Congress to cell carriers: Why have SMS rates doubled?

Thu Sep 11, 2008 10:22AM EDT

See Comments (163)

That’s the question that Senator Herb Kohl, chairman of the Senate's antitrust panel, is asking the four big U.S. cell carriers—and SMS rates have, indeed, doubled since 2005. What gives?

In a letter to AT&T, Sprint, T-Mobile, and Verizon Wireless execs, Kohl wrote that text messages still have the same length restriction—160 characters—as they did in 2005. If that's the case, Kohl asks, why do the big four carriers now charge 20 cents per message, compared to 10 cents just a few years ago (this according to InternetNews)?

Maybe because mergers and acquisitions—witness Sprint-Nextel, Verizon-Alltel, and AT&T-BellSouth—have led to less and less competition, Kohl said.

"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," wrote Kohl, who gave the carriers a month to justify their higher SMS rates.

So, how are the big carriers responding? Verizon Wiireless CEO Lowell McAdam told Bloomberg (via the Calgary Herald) that the average price of a U.S. text message has actually "plummeted" in the past few years—that is, if you consider SMS messages bundled with a rate plan.

But then again, that's their whole strategy, isn't it? Boost prices on individual messages to push users toward SMS bundles, which means guaranteed monthly revenue for the big four.

Meanwhile, higher prices or not, U.S. cell users have gone SMS crazy in the past 12 months.

According to the latest numbers from CTIA (the organization that represents the wireless industry), U.S. texters sent 2.5 billion SMS messages in June—each day, mind you, or 78 billion messages for the month.

That's a staggering 160-percent increase over last year, the CTIA reports—as well as a lot of money for the carriers, who collectively raked in $14.8 billion in wireless data revenue in the first half of 2008.

So, what do you think: Are the big four carriers trying to gouge us with text messaging? Would you dump your bundled texting plan if individual messages were more affordable?

Related:
Sen. Kohl: Why Does Texting Cost So Much? [InternetNews]

 

Comments on Congress to cell carriers: Why have SMS rates doubled?

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  • 26 Posted by pomahlosh on Thu Sep 3, 2009 8:16PM EDT Report Abuse

    If this has already been addressed, I apologize, but considering the avg. text message takes less time to type/send, etc., than an avg. 1-2 minute quick phone call to somebody, well, something's rotten in Denmark. The consolidation/merger is to offset the unjustified bonuses management gets. Yes, yes, we are told consolidation efforts occur, but that's just saying task A, done by employee from company B and also done by employee from company C, is now done by one employee. Cost save. And as labor costs rise, you can outsource to 3rd World countries... And being charged, for something you don't want (i.e, text messages from your "friends", yeah, very consumer friendly business model...

  • 27 Posted by lawtalkingal on Thu Sep 3, 2009 4:57PM EDT Report Abuse

    I'll tell you what Mr Kohl. How about you just give us the ten's of billions of dollars we have paid the Federal government for the spectrum licenses and we will lower the charges. I don't see TV and radio paying for the spectrum that they use to make money.

  • 28 Posted by john_remy2003 on Thu Sep 3, 2009 4:39PM EDT Report Abuse

    They know people won't stop texting just like people won't stop buying gas no matter what the price is!

  • 29 Posted by atonys on Thu Sep 3, 2009 2:59PM EDT Report Abuse

    Sadly, this investigation will be another one that disappears never to be heard from again. Usually because lone fighters like the Senator here find no support from any of their kickback-taking cronies, and actually meet up with great resistance from other elected officials who are supposed to be looking out for our best interests. Greed, plain and simple, and the cellular phone lobbyists who pad the pockets will make sure this goes away soon. Nice and neat how these things happen.

  • 30 Posted by leighodinet on Thu Sep 3, 2009 6:48PM EDT Report Abuse

    Cell carriers are definitely taking advantage of the trends. The USA model for cell carriers in general in not consumer oriented. We need to open it up completely, like it is in at least some Asian countries. Why can't we buy whatever phone we want, then sign up for whatever carrier we want, and forget about long term contracts. This is one industry where the free market is not operating well at all. There are so many great phones available overseas that we never see here, because the phone manufacturers won't be forced to give them away to our big cell carriers.

  • 31 Posted by misskris607 on Thu Sep 3, 2009 7:21PM EDT Report Abuse

    Oil...pfft. I worked for a major cell phone company and while i will agree that most carriers will rob you of house and home if given the chance, oil has NOTHING to do with rising sms costs. Truth be told if you only do about 2-5 texts a month you should still look into a bundle because you have to remember even if you don't send a text you get charged for receiving them, even if you don't open the message.

  • 32 Posted by taggart_ward on Thu Sep 3, 2009 9:54PM EDT Report Abuse

    It's not money that's the root of all evil, it's the love of money that's the root of all evil! Just look at the world today and all the evil, the biggest money makers care about nothing more than their bank accounts! Human beings are starting to become disposable like yesterdays newspaper, sad but true! "WHEN THE POWER OF LOVE OVERCOMES THE LOVE OF POWER, THE WORLD WILL KNOW PEACE."

  • 33 Posted by tehb2 on Thu Sep 3, 2009 9:59PM EDT Report Abuse

    I think SMS messages may have become more popular because it has gotten so much attention over the years as an overwhelmingly popular new form of communication by teens and youths, that finally adults and parents in larger numbers are starting to try it out, and find themselves using it more and more to send messages. My parents use it 'cause for some of my brothers, they are more likely to respond to a text on their cell phone than if you actually call it.

  • 34 Posted by jonbearfla on Thu Sep 3, 2009 4:40PM EDT Report Abuse

    I hate text messages, it takes 10 times the amount of time to converse as compared to actually calling the person. I am forced to pay for text messages because of idiot people I know who prefer to text for some ludicrous reason. Its insane to pay 20 cents every time some idiot messages me "hi how are you today"? I have a call plan where I cannot possibly use all the minutes so its a complete waste, yet because of these idiots I have to pay another $10 per month to have a certain amount of text messages or else end up paying $25 a month for these stupid messages.

  • 35 Posted by ihvpave on Thu Sep 3, 2009 4:23PM EDT Report Abuse

    #21: That's not always entirely true. I am in sales and travel often for work. I am also a high-volume texter in large part out of a desire to be courteous to others and protection of my business interests, and I often am in environments where hearing someone on a call is not feasible. Texting is a valuable part of my client contact. What is problematic for me is that my internet package has almost the same costs associated with it, and that's a much more significant bandwidth drain.

  • 36 Posted by barbduchek on Thu Sep 3, 2009 3:02PM EDT Report Abuse

    Here's a thought. If everyone stopped the idiot texting--it's way out of control anyway. Prices would plummet. Still can't believe ANYONE pays over $50 a month for a cell phone anyway. HANG UP AND DRIVE!!!!!!!!!

  • 37 Posted by lovemyanimals64 on Thu Sep 3, 2009 6:57PM EDT Report Abuse

    I am with t-Mobile and I do not use text messages but if one comes into my phone I am charged for it. I do not want them as part of a package but it is there and they have no way to take it off they say. I have to pay even if someone I do not know makes a mistake and it ends up on my phone. Not Fair!!!

  • 38 Posted by no1officeasst on Thu Sep 3, 2009 7:40PM EDT Report Abuse

    I am just wondering what else they can charge more for. More money for texting. But of course why not. That is the way of the world now. That's just it. There are more people texting, so shouldn't it be cheaper now. They are getting their money. I don't know. Money hungary corporations.

  • 39 Posted by desertdungarees on Thu Sep 3, 2009 3:41PM EDT Report Abuse

    Yeah, these things were free years ago. I have VoiceSteam or OmniPoint, years ago, and texting was FREEEEEEE! Wireless companies in the 'States are just taking advantage of us, seriously. In Europe, and the world over for that matter, mobile service is so much more cheaper and reliable as a general rule. It's big oil, capitalist HMO's and the cable companies' fault, collectively.

  • 40 Posted by tamanzink on Thu Sep 3, 2009 9:55PM EDT Report Abuse

    Telecoms are big business -- and I'm sure that they've contributed enough money to enough influential politicians that Kohl's inquiry will "go away," as do so many others. Did you know that it actually costs carriers next-to-nothing to provide text messaging services? Every penny they charge for text messaging is almost 100 percent profit. Of course, in a capitalistic society -- well, they can charge whatever the market will bear, right?

  • 41 Posted by billuicker on Thu Sep 3, 2009 3:08PM EDT Report Abuse

    Yeah, of course they are ripping us off. Texts have barely any data in them at all. It costs phone companies next to nothing to send them. They charge 20 cents apiece because they can. Its just like how the movie theater charges 3$ for a small coke. The cup costs 7 cents and the coke costs less than 1 cent. That's a healthy 3000% margin. So stop buying, right? Well, I like texting because the communication can be the fourth thing I'm doing at one time, and I don't have to go through all the pleasantries and junk.

  • 42 Posted by judy_paynter on Thu Sep 3, 2009 4:43PM EDT Report Abuse

    Do any of you remember the good ole days. When cell phones weighed as much as a sack of taters and was as big as a sack of taters? Do you remember when you paid by the minute for incoming and outgoing? And there was prices dependent on where you were calling from at where that call was going. This, all before nationwide roaming! It took a map to determine if your call was going to cost you an arm or a leg. I would like to see fee cell service. How about you???? Guess we will be waiting a while for that offer.

  • 43 Posted by zxyggrhyn on Thu Sep 3, 2009 11:02PM EDT Report Abuse

    The Filipino eyes view this as 'crazy.' Why? Our case stands that SMS rates here have been reduced from around Php 1.50~1.00 (US$ 0.03~0.02, $ 1 = Php 54.00, 2005) to just around Php 0.20~0.10 (US$ 0.004~0.002, $ 1 = 47.00, 2008) (if not availing for an unlimited textimg promo which makes texting free for a full day) per sent text! Even calling rates have gone down - if not for a free calling promo - from Php 7.50~6.50 (US$ 0.14~0.12, $ 1 = Php 54.00, 2005) a minute to just Php 0.10~0.016 (US$ 0.002~0.0004, $ 1 = Php 47.00, 2008) a second! Don't blame your oil dilemma, blame the SMS bosses!

  • 44 Posted by dagilis05 on Thu Sep 3, 2009 3:34PM EDT Report Abuse

    The current pricing of text messages in the U.S. is simply absurd, and I am glad somebody tries to raise this issue. Somebody said that text messaging is a luxury. Where do you people get such ideas? In all developed countries with well functioning market economies making a call is a luxury compared to sending a text, texting costs around 5c equalent or so. Some phone companies come together, agree to double the prices, and nobody cares. I wonder whats next... Some Internet Service Providers could also come up with an idea to raise a montly fee to $100 for no reason, and frankly I don't see many obstacles to this happening in our so called "free market" economy if congress keeps their eyes closed.

  • 45 Posted by maligna73 on Thu Sep 3, 2009 7:04PM EDT Report Abuse

    The increase in SMS messages price is ridiculous. Even with the bundle the price has over doubled in the past few years. The carriers a definitely gouging the customer, unfortunately we as customers still pay the high rates. If the prices went down I would be more inclined to spend the extra money on the extremely over priced internet plan for the smart phone.

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