Sen. Kohl: Why Does Texting Cost So Much?
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In a letter to the country's four largest wireless carriers, the chairman of the Senate Antitrust Subcommittee asked why the text-messaging rates of each of the four providers had doubled in the last three years and warned that consolidation in the industry could be undermining competition.
Herb Kohl, D-Wisc., asked the chief executives of AT&T (NYSE: T), Verizon Wireless, T-Mobile and Sprint why the big four appeared to be moving in lockstep in raising the per-message fee from 10 cents in 2005 to today's standard rate of 20 cents.
"Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text-messaging services but may instead be a reflection of a decrease in competition and an increase in market power, among your four companies," Kohl wrote.
Of particular alarm to Kohl was that the increase "does not appear justified by rising costs in delivering text messages." Still capped at 160 characters, text messages carry the same modest strain on the networks that they did in 2005.
"What has changed in recent years is the level of consolidation in the wireless telephone industry," Kohl said. With the Sprint-Nextel merger and AT&T absorbing Cingular through the BellSouth merger, the number of carriers with a nationwide footprint has dropped from six to four. Then, too, Kohl noted that the big four continue to expand their customer base through the acquisition of regional providers -- seen most recently in Verizon's purchase of Alltel.
"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 said.
Spokesmen for each of the carriers told InternetNews.com that they looked forward to working with Kohl on his inquiry into wireless competition and text rates.
Verizon's Jeffrey Nelson said that looking at the pricing of just one feature is not enough to gauge competition in the industry.
"While some carriers may have similar price plans, that's not an indicator of anticompetitiveness," he said. "Wireless companies compete every day on a variety of factors -- network quality, scope, customer service, consumer multimedia offerings and content, handsets and devices and, of course, pricing."
Nelson also pointed to the shift in the rate-plan pricing model, where more people are opting for bundled service packages that offer unlimited text messaging.
"With the huge adoption of texting, we've introduced bundled plans that bring the cost per message down significantly on a per-message basis," he said.
Kohl asked for the companies to provide their responses by Oct. 6.