Senator Quizzes Telecoms on Texting Rates

Published December 1, 2008

The chairman of a powerful U.S. Senate committee is demanding the telecommunications industry justify rising text-messaging charges, in a letter suggesting the price hike is the result of collusion and consolidation.

Sen. Herb Kohl (D-WI), chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, sent a letter to the country’s largest wireless carriers—Verizon Wireless, AT&T, Sprint, and T-Mobile—requesting they explain why texting charges have doubled over the past three years.

Kohl noted in his September letter most telecoms charged about 10 cents per text message in 2005 but the price had doubled to 20 cents per message by the end of August 2008. Sprint was the first wireless carrier to raise its texting rates in 2007, and the other big telecoms soon followed suit.

‘Suspicious’ Price Hikes

The senator said he found the price increases across the industry suspicious.

“Text messaging files are a fraction of the size of e-mails or music downloads,” Kohl wrote. “Also of concern is that it appears that each of the companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.

“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,” Kohl wrote.

Consumers ‘Perfectly Happy’

Mike Masnick, founder of Techdirt, a blog focusing on technology news, sees no collusion. He says Kohl is missing “the big picture.”

“The rates he’s quoting are the a la carte rates [for text messaging], which are rarely used these days,” Masnick said. “Most people who text message with any regularity are using plans that include a bucket of messages or, in some cases, unlimited messaging.

“Furthermore,” Masnick continued, “the growth of text messaging, even as these a la carte prices go up, suggests people are perfectly happy with the packages being offered by the telecoms.”

This is a case, Masnick said, of the government seeing a problem where none exists.

“While it always makes sense to encourage more competition, in the mobile market there is quite a bit of competition already, including the four national providers and numerous regional carriers,” Masnick said.

“If it ever reaches the point where text messaging is too expensive, we’ll see competition kick in via alternatives to text messaging—such as using instant messaging clients, email, or services like Twitter on phones instead,” Masnick predicted.

Lawsuit Explosion

Meanwhile, the four telecom giants have responded to Kohl’s letter, arguing per-text prices have actually gone down in recent years.

“Although your letter states that carriers’ prices for text messaging appear to have increased since 2005, the opposite is true,” wrote T-Mobile USA President and CEO Robert Dotson in a response to Kohl. “Since 2005, the prices that T-Mobile charges for text messages—90 percent of which are purchased in texting package plans—have fallen by more than half.”

Timothy McKone, executive vice president for federal relations at AT&T, noted a raft of class-action lawsuits against the telecoms has followed Kohl’s accusation of collusion. He said the industry is eager to respond publicly to the charge.

“As you probably know, since your letter was made public, 20 class-action lawsuits have been filed around the country against AT&T and other national carriers, specifically alleging price-fixing for texting messaging services,” McKone wrote in his response letter to Kohl. “All but one of these cases cite your inquiry as one of the bases of alleged collusion. We are therefore eager to clear up any misunderstanding.”

James G. Lakely ([email protected]) is managing editor of Infotech & Telecom News.