Congress to cell carriers: Why have SMS rates doubled?

Thu Sep 11, 2008 10:22AM EDT

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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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  • 1 Posted by nathan38701 on Thu Sep 3, 2009 7:34PM EDT Report Abuse

    Because of Oil! Oil is so much more and we all know you need oii to send a SMS.

  • 2 Posted by matt_archbold2002 on Thu Sep 3, 2009 7:11PM EDT Report Abuse

    I hate Text messaging to begin with so maybe I'm not the usual but if they were less expensive I'd be more inclined to use them. 20 cents per message? Please. I have no need to buy the plans which are about 5 dollars for a couple hundred messages or 15 dollars for unlimited. I average MAYBE 2-3 messages per month right now. Plus, I have an unlimited data plan for email and internet and feel that should include text. Even when texting hundreds of messages (as some of my friends do), amouts to very little actual data compared to everything else phones are capable of using. Whereas sending and recieving emial daily (which I do) takes much, MUCH more.

  • 3 Posted by royale_18 on Thu Sep 3, 2009 8:53PM EDT Report Abuse

    to #1. You're right! We need to drill more oil and text message, gas and stuffed animal rates will all decrease!

  • 5 Posted by ralph.f@sbcglobal.net on Thu Sep 3, 2009 8:27PM EDT Report Abuse

    It won't matter anyway! Our oil producing companies will soon have us by the $%# once they've bought an interest in the telcom companies...it's just a matter of time! In reality, I don't think we have a chance at reducing SMS rates, even with renewable energy!

  • 6 Posted by tomaria99 on Thu Sep 3, 2009 10:14PM EDT Report Abuse

    It's just wonderful that the carriers think so much of their heavy users that they've "lowered" their rates through bundling - but what about we casual users who don't send tons of messages. The carriers may believe their strategy will drive us toward a bundled package but I'll just stop using the service before that. It's interesting that they'd like to have (and charge for) a 2 tiered internet because they have to accommodate heavy data usage, but they are now also charging this premium for even casual users of the light data usage SMS messages. "$14.8 billion in wireless data revenue in the first half of 2008." Poor babies are having a tough go of it, huh?

  • 7 Posted by powersaversystems@sbcglobal.net on Thu Sep 3, 2009 8:18PM EDT Report Abuse

    I have no desire to text msg. I have my Blackberry for important business. I also don't have an ATM card. Just because something is available, it doesn't mean you have to have it.

  • 8 Posted by guitarmunkey05 on Thu Sep 3, 2009 4:14PM EDT Report Abuse

    There is absolutely no justification on pricing for text messaging. I love texting, but it's a HUGE scam. A text is 160 characters, which is maybe 1kb. Even if you send 1000 a month, that's only 1mb. 1mb is such a minuscule amount now days that most providers give you up a few mb per month of free internet data. I don't understand why texting, even as bundled, could cost $10-$20 a month ON TOP of your $50/month plan. Absolutely ridiculous

  • 9 Posted by guitarmunkey05 on Thu Sep 3, 2009 4:14PM EDT Report Abuse

    There is absolutely no justification on pricing for text messaging. I love texting, but it's a HUGE scam. A text is 160 characters, which is maybe 1kb. Even if you send 1000 a month, that's only 1mb. 1mb is such a minuscule amount now days that most providers give you up a few mb per month of free internet data. I don't understand why texting, even as bundled, could cost $10-$20 a month ON TOP of your $50/month plan. Absolutely ridiculous

  • 10 Posted by royalscot_1955 on Thu Sep 3, 2009 8:53PM EDT Report Abuse

    I think Senator Kohl needs to as the Cell Companies why they gouge us in the first place. The make enough with all of their fingers in everything, I say they need to just charge us a a flat fee for everything and not 100.00 a month either. I still say Cricket still is a good deal but needs to catch up with the "Big Four".....that tells you a lot, so if Senator Kohl wants to help out the already over taxed Americans, ask why they nickel and dime us on everything they have, No overages, no charge for internet use, no charges for long distance. no charges on texts, just a good rate for a flat fee they will make millions even still with just that. I know i worked for a cell company and it isn't needed to gouge us. It goes to show that they are dishonest and if you can't pay your bill because of this stinking economy they need to get out of the business, because they can't be trusted.

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