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)
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*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.
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.
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?
The senator is on to something! Good for him for it will reap him REWARD$ there after.
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.
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!!
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.
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.
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!
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.
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.
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…
@ZukeZuke:
Except that Starbucks isn’t providing a public utility.
@ZukeZuke:
supply and demand doesn’t work here. People are locked into 2 year contracts and carriers don’t have equal coverage.
Regulate these bastards like a utility.
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.
@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.
@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.
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.
@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.
“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.
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.
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.
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.
It seems Senator Kohl is looking more into price fixing among the companies.
“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.
I am reasonably certain wireless providers technically ARE NOT considered utilities. Anyone confirm?
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.
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.
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.
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.
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!
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.
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.
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.
@EricLecarde: I can’t speak for cable but Congress HAS brought oil execs to the hill a number of times in the past couple of years.
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.
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.
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.