think this has anything to do with natural supply/demand you are smoking crack or working for one of these companies.
A single text costs next to nothing. That 20 cents is 19.5 cents pure profit, and that is a generous estimate.
All they are going to do is get themselves more tightly regulated which is a good thing. In the US, with its greed first requirements, regulation is required.
Name one instance where a industry was deregulated and havoc didn't ensue. No one instance where deregulation actually worked to provide a vibrant, competitive environment where companies thrived as well as their customers.
I am currently an undergraduate studying Computer Science, and in one of my classes we are studying wireless data networks. Today we discussed the GSM cell phone standard. As it turns out, SMS was created as a way of utilizing wasted space in the data transmission scheme. Put differently, SMS is being sent in space where, if SMS didn't exist, no data would be sent. Thus, the transmission of SMS messages is effectively costing the cell carriers nothing, and making them BILLIONS of dollars per year.
I am currently an undergraduate studying Computer Science, and in one of my classes we are studying wireless data networks. Today we discussed the GSM cell phone standard. As it turns out, SMS was created as a way of utilizing wasted space in the data transmission scheme. Put differently, SMS is being sent in space where, if SMS didn't exist, no data would be sent. Thus, the transmission of SMS messages is effectively costing the cell carriers nothing, and making them BILLIONS of dollars per year.
For comparison, let's figure out how much a voice call would cost, if SMS messaging reflected true transmission costs. A compressed voice channel is 64 KBit/sec each way. An SMS message is 160 bytes. So a voice channel is about 51 SMS messages per second. Billed on each end, for each direction, at $0.20/SMS message, that would be $40.80 --- PER SECOND, or almost $2500 per minute!!!! Yet how many minutes are there in your monthly plan? The prices charged for SMS messaging are just all profit, have nothing to do with actual cost, which is vanishingly small.
Econ 101 --- price depends not on cost, but on what the customer will pay.
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by JCPayne
September 9, 2008 9:48 PM PDT
- Why not ASK the FCC about the high taxes they charge on Telecom bills.
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