Wireless

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.

It looks like Boost Mobile's new $50 unlimited calling plan has become a victim of its own success.

Customers using the prepaid wireless service, which is owned by Sprint Nextel, say that they've experienced delays in receiving text messages. The problem was first reported by the Associated Press. A Boost representative acknowledged that since March, some customers have experienced text delays that have lasted anywhere from a few minutes to a few hours.

"We've already diagnosed and isolated the problem," said John Votava, Boost's spokesman. "And we've been working day and night since late March to fix the problem. Our technical team has been upgrading the network, and they've told us that the work will be completed by May 7."

Boost began offering its unlimited monthly service January 22. The $50 service, which doesn't require a contract, and costs only $50 for unlimited voice, SMS, and MMS messaging, and Web browsing, has proven to be very successful, the company has said. Exactly how successful, won't be known until Monday when Boost's parent company Sprint Nextel reports first quarter 2009 results. But analysts are expecting the subsidiary to report that it's gained about 500,000 new subscribers in the first quarter. As of the end of the fourth quarter of 2008, Boost had 3.6 million subscribers.

"To be honest, we were overwhelmed by the number of people signing up for the unlimited service," Votava said. "People have really been taking advantage of the unlimited texting, as they should, and it has caused us some growing pains."

Votava said delays have occurred most often during peak hours, which are from 2 p.m. EDT to about 10 p.m. EDT.

Boost uses the Nextel portion of Sprint's network for its service. Nextel uses a technology called iDEN, which differs from Sprint's PCS network, which uses CDMA. Over the years, Nextel users have complained occasionally of delayed text messages, the AP reported. But Votava said that Boost, which has used the Nextel network for its service since it launched in 2002, has not had any problems over the past seven years with delayed text messages. He said the problems only started occurring after the $50 offer went nationwide.

The AP reported that several customers are upset and frustrated with the service, but many say they won't drop the service because it's so affordable.

At $50 a month, the service is indeed a bargain. But Boost will need to fix this problem if it expects to compete with other low-cost providers, such as MetroPCS Communications and Leap Wireless International. These regional operators have long offered unlimited calling for roughly $50 per month in some areas. And now they are expanding their services into bigger cities in the Northeast. Boost also faces competition from Virgin Mobile, which followed Boost with its own $50 all-you-can-eat prepaid plan. T-Mobile USA is also offering a similar service to its existing customers in an effort to keep those customers.

E-marketing firm SmartReply has acquired mobile-advertising specialist MSnap in an effort to increase its presence on wireless devices.

SmartReply, which distributes advertisements via voice messages, e-mail, and text messages, is seeking to create the largest U.S. mobile-messaging ad network through the acquisition, according to a post on MSnap's Web site.

Terms of the deal were not disclosed, and MSnap and SmartReply were not immediately available for comment, but according to a report in The Wall Street Journal, MSnap's shareholders will receive a minority stake in SmartReply.

MSnap, founded in 2006, has received investments from Partech International and First Round Capital.

The Journal, citing figures from investment bank Partech, noted that approximately 80 mobile-marketing companies have collectively raised more than $1.2 billion in venture funding since January 2006. During the same period, the Journal noted that 20 companies in the sector have been acquired for a total of roughly $900 million.

The advertising sector has seen a large pullback in the weakened economy, and industry analysts have pointed to small companies and nontraditional media companies as being the likely targets of mergers and acquisitions.

Seeking love and affection this Valentine's Day, but don't have the guts to tell your sweetheart? Using anonymous greeting cards because you're too socially inept to communicate face to face? If so, it's probably time to try a new tactic: stalking innocent commuters while they're stuck in traffic.

The newly launched MYPL8 service--also known as PL8M8--allows love-starved U.K. drivers to communicate via text. Once you spot someone you fancy, note their car's registration number and, when it's convenient, text their registration number and a brief message to the MYPL8 text number. Provided the intended recipient has previously registered with the service, they'll get your message and the opportunity to reply as they see fit.

Fellow MYPL8 members should be fairly easy to recognize. Members are offered a car sticker to display on their car windows, while others have taken to printing their registration numbers on T-shirts to get dates while away from the car. For shy daters, MYPL8 also offers a more clandestine means of identifying yourself as a member, but they're not saying what that is--you'll have to join to find out for yourself.

What do you think--is it a good idea or a waste of 35p (about 51 cents) plus your standard network text rate? Personally, Crave prefers the old-fashioned method of staring at someone until they make eye contact, pushing a naked boob up against the window, then chasing them for as long as it takes for them to run out of gas. Yes, we're old romantics.

(Via Crave UK)

If texting is dangerous while driving a car, it's downright idiotic while stealing one.

An Ohio man used a friend's cell phone to get back his car, cell phone, and cash, all of which were stolen in a car jacking, according to a local TV report. Alan Heuss was sitting in his running BMW in Columbus on Wednesday when an armed man opened a passenger door, stuck a gun in his face, and made off with his stuff.

After filing a police report, Heuss was meeting with some friends to drown his sorrows when one suggested that they try to contact the thieves by texting Heuss' stolen cell phone.

"He said, 'I'm going to text these guys, I'm going to blow some smoke their way,'" Heuss told the station. "He said, 'I'm going to tell them I've got a bunch of hot chicks, as if I'm texting you, and that we've got some drugs, too.'"

The carjacking suspects fell for the ruse and went to an address sent to them by Heuss' friend just seven hours after the carjacking. But instead of the "hot chick with drugs" they were expecting, they were met with by cops with cuffs.

And to make things easier for the officers, the suspects showed up in the stolen car.

Worldwide mobile messaging grew nearly 10 percent in the third quarter compared to the second quarter of the year, fueled by new trends in the messaging market, according to VeriSign, which provides Internet infrastructure services and delivers messages on behalf of carriers and content providers.

The company reported Tuesday that VeriSign enabled more than 58.3 billion messages per day during the third quarter of 2008. This was up from about 52 billion messages sent during the second quarter of 2008.

On average, this means that VeriSign facilitated the delivery of about 634 million messages per day during the third quarter, compared to 572 million messages a day in the second quarter. In the third quarter of 2007, the company helped move 280 million messages per day across its systems. VeriSign said it expects to enable nearly 200 billion messages during 2008.

The company attributed a lot of this growth in mobile messaging to new uses of the technology, which include messaging for social and political change and marketing. One of the most notable examples of this is how U.S. President-elect Barack Obama used SMS text messaging to send messages to supporters during the campaign, even using the medium to distribute some of the campaign's biggest news like the selection of his vice presidential runningmate Joe Biden.

Other groups used text messaging to solicit charitable donations. And several businesses and financial institutions also used mobile. In fact, messaging volume from businesses skyrocketed about 115 percent in the third quarter of 2008 compared to the same period a year ago, the company said. Messaging on VeriSign's Mobile Banking platform also saw a 35 percent bump in volume from the second quarter of 2008 to the third quarter.

VeriSigns figures, which include text messaging as well as other forms of messaging like multimedia messaging, is in line with growth other groups have observed. In September, the U.S. wireless association CTIA noted the explosion in text messaging among U.S. consumers. The group reported that for the month of June, American cell phone subscribers sent about 75 billion SMS text messages, averaging about 2.5 billion messages per day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

The blogosphere has been up in arms over the past 24 hours as news spread that Verizon Wireless is planning to increase the per-message fee it charges companies that send text alerts.

On Thursday RCR WirelessN News published a story citing a letter that OpenMarket, a direct to consumer messaging service that sends alerts for companies like Google or Orbitz, was sending to its clients explaining that it would have to tack on an additional three cents for every text message that is terminated on Verizon Wireless network.

"Effective Nov. 1, 2008, Verizon will assess a transaction fee of $0.03 for every MT message processed on its network," the letter said. "Please note that these message fees will apply to standard rate and premium programs. Transaction fees will not apply to Free-2-End-User, Mobile Giving or Non-Profit organizational programs."

OpenMarket went on to say in its letter that it planned to pass on the charges to its clients.

"Pursuant to your Commercial Services Agreement with OpenMarket (including former Simplewire Agreements) concerning Third-Party/Operator Fees, in the event message fees are assessed by Verizon for any of your programs, these fees will be passed on to your company at cost."

The letter ignited a firestorm of criticism from bloggers all over the Web who complained that this steep fee hike would kill services like ChaCha, which allows anyone to text a question to a number from their cell phone and receive an answer relatively quickly.

Others said it would likely discourage brands like ESPN from using SMS text messaging.

"Three cents may not sound like a lot, but think about how much profit ESPN generates for sending you the latest Red Sox score," Brennon Slattery of PC World writes. "Nothing. Raising the fee may eventually discourage companies from participating in the convenient service."

My colleague Sam Diaz at ZDNet said he'd stop using Twitter if the charge was passed along to him.

"Certainly, as someone who updates my own Twitter account somewhat regularly, I'm not inclined to start paying for users to receive my notifications via SMS. If that were the case, I'd just stop using Twitter."

But Jeffrey Nelson, a Verizon Wireless spokesman, said the price hike has not been finalized. Still, he acknowledged that Verizon Wireless has been discussing ways to offset increased costs associated with heavy volumes of SMS text messaging on its network.

"We are currently assessing how to best address the changing messaging marketplace, and are communicating with messaging aggregators, our valued content partners, our technology business partners and, importantly, our friends in the nonprofit and public policy arenas," he said in an e-mail. "To that end, we recently notified text messaging aggregators--those for-profit companies that provide services to content providers to aggregate and bill for their text messaging programs--that we are exploring ways to offset significantly increased costs for delivering billions upon billions of text messages each month."

Even the mere thought that Verizon is considering upping rates on text messaging is enough to get people worked up, especially since Verizon and the other three major wireless operators in the U.S. have increased the price of sending and receiving texts for consumers by 100 percent over the past two years. Rates have gone from 10 cents a message to 20 cents per message.

These price hikes come as the volume of text messages has also increased. Last month, the wireless industry association CTIA reported that 75 billion SMS text messages were sent in June, averaging about 2.5 billion messages a day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

Even though text volumes have increased, I'm still not sure why Verizon would have to increase rates to cover the cost of delivering the service. SMS text messages cost carriers very little to transmit. In fact, SMS uses a pathway or control channel that already exists in cellular networks to establish communications between cell towers and handsets. Devices are constantly in communication with cell towers to let them know where they are, and the SMS messages are simply delivered along with this normal course of communication.

Given that the carriers haven't had to do anything extra to enable SMS, I'm not sure why increased volumes would necessitate raising rates to cover increased costs. Right now it seems like SMS is nearly 100 percent profit. So Verizon could use some of those existing profits to invest in some kind of expansion of the service.

That said, Verizon notes it hasn't increased per-message costs to aggregators since the messaging service began in 2003. Nelson made it clear that nonprofits and political organizations would not be charged extra to send text. And he emphasized that Verizon is still reviewing all its alternatives.

"Specific information in one proposal, which would impose a small per-message fee on for-profit content aggregators for commercial messages, has been mistakenly characterized as a final decision to implement," he said. "That draft was intended to stimulate internal business discussions and in no way should have been released to the public and represented as a final document."

American cell phone users are sending more text messages than they are making phone calls, according to a Nielsen Mobile survey released Monday.

For the second quarter of 2008, U.S. mobile subscribers sent and received on average 357 text messages per month, compared with making and receiving 204 phone calls a month, according to Nielsen. The new statistic is a clear indication that Americans have jumped onto the SMS text bandwagon.

On average, American teens send and receive 1,742 text messages a month.

(Credit: Marguerite Reardon/CBS Interactive)

In the first quarter of 2006, Americans sent and received 65 text messages per month. The number of messages sent and received today has increased 450 percent. But even though people are texting more, it doesn't mean that they've stopped talking on the phone. According to Nielsen, the number of phone calls that people make and receive each month has remained relatively flat over the past two years.

The wireless industry's trade association, CTIA, recently noted the explosion in texting in its own report. It recently reported that for the month of June, American cell phone subscribers sent about 75 billion SMS text messages, averaging about 2.5 billion messages per day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

Short Message Service, or SMS, text messaging first became popular in Europe and Asia, because it was much cheaper to send short text messages than make an actual phone call. In countries such as the Philippines, the cost of sending one text is less than a penny. And in Europe where cell phone users are still penalized with high roaming charges between countries, texting is still a more economical form of communication.

But in the U.S. texting is proving to be a cash cow for carriers. Over the past two years, the cost of sending and receiving individual text messages without a special text message package has gone up 100 percent with individual text messages costing 20 cents per message. Carriers are now offering unlimited cell phone texting plans that cost an additional $20 a month, which makes sending texts more affordable for heavy texters.

The surge in text messaging is being driven by teens 13 to 17 years old, who on average send and receive about 1,742 text messages a month. Teens also talk on the phone, but at a much lower rate, only making and receiving about 231 calls per month. The report even suggests that tweens or kids under the age of 12 are also heavy text users, averaging about 428 messages per month.

SAN FRANCISCO--Despite a 100 percent price increase over the past couple of years, SMS text messaging usage is exploding in the U.S.

American cell phone subscribers are sending more text messages than ever, according to a recent survey released here Wednesday by the mobile industry's trade association CTIA. About 75 billion SMS text messages were sent in June, averaging about 2.5 billion messages a day, the report said. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

Short message service, or SMS, text messaging first became popular in Europe and Asia, because it was much cheaper to send these short text messages than make an actual phone call. In countries such as the Philippines, the cost of sending one text is less than one penny. And in Europe where cell phone users are still penalized with high roaming charges between countries, texting is still a more economical form of communication.

But that's not the case in the U.S., which has seen the price of sending and receiving individual text messages skyrocket 100 percent over the past two years to 20 cents a pop. Sprint Nextel was the first to introduce the new 20 cent per text message rate last year. And other major carriers, such as AT&T, Verizon Wireless, and T-Mobile USA, soon followed.

The new wave of price hikes came just one year after all the major carriers raised individual text messaging rates from 10 cents a message to 15 cents per message.

So what's with the 100 percent price hike in two years? Well, there's nothing that has changed in terms of the cost associated with delivering this service. In fact, text messages cost carriers very little to transmit. And when compared with what carriers charge for transmitting other data services, such as music downloads or surfing the Web, the text messaging rates seem exorbitant.

Despite the rising price of texting, U.S. subscribers are using the service more than ever. And the combination of higher prices and heavier volumes of text traffic are driving enormous profits for carriers. In fact, CTIA also reported Wednesday that data services, which primarily consist of text messaging service, generated $14.8 billion in revenue for the first half of 2008, or accounted for about 20 percent of total mobile carrier revenues. This represents a 40 percent increase over the first half of 2007, when data revenues totaled $10.5 billion.

The big profits and high price hikes have raised eyebrows among some lawmakers in Washington, D.C. On Tuesday, Sen. Herb Kohl (D-Wis.), who is chairman of the Senate Judiciary Antitrust Subcommittee, sent letters to Verizon Wireless, AT&T, Sprint-Nextel, and T-Mobile USA, expressing concern over the 100 percent increase in texting rates since 2005.

"What is particularly alarming about this industrywide rate increase is that it does not appear to be justified by rising costs in delivering text messages," Kohl's letter said. "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."

The senator from Wisconsin suggested in his letter that the price hikes are related to industry consolidation, which has reduced competition and put more control in the hands of four major carriers. He also asked all four of these carriers to provide evidence of the factors that led to the price increases.

It will be interesting to see what justification the phone companies come up with for the price hike. But even though the price of the service has increased dramatically, the fact that usage is growing as quickly as it has suggests that the actual 20 cent per message price is not more than the market can bear. Of course, as a consumer it's frustrating to have to pay more for a service that I know costs next to nothing in other countries. It's also frustrating to know that carriers are making big bucks off a service that really costs them nothing to provide. I guess, at least for the moment, mobile operators have found themselves a goose that lays golden eggs.