Congress Asks Wireless Carriers To Justify Text Message Rate Increases

This week, Senator Herb Kohl (D-WI) asked the top wireless carriers—AT&T, Verizon Wireless, Sprint, and T-Mobile—to explain why they doubled the cost of sending text messages over the past 3 years. They have until October 6th to respond.

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.”

Kohl noted in the letter that the top four carriers combined have over 90 percent of the U.S. market, and wants the carriers to provide information on

  • how their pricing structures differ from their competitors;
  • the factors that led to their decision to raise prices;
  • a comparison of text message pricing to other wireless service pricing;
  • the utilization of text messaging over the past three years.


“Congress questions high cost of texting” [Cnet: The Iconoclast] (Thanks to Brett!)
(Photo: Getty)

Comments

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  1. Diet-Orange-Soda says:

    Good. It costs me $1 now for a quick message & response with my wife now. There’s not reason for that.

    • ELC says:

      @Diet-Orange-Soda: “Good. It costs me $1 now for a quick message & response with my wife now. There’s not reason for that.”

      Why not use that regular phone plan, that’s probably “free” between your family members, and not incure ANY extra cost? The IM and texting mania is lost on me. It’s amazing to me what people consider “necessities” these days, and then complain when the companies screw them over for that “necessity” (cable, satellite, cell phones).

      IF people didn’t text, talk, watch so much I bet there’d be LOTS of price reductions and competition.

  2. aka_bigred says:

    AMEN!!

    It costs 4.4 times more per byte to send a text message than it does to send/receive data from the Hubble telescope. Justify that!

    [thelede.blogs.nytimes.com]

    • mike says:

      @Colage: I’m not sure if texting is a luxury. I guess its how you define luxury.

      For most people, texting is for situations where you cannot talk with someone, but requires a quick response.

  3. Oh how I long for blissful days, way back in the the early 00s, when a text-message was a nickel.

  4. AMetamorphosis says:

    Can someone explain to me why I can have 750 minutes a month to talk for 39.99 and yet, text, which I would imagine uses less bandwidth that a phone call costs 15 cents per text ?

    This is why I turned text off on our phones. I got tired of paying for text from friends saying ” Whats up? ” and having to pay for it.

    • howie_in_az says:

      @AMetamorphosis: Because American customers like to text and companies know American customers will pay that amount per month, usually without questioning it.

    • ludwigk says:

      @AMetamorphosis: An SMS message is 140 bytes of data, tiny by most measures.

      • CountryJustice says:

        @ludwigk

        As a matter of comparison, I used my phone’s (Razr) mobile browser to access m.GMail.com and read one email. Since I’m not on a data plan, it costs me $.01 per KB transferred. I did nothing else on the browser and it logged ~88KB transferred, costing $.88.

        I have no point to this…just wanted to see how it stacks up, penny-for-penny, as it were.

  5. taking_this_easy says:

    true…. 20cents/txt message if u dont have a plan or go over is outrageous…

    but then how would AT&T pay their CEO millions a year?

  6. azntg says:

    I really think this is an “only in the Americas” thing. Text messaging in most other countries are relatively dirt cheap (and in many, receiving messages are always free).

    Only in the United States, making voice calls are actually cheaper than texting in some cases. (In my case, it is relatively cheaper to call than to text!)

    This is probably a drafted answer by the cell phone companies filed in a “Do Not Send to Congressmen” box:

    (Note: Please take it in part seriousness and part jest.)

    Dear Senator Kohl and members of the Congress,

    We are raising text messaging prices because we can. We’re a tight knit group here in our industry and all thanks to you, we’re getting even cozier. We also know that all you finger-sucking bunch can’t do a thing about it, especially if you care about funding and re-election. Some of you are too lazy to bothered about doing anything anyway.

    So, if y’all care about next year, we suggest that you drop this and do whatever we say.

    • Onouris says:

      @azntg: Yep, it is. The idea that people are charged to RECEIVE a text is just completely unbelievable. Shit, being charged to receive calls is just as bad.

      I paid a £20 one off payment about 8 years ago, which gave me 5 free texts per day, for LIFE. So far, if I used all those texts, they’ve cost me 1/1000th of a penny each. And I’ll keep getting them for as long as Orange exists. I don’t think there’s a plan in the UK that doesn’t include texts, and many are unlimited.

    • rellog says:

      @azntg: Kohl is the former owner of Kohl’s Department stores and the late Kohl’s Food Stores. He also owns the Milwaukee Bucks. He isn’t worried about getting campaign contributions, trust me…

      I use US Cellular (a midwest company) that doesn’t charge for incoming text or pictures… as it should be. I’d get pretty danged mad if my cellular company tried charging me for something I did request…

  7. esd2020 says:

    Um, because people are willing to pay it? Duh.

    Text messaging is a cash cow. It is what makes cheaper voice plans & free nights and weekends possible.

    If people start to text significantly less, than the price will go down.

    • trellis23 says:

      @esd2020:

      “Text messaging is a cash cow. It is what makes cheaper voice plans & free nights and weekends possible.”

      Free nights and weekends, and as cheap, and sometimes cheaper voice plans, existed before most people knew they could text message.

  8. Mfalconieri says:

    I want one of the “Bells” to have text messaging only. I hate talking on the phone and voice mail. I am very interested in “Text only”

    • quail says:

      @Mfalconieri: Hmm, text only. Wasn’t that called email at one time?

      Just had a discussion about texting with the neighbors tonight. Our conclusion is that it’s glorified note passing. What could be so important that it couldn’t wait until you got to a time and place where you could call, or email someone? Plus those T9 keyboards or those itsy bitsy Qwerty keyboards are just a joke.

      I say keep the prices high. You’re subsidizing those of us who don’t use it.

  9. Bladefist says:

    eh, the American people didn’t decrease usage when prices went up. Don’t know why the government thinks they can control text message prices.

    I would respond to senator with “Because.”

    • dequeued says:

      @Bladefist:

      You’re kidding me, right?
      Oh, gee, I don’t know why they should justify the cost.
      Perhaps because they get massive subsidies and infrastructure right-of-ways, and all sorts of other privileges thanks to the government.

      This debate is very similar to net neutrality…

      In exchange for that, there is a presumption that they should act in the public good, or at least not outright swindle the public by charging unjustifiable rates for text messages.

      And if you don’t like it, you can start your own cell phone company OH NO WAIT YOU CAN’T!

    • lannister80 says:

      @Bladefist: and the Senator would reply with “Antitrust suit”.

      Viva the free market, eh Blade? Deregulators make me sick. Thanks so much for Enron.

  10. ironchef says:

    they do it because they can get away with it.

  11. I’d say its to offset the rising costs of oil. Oh wait a min…

    • ViperBorg says:

      @LiquidGravity: No, no, wait… your on to something there.

      It’s to offset the rising price of oil that you choose to do nothing about. Sure you have hearings and meetings… but to what end? Nothing, as usual. Therefore, we choose to raise prices on texting, because what’s going to happen to us? Sure, we’ll have hearings and meetings, but nothing will happen, as usual.

      Golf game still at 2PM, tomorrow?

      Regards,
      -Insert Wireless Service Provider CEO here-

    • Oranges w/ Cheese says:

      @LiquidGravity: It may be in a very very small part. They do, after all, still have to pay technicians to go out and install new towers and maintenance, and the shipping costs of the parts for these towers.. Plus, the rising cost of the electronic equipment they use to install, troubleshoot, and ensure quality of service on these towers… ( I work for a company that sells Test Equipment, and let me tell you it ain’t cheap )
      But this does not justify them doubling the rate on pure DATA. Just possibly one of the reasons they raised the prices in the first place, offset with pure greed, and you have your answer.

  12. snoop-blog says:

    I have that unlimited everything plan. It’s nice to not have to worry.

  13. AMetamorphosis says:

    On the bright side:

    I will say that the ever increasing text messaging fees increases allowed me to get out of a contract with Verizon for ” Material Advese Affect ” ( Thank you Consumerist ! )

  14. Johnyalamo says:

    Because technology is much better and the microchip is much smaller it takes more time and energy for the phone to “find” the text inside the tiny little chip. And since the little hamsters inside the phone have to run harder inside the phone, it costs more to feed them to keep up with their metabolism. That is how they can justify higher charges.

    Oh, and if your interested, I got a killer mortgage rate on financing a big red bridge in San Francisco, if your looking for a good long term investment.

  15. Quick, deregulate the industry! Prices will magically…

    Oh, what, we already deregulated the fuck out of this industry and prices keep going up?

    Oh.

    • everfade says:

      @twophrasebark: spot on.

      As if this is going to matter really. Someone will get paid off and this will be swept under the rug until some other state official wants to come milk some more lobbyist money outta the telecoms.
      I’m feeling way negative today.

  16. Bladefist says:

    I pay .01 per text. I have a $5 plan for 500 text messages. Really the rate only hurts the few people who don’t have a text plan and send 2 per month.

  17. Colage says:

    It’s about time Congress did something! God forbid people stop texting when prices get too high.

  18. dEr Congress, We cn do WE d fuK we wnt. lov, d ppl hu funded yr Fkng campaigns, aka d ph compnEz

  19. fjordtjie says:

    hell yeah herb kohl! finally doing something after 100 years in office. and i like it!

    they didn’t tell us they were raising it the last time. our contract says 10cents, they told us they were raising it to 15, and then it magically became 20 one day. just biding time until the contract ends, then no more at&t!

  20. CountryJustice says:

    I don’t know a single person that regularly uses text messaging that doesn’t have a bulk or unlimited text plan bundled with their voice plan.

    I’m not saying that $.20 per isn’t exhorbitant. I’m just saying that it’s also not like there’s no way around it.

    • Rectilinear Propagation says:

      I’m not saying that $.20 per isn’t exhorbitant. I’m just saying that it’s also not like there’s no way around it.
      @CountryJustice: I agree but I don’t think the cost itself is the point. It sounds like the senator is working up to an accusation of price fixing.

      @Bladefist: They’ll probably respond with laughter or silence.

  21. NotATool says:

    Um, Capitalism 101? Companies will charge what the market will bear (even if the market b!tches and moans about it)?

    • mugsywwiii says:

      I’m generally opposed to the government getting involved in markets where competition exists, but price fixing is not acceptable.

    • Tzepish says:

      @NotATool: Um, Capitalism 101? Price-Fixing fucks up the market. Senator Kohl knows this, which is why he’s asking these companies why they all raised their prices at the same time – what’s the reason for the price increase?

    • @NotATool: Um, Capitalism 101? Companies will charge what the market will bear (even if the market b!tches and moans about it)?

      Unfortunately, the cellular companies do not compete in a Capitalism 101 free market. They are regulated in exchange for the privilege of using a chunk of wireless spectrum. Nobody can convince me that we’d be better off with a spectrum that runs on the survival-of-the-fittest principal.

      Besides, OPEC charges what the market will bear too. Seems to be working great of course.

  22. jpmoney says:

    Another me-too on the ‘because the market will allow it’.

    I miss the days of it only costing .02 (dollars, not cents Mr./Mrs. Verizon rep) to receive a message so you didn’t have to pay for it when someone with an unlimited plan decided to start texting you.

    I just don’t use them. Now, when text spam starts getting to be a problem there *should* be some way to get cheap/free incoming texts but still overpay for sending one.

  23. jpmoney says:

    Ugh, posted too soon. I completely forgot to mention that I’m glad we don’t have anything else important for our government to work on.

  24. jaydez says:

    I’m just annoyed that AT&T has 3 plans:

    $5 for 200 message
    $15 for 1500
    20 for unlimited.

    I always go over 200 by quite a bit but never over 500. All I want is 500 messages for about $10 a month becasue I can not justify spending $15 and never coming close.

  25. We live in a country where prices aren’t contested by the majority of people. Gas prices can skyrocket like they have, with the exception of a few dips, and people will still drive large gas guzzlers when all they use it for is maybe a kid’s backpack. Likewise, though not to blame people who text message because there are benefits, people will continue to text with or without a plan. The companies exploit this and can charge whatever they want for how long they want until some politician like Kohl says WTF? Of course, said politician probably won’t get reelected without AT&T or whomever funding his campaign. I would see support for his questioning if we didn’t live in a bureaucracy, but not everyone is a savvy consumer like a lot of Consumerist readers so I don’t see text-rates, gas, food, etc. going down anytime soon. Or Ever.

  26. Lithium542 says:

    Try using your phone for calling people. Novel idea.

    • FearlessUser says:

      @Lithium542: Whoa, whoa, whoa. Slow down a minute. Can you go over that again? What is this “calling from a phone” feature you’re talking about? Can my phone do this? What other phones can do this?

      Seriously people, you only have yourselves to blame. Stop texting so gd much and the prices will stop going up, and maybe even down. My plan includes texts, but I’ll call anyone back who texts me, or send them an email. Companies know how to make money, and will get as much out of you as they can. I think the “because” answer other people brought up will be basically what they tell Herbie.

  27. technoluster says:

    Who cares how much it costs?? If it’s too much for you, DON”T USE IT!! It’s not a necessity and I hate to see the government get more involved in a private industry.

    • dequeued says:

      @cheeser83:

      No.
      Communications is an essential utility, like Water or Electricity.
      Indeed, the government agrees because they are so in bed with the communications companies, for better or worse…

      But so long as a company gets a penny of my tax dollars, their internal workings are a PUBLIC MATTER.

      The phone companies want to have their cake and eat it too; they want the privileges of a utility company, yet they want to fully exploit their position.

      I can understand WHY they do it, they are a for profit business.
      But it’s still wrong.

      • Coelacanth says:

        @dequeued: I agree. Especially since many people don’t even own a landline, but have switched to cell phones as their primary form of voice service, mobile service becomes even more of a “utility” and less of a luxury each passing day, and should be regulated as such.

  28. Colage says:

    Why does the cost to the companies matter? Does anyone care that it costs 30 cents to make a $4 latte? (Oh, wait, I forgot what website I was on.)

    The thing is, that like a latte, text messaging, like cellphones in general are a luxury. You don’t need to text people. For that matter, you don’t need to be able to call people when you’re at Target. If you want an emergency phone, that’s fine – you can get a prepaid one dirt cheap.

    This whole argument is just ridiculous. I hope tomorrow we can get Congress to investigate something equally worthwhile, like how magazines have ads and yet still charge subscription fees.

    • technoluster says:

      @Colage:
      Oh thank God there is someone else here who I can agree with.

    • xredgambit says:

      @Colage:

      The thing is though that a Latte didn’t cost $1.33 3 years ago. I’m sure the price has gone up, but not by 3x in 3 years.

      • Colage says:

        @xredgambit: Yes, but this isn’t gas. Or food staples. You don’t need to text people to get by in the day, just like you don’t need a latte.

        Texting is a luxury. I can’t think of a single situation where someone would need to text someone else.

        • fjordtjie says:

          @Colage: hostage in the back seat, with the kidnapper driving. tell someone where you are, everything, with only a little click (easily inaudible in contrast to the car sounds) and get saved.

          there is 1 situation you would need it. you’re welcome : )

          • Colage says:

            @fjordtjie: If you’re being kidnapped, would you really think twice about being charged 20 cents?

            If so, you’re probably not worth kidnapping. =p

            • fjordtjie says:

              @Colage: no, i wouldn’t care at that moment if it was 20cents or $5. it’s just a single scenario where a text message would prove a necessity and not a luxury.

              and for the record, i never text, because i use my phone for calling…and occasionally taking worthless grainy pictures.

  29. Starfury says:

    First: I’m over 40. I remember when a cell phone was a luxury and not a common thing. I have one and only use it to make/get calls. We have text/internet shut off on our phones since we don’t need it. I even leave it at home sometimes or turn it off.

    What I’ve noticed is that people believe they always need to be connected to each other either through email, text, or calls. This belief seems to be reinforced by marketing and the phone companies themselves. Until people are willing to slow down this will just get worse.

  30. Xerloq says:

    The senator observed that the price increases happened almost simultaneously, which seems to be the outstanding issue. Free markets rely on competition to keep prices low, but if the major carriers decide together to raise prices there is no true competition even though there are multiple vendors.

    Other than investigating whether or not there was price-fixing behavior happening, the government should stay out of this.

    Better yet, just block text messages on your phone like I do. You want to talk to me, call me.

    • cf27 says:

      @Xerloq: I don’t think that’s particularly surprising. Gasoline prices at nearby gas stations frequently change at the same time also. The reason is that competitors are watching each other.

      At the same time that the carriers were increasing their instant messaging prices, they were also reducing the prices of their other programs. It appears that they have concluded that consumers care more about the monthly price than they do about the text messaging fees. It could also be that the people who most use text messaging (often younger people) are not particularly sensitive to text messaging pricing.

      Unfortunately, this sort of meddling has become far too common for our government.

      @Diet-Orange-Soda: You’re right. No reason for it. I suggest you don’t do it.

  31. johnva says:

    SMS is a totally stupid technology in the first place, and is priced at a beyond exorbitant rate given how primitive it is. Imagine if your ISP charged you $0.20 for every email you sent OR RECEIVED, or $20 for an “unlimited” plan. SMS is even dumber than that, considering that it isn’t nearly as flexible. SMS should just die a quick death very soon, and get replaced by real email.

    I cannot at all understand its popularity with the public.

  32. dgsaunders says:

    well, they are just going to collude on why they raised prices too.

  33. dragonfire81 says:

    I suspect it’s because the competition is getting so stiff on minutes, the providers have to make money elsewhere.

    But you it’s really silly these days to not just get an all in unlimited plan or at least an unlimited messaging package. I pay $10 month for unlimited messaging, seems like a fair deal to me considering how much I text.

  34. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    Call me crazy (not fully crazy, just going crazy so my price is half off), but does the US Congress really have nothing better to do?

    • cmdrsass says:

      @Applekid: Believe it or not, there’s actually more than one boob working in Washington, so it is possible for them to screw up more than one thing at a time.

  35. squatchie44 says:

    My texting costs me $0. I dont care how much it costs others.

  36. karmaghost says:

    Ahh, remember when receiving texts used to be free? Those were the days…

  37. Good43 says:

    Its called price fixing Mr. Kohl. You see in a market with heavy switching costs (new phones and long term contracts with huge buyouts) and large saturation (most people already have a phone) its easy for price fixed market to become stable. The ability for a single competitor to simply lower prices and attract business away is limited. Especially on a single piece of an overall larger contract. Fixed pricing is usually unstable – think fixed priced groceries – as a single member of the fixing group can drop out and at least temporarily gain market share.

    I would be shocked if the fixing in this case were overt. I expect that the claims will come in as price leadership, additional capacity due to increasing demand – never because we knew we could get away with it.

    Additionally some of the heaviest text users are kids/young adults who don’t get to choose a plan, they get stuck on the plan that their parents picked. They can’t afford to break their contracts/buy a new phone to chase lower rates on their preferred features even if there were a company willing to compete on price. Of course companies realize that mobile phones are sticky and choose to maximize revenue from current customers instead of maximizing market share. Sprint is trying really hard to compete on price, but when you’re that far behind the 8-ball there is only so far you can drop prices and still service you obligations.

    Mr. Kohl should sponsor legislation to force companies to be phone agnostic and to remove contracts. Commoditizing the mobile phones will force the companies to compete on *gasp* service. Instead of competing via whose lawyers are best.

  38. BrianDaBrain says:

    I’m glad somebody’s going to bat on this issue. I went up to an unlimited text messaging plan, because texting has very practical uses around work mostly. But before that I was almost doubling my phone bill with texting rates. Absurd. And I thought I was the only one who found it strange that companies raised the fees on the text messages almost simultaneously.

  39. ct_price says:

    I do believe the point of this Congressman’s inquiry is to find out if there is reason to believe price-fixing is going on. If that were the case then the scrutiny of this initial inquiry would have the effect of causing the telecom players to perhaps start being competitive to avoid a deeper look.

  40. loganmo says:

    Here’s a thought…although text messaging has become fairly commonplace, it is a service that is not at all necessary to get buy in life. it is not like the cost of milk has tripled-we are talking about something that frankly is superflous in life. If people don’t like it, then don’t use it-why is that so hard?

  41. holyhell says:

    Usually i would hate the government getting involved in private-sector industries, but look at the facts:

    you have oligopoly controlling a sector where 1 company was already broken up due to being a monopoly

    the cost of entry is extremely high unless you can differentiate (boost mobile)

    successful new phone companies are bought up by the existing phone companies, so most consumers will never see the benefits of the regional or niche companies

    I applaud them for at least checking to make sure things are on the up and up.

  42. Oranges w/ Cheese says:

    I was on a walk the other day, and overheard a couple arguing about their texting bill $38 the husband said.

    I was under the assumption that txting was still 10 cents a text!

  43. Whiskey Tango Foxtrot says:

    What’s bothering me most is the “double dipping” on text messages – you’re getting billed to both send *and* receive!!!!

  44. MrEvil says:

    What I don’t get is why people spend five minutes typing crap with T9 text entry that they coulda called and said in 5 seconds. I have a Smartphone with qwerty keyboard and I hate it when friends text me since I spend most of my time behind the wheel. I’d rather just they tell me what they need over the phone so I can call them back later.

    • ViperBorg says:

      @MrEvil: A Windows Smartphone? Google Text2Voice Windows Mobile (insert version here). And download the program (I forget the name of it, but I have it on my smartphone that I was dumb enough to leave at home today, and it reads my text messages for me.)

  45. hipersons says:

    I recently realized that not only do I hardly ever text, I hardly ever talk to anyone on the phone either. If I do need to call someone, I do it at work for free or use skype when I get home. I do, however, have the need to text select friends from time to time, so purchasing a txt plan does not fit for me. Instead I’m forced to pay .15 to send and receive a couple pieces of data that probably literally cost AT&T .0001 to procure.

    On the bight side, I am still saving money by not paying Verizon $45 a month for a service I hardly used and instead pay ATT $10ish a month to top up. So I guess I really shouldn’t complain too much.

  46. toddkravos says:

    I find it curious that the iPhone text messaging price structure is different than a PDA or “standard” cell phone. It’s still the same 140-160 bytes on the same data network.

    Oh andto those of you saying to “block” texts from your phone via your carrier. That’s all well and good advice, provided you do not own an iphone.

    And Text only plans are only available to the legally deaf. Wasn’t this covered here already?

  47. parad0x360 says:

    If you want to break it down into bandwidth and cost its something like…

    1 txt message = $.0001 worth of bandwidth.

    Unlike calls a txt message does not need to be sent instantly. It can arrive a couple min later with nobody the wiser and often they do. They also have so little real data in them they take up just about zero bandwidth, even at max size limit.

    Now I could understand 15 cents for a picture or video message, but pure text should be 100% free for at least the first 500 messages per month. Anything over that I would consider in excess and the person should be charged a flat $5 fee for that month.

    • Alereon says:

      @parad0x360: Unlike calls a txt message does not need to be sent instantly. It can arrive a couple min later with nobody the wiser and often they do.

      This is actually not the case. I work for an inter-carrier SMS messaging company, and industry SLAs are aimed to guarantee delivery in less than one second. If it takes more than 10 seconds to get an SMS, something is wrong. If it takes more than a minute, you can be guaranteed that there are some very annoyed engineers working on the issue.

      If you think $.20 per SMS is expensive, give it a couple months. SMS rates are moving up to $.25 per message, and major carriers are already preparing their communications to customers. I look forward to a day where all data sent over my phone is billed the same, whether it’s a voice call, SMS, MMS, or Internet usage. Give me a fair per-megabyte rate and let me go from there. Unfortunately, this would require actual regulation from the FCC, and will never happen. Our only hope is Google being incredibly disruptive with their WiMax 4G services.

  48. FessLove says:

    If you’re texting enough for the 20 cents to add up to anything, you should probably get a plan. I never talk, and just use texting. I have the unlimited text, much cheaper than using the phone for calls actually. But I guess his generation didn’t text, so it probably scares him.

  49. dequeued says:

    The phone companies prices are absurd and insulting.

    I hope the government forces them to not charge anything for text messages.
    Or maybe just a nominal fee to prevent people from abusing or spamming.
    I think I would be okay with them capping the text rate at 1 cent per message after the first 100 messages, per month.

    The phone companies should be thankful, they would still be making a hefty profit at that rate.

  50. bkpatt says:

    What exactly did we THINK was going to happen?

    4 companies, 90% of the market. That’s supposed to drive competition?

    Free market economics works great in theory and on paper, but reality proves time and time again that it is unsustainable without regulation, and CERTAINLY unsustainable when these companies are awarded for behavior that goes directly against the principle.

    Case Study: AT&T buys up many small local wireless carriers under AT&T Wireless brand. It can’t find sustainability in its growth and pricing models, so it spins the unit off.

    Cingular purchases the now-spun AT&T Wireless, a company that grew much like Cingular itself had. Once most of the expense of growth is completed, AT&T moves back in and buys the farm for a bargain price versus what that much growth would have taken.

    So, we go from many local carriers, to many less regional carriers, down to 1 national carrier – and this took what, 7 years start to finish?

    Eventually, just as when Ma Bell was broken up, government will realize its own people are getting reamed and slice and dice the offenders (even though they profited the entire time to turn their heads). It’s a constant race between this and the offenders staying moving quickly enough to not get stagnant and busted.

    Thus begins the cycle again. Ma Bell was broken into 7 RBOC’s, and yet now, barely 25 years later, we are down to 3, all of them re-joining through mergers/acquisitions.

    It wasn’t good for consumers 25 years ago, yet since they’ve been allowed to do it again?

    Yay for the free market!

  51. theblackdog says:

    *shrug* I think the cell phone companies could do better about making sure to give folks the option to shut off their texts, but otherwise at this point they’re well justified to set the rate at the price they want. Who doesn’t see that the reason the text prices are so high is so that they can get you on a plan in the first place? It’s obvious, and yet we deal with it by getting a plan.

    Of course, it still sucks when grandma only has a cell for emergencies but a text spammer starts running up her bill, but like I said, make it easier then for texts to get filtered or blocked on her phone.

  52. Skipweasel says:

    How on earth can a telco justify charging you to /receive/ a text? That’s like the postman asking you to pay him for all your letters – even junk mail!

    My Orange (UK) PAYG plan gives me 300 free texts if I top-up by £10/month. As it happens I rarely do, so texts cost me about 10p each and of course, nothing to receive.

  53. flamincheney says:

    I think the larger question to ask is if there is price fixing going on. From all outward appearances it indicates there is. If one company breaks from the pack it will force them all. Right now they know they are robbing people, so why be the catalyst unless forced?

  54. ARPRINCE says:

    The senator is on to something! Good for him for it will reap him REWARD$ there after. ;)

  55. dveight says:

    My biggest issue with text messaging is that you can either have it on, or off, there is no way to filter who you can get a text from.

    Text messaging gets a quick/important message by much faster then leaving a voice mail, so I use it with my fiancee when we have important info that we need to tell each other (and no, “just saying hi” or “what’s up” is not important) and that is why we have it enabled. What sucks with when other people that send shit like that to us, and we have to pay it.

    Fortunately, we keep our cost under $5 each a month for texting, so it has not been worth it to us to buy a bulk plan.

  56. RStewie says:

    My SO and I have a grandfathered plan that allows us unlimited “text only” text meassages for $10/month per phone. I can’t even imagine how much we’d be paying otherwise.

    But we’ve had to guard that plan with our lives, even forgoing the rebate on my new phone to maintain it.

    Wouldn’t it be exciting to see some anti-trust lawsuit action happening, though!!? Rebates for everyone!!

  57. goodywitch says:

    I think Kohl’s teenager texted one too many times and now he’s annoyed that he has to pay so much.

    I agree w/ dveight, we need to be able to reject incoming text, like we can reject incoming phone calls, otherwise don’t charge for incoming text.

  58. ModernTenshi04 says:

    I think text messaging in general should be cheaper than it is. $20 for unlimited texting? Tell me, how is $5 the difference between 1500 texts a month (at $15/month), and 15,000 or more texts a month? There’s no real price structure to them if you ask me.

    And yeah, stop charging me to receive a text. 200 texts a month with you data plan? More like 100 assuming an even send/receive ratio.

  59. suzapalooza says:

    GO WITH A DIFFERENT CARRIER and take your number with you. Any BS they give you about not being able to, is, well, BS. Whomever is telling you that it can’t be done is just wanting an activation credit for their sales budget.

    Here in KC, home to behemoth Sprint, we have Cricket – same services as the others only everything is included in the plan for one price. We travel all over and have had service just about everywhere (except for the sticks, but no on really covers there). If they are not where you are, they will be soon. I pay less than $50 for unlimited everything – web, text, voice, bells, whistles and no contract. DISCLAIMER: my husband is one of their network engineers, but we had them before he worked for them. Highly recommended!

  60. MeOhMy says:

    The major mobile providers have a ton of “churn.” Very little loyalty and they are always looking for the next gimmick to poach another provider’s clients and lock them in to long-term contracts.

    Text messages are almost a pure-profit venture.

    Yet despite these two conditions the fact that none of the major providers has stepped out of line and offered huge discounts on text messaging in exchange for more expensive long term agreements is very suspicious to me.

  61. incognit000 says:

    You know, outside the states, texts are so cheap that most phone services offer them for free, because it costs almost nothing to provide the service and it’s a great way to get people to use your network without using up a lot of bandwidth.

    I think they keep jacking up the price is because they want to force people into buying all inclusive, unlimited plans which provide much more service (and cost) than most people need. I pay $30/month for a bare-bones serice which gives me nothing but phone calls. As I use my phone rarely, I’m cool with that, but I’m constantly being pressured to switch to a plan that incluides “unlimited free texting” or else I’ll be punished with a 50 cent fee every time I want to send a 128 character message.

  62. ZukeZuke says:

    Supply.

    Demand.

    Do the math!

    After this, I hope the good Senator tackles the outrageous pricing of a $4.85 Starbucks mocha. And then $24.99 priced Blu-ray DVDs. And then $25 haircuts…

  63. sam-i-am says:

    I wrote an article on my website about this some time ago: [gthing.net]

    One thing people have continued to say is that the price increases are justified because “people are willing to pay them!” Several people have echoed that sentiment here. These are the kind of people who troll around the Internet looking for places where they can show how smart they are compared to everyone else. “No duh! All you sheeple don’t get it, but I do!”

    The fact is that just because someone pays for something doesn’t mean the price is justified. Is it justified that a friend of mine went $400,000 in debt because he got brain cancer while he was uninsured? Just because his family was willing to pay to save his life, is the cost justified? Is the price of gasoline justified just because people need to drive and products need to be sent on trucks from point A to point B? Is the price of the Iraq war justified just because our government is willing to make us pay it?

    Text messages are OVERPRICED and there is NO JUSTIFICATION. They cost virtually nothing to send and are sent in such a way they don’t even use up “prime” network resources.

    The true costs associated with text messaging:
    -The servers required to manage the sms system (these are pretty expensive but it’s a one time cost).
    -The cost of transfering 140 bytes of information (usually much less) which piggybacks on packets that are being sent around the network anyway.
    -Cross carrier text messages cost your carrier somewhere around 1 penny. Keep under consideration that when you send a text message to someone on another carrier they usually send one back, meaning that these costs probably pretty much cancel each other out at the end of the month.

    So why are we paying $.40 cents per text messages? Yes, $.40 – remember we’re paying to send AS WELL AS receive each message. I can get a letter hand delivered by a human to any address in the United states for 42 cents.

    The bottom line is that $1 worth of data transfer from your ISP would cost over $61 million dollars if that data were transfered over sms messages. I can understand a premium, but not a premium 61 million times the cost of bulk data from your ISP.

    I recommend reading the article I linked to above. It was widely covered in the mainstream media as well as the blogosphere.

    • AustinTXProgrammer says:

      @sam-i-am:
      The vast majority of the costs are the transactional costs. Storing a record in a database for billing and network tracking isn’t free.

      Still, they could charge a penny and come out ahead. If they chose not to bill (no integration costs with the rest of the billing system), and dropped the retention period (for diagnostic purposes), they could drop the price to 0 and still do fine.

    • god_forbids says:

      @sam-i-am: Thank you, thank you, THANK YOU!!! This ECON minor is loving your comments!

      Look people. Especially you simplistic neoclassical “supply and demand” freaks. You ought to know that market intervention is necessitated by market failure, and I’m sure its also quite obvious to you that all forms of monopolistic/oligarchic pricing schemes ARE MARKET FAILURE. They are defined as such, to begin with, because they slam Pareto efficiency to shit.

      It is so easy for you to say “well they pay it, so it must be worth that much to them!” This is because you only quantify the supply-side (producer) surplus, which yes, I know is easier because dollars make more sense than utility functions. The problem is that market clearing assumptions (perf. comp. mkt, flexible P, etc.) are not in this case about merely “making people happy” or “forcing down prices of luxury goods” but a matter of policy violations.

      In constructing the public telephone network, which still forms the backbone of the wireless telephony industry, the gov’t gained full policy control over its use. It deregulated the AT&T and the Bells b/c of concerns of abuse of the power over what is essentially a PUBLIC UTILITY – like sewer, water, garbage disposal, gas and electric. You might not like it but Congress must intervene when companies abuse its network to wring helpless consumer necks.

  64. Whitey Fisk says:

    Yes, I’d also like a luxury service where I get to set the price (how about zero?!?) and have Congressman strong-arm companies into giving it to me at the price I demand.

    This is moronic. Companies charge what they can get. Either stop using the service or stop bitching about it. Is anyone really arguing that they are “forced” or “coerced” into using this service? Or that it’s even a necessity?

    Anyone paying 15 or 20 cents per text needs to seriously reevaluate their phone plan.

    • sam-i-am says:

      @Whitey Fisk: Yes, you are coerced into using this service. Next time you receive a text message try to stop it before it gets to your phone. Awww, nope you just got charged $.20.

      If you don’t understand why price fixing is a really, really bad thing, I recommend the following article from Wikipedia: [en.wikipedia.org]

      Would you think it was okay if all the supermarkets in the country suddenly decided to raise the price of food 10 fold? Competition breeds excellence including fair prices. Anticompetitive behavior like SMS fees rape consumers over the coals.

  65. sam-i-am says:

    “The vast majority of the costs are the transactional costs. Storing a record in a database for billing and network tracking isn’t free.”

    @AustinTXProgrammer: So you’re saying they are billing us because it costs money to bill us? I’m not sure I see how that is fair.

    But I agree with the rest of your comment.

  66. gzusrox says:

    thats why i signed up for unlimited texts on all lines shared for 20 bucks a month. i dont think its offered anymore, but im glad i have it. my daughter uses over 1k of text a month.

  67. TheUncleBob says:

    For those comparing the cost of minutes to the cost of texting, look how much you pay per minute outside of your plan.

    I pay 45 cents/minute outside of my voice plan (although I’ve only went over one time).

    Paying 20 cents/message outside of a texting plan doesn’t seem that far off.

  68. Quatre707 says:

    Buy phone with an HTML web browser, and use a web based instant messaging client service for free, or the AIM application for the iPhone.

  69. Joewithay says:

    It seems Senator Kohl is looking more into price fixing among the companies.

  70. MeOhMy says:

    “Supply and demand” doesn’t make sense when we’re talking about tiny packets of data. Yes, it requires many hours of child labor to mine all of those bits and bytes but at this point the children have pretty much mined a critical mass of them. Since they are reusable and do not degrade over time at this point we can safely say that the supply of bits and bytes is infinite.

  71. dragonfire81 says:

    I am reasonably certain wireless providers technically ARE NOT considered utilities. Anyone confirm?

  72. Hawk07 says:

    Txt messages are 160 bytes in length. I saved this webpage in firefox and it said it was roughly 189KB.

    189,000 bytes / 160 bytes = 1181 or so txt messages on any cell carrier to load this page

    1181 txt messages @ 20 cents each = $236

    So, it’d be roughly $236 at the current structure to load a single webpage. And data is data whether it’s SMS or HTML.

  73. jamar0303 says:

    Geez, I pay less when roaming in with my Chinese SIM. In fact, last time I went to the US I did just that and it cost less than the time I used an AT&T prepaid SIM.

  74. Fist-o™ says:

    Nobody will probably read this comment or care, but…

    In China, they sell Cell phone plans based on the TEXTING! For instance, you get x number of free texts per month, and every minute of talking is so much $$. (Yuan actually but my keyboard don’t got that symbol. hehe)

    I’m a computer nerd and I can tell you that texting *probably* takes much, much less resources to handle over a cell network than voice does. I have a friend that’s an engineer for sprint; I could ask him.

    But like I said, probably nobody cares about my comment.

  75. Text messeges cost more because it is easy, and popular. I text all the time, because it is much easier then calling someone and having a 10 minute conversation full of “small talk” just to accomplish something small. Phone companies know they can gouge the prices for txt, so they do. My unlimited data transfer costs $29 per month, but doesn’t include text, that is extra. Unlimited data my ass.

  76. The irony is, it’s not a NEEDED feature and people opt to pay for the cost. Let the market dictate the cost and if people stop using it, they will learn.

    NO MORE NANNY STATE, STOP MEDDLING WITH EVERYTHING, FEDS!

  77. Saboth says:

    It should cost like $10 a month for a cell plan, text messages should be like a penny apiece, and high speed internet should be $25 a month.

    Seems like we are going the opposite way though…slower speeds, data caps, and it costs more to communicate as time goes on. All of these companies are in collusion.

  78. Ben Popken says:

    Default text message rates are out of control. Instead of competing on lowering price, they’re competing to see who can raise the price the most.

  79. EricLecarde says:

    Wait, gas prices have more than tripled in the past 6 years. Cable in my area has slowly increased base prices every year. Yet, Congress is asking why text messaging plans have gone up 10 cents? Wow, where are our priorities.

  80. Haltingpoint says:

    Part of the reason for these ridiculous prices is that they are trying to force people over to a text plan even if they don’t use anywhere near the volume of texting to justify it. That way, they increase their regular monthly subscription cost.

    I’m willing to bet that increasing a regular source of revenue is more valuable to them than increasing varying amounts of revenue from one off messages since it is more reliable and more than anything, shareholders want RELIABLE profits. That is why publicly traded companies see their share price get dinged if they come in OVER earnings estimates.

  81. Oooo, somebody give Congress a gold star. They figured that out already? All by themselves?

    I look forward to the day they master abstract reasoning (eighth grade or so, I’m told), and can figure out that allowing endless consolidations and removing regulations doesn’t, in fact, “create competition”.

    That day, I will be ready with TWO gold stars.

  82. ToddMusket says:

    Quite frankly, there’s a lot of sour grapes about pay per use pricing.

    Their response to the inquiry will include both pay per use pricing and
    package pricing; they have non-similar pricing structures when you factor in
    packages.

    The simple fact of the matter is, pay per use pricing has gone up while
    package pricing has gone down. One poster commented on the price difference
    between 1500 and unlimited; at the time that the pay per use rate was
    .10/msg, these packages were 1000 for $15 and 2500 for $20. When the rate
    went to .15/msg, it changed to unlimited in-network and 1000 out of network
    for $15, and unl in-network and 2500 out-of-network for $20. When the PPU
    price went to .20, it changed to 1500 out of network on the $15, and
    completely unlimited for $20. $30 now gets you unlimited on an entire
    family plan…for a family of 5, that works out to $6 per phone. When I
    worked in the industry, I’d routinely see families that would crest 25000
    txts in a single month with 2 or 3 teenagers. That works out to $.0012 per
    message. Years ago, when I got my AT&T Wireless phone when I turned 18, I
    got 1000 txt for $20. PPU was .10/msg with free incoming. If a family used
    those same 25000 text messages, assuming half are incoming and spread evenly
    between all 5 lines, you would pay $50 in package charges, and an additional
    $400 in overages. $30 vs $450. And people complain that it has gotten more
    expensive?

    As a former industry insider, here’s the nitty-gritty: Packages have become
    far more economical, for two reasons. 1) Revenue from monthly recurring
    charges factors into ARPU, making financial statements look impressive. 2)
    Less huge bills from customers overusing results in fewer unhappy customers,
    and lower churn.

    And pay per use has gotten more expensive simply to offset revenue loss from
    the packages. This is targetting the extremely light user who won’t notice
    that this month they paid $1 instead of $.50 for the few messages they use.

    And as for the allegations of price fixing, they are completely untrue.
    There’s always a stagger between when one carrier raises their rates and any
    other ones do. When one carrier raises them, other carriers evaluate how
    this affects churn and gross subscriber additions. If 2 weeks go by after
    Sprint raises their text rate on pay per use, and vzw doesn’t see a
    noticeable impact on the amount of port-ins, they raise their rates to take
    advantage of a higher revenue stream. Their sales people are specifically
    told to use that as a differentiator to close sales. The bottom line,
    though, is the only people that care are the people who are either already
    angry at their current provider, or looking for a way to get out of their
    contract early.