Congress asks phone companies: Why are text prices rising?
By Chris Gaylord | 09.10.08
With text-messaging rates doubling over the past three years, Sen. Herb Kohl has started asking questions.
The Wisconsin Democrat and head of the Senate’s antitrust subcommittee sent a letter to the four major cellular companies on Tuesday with some interesting points.
In 2005, the industry charged about 10 cents per text. Now it’s 20 cents. All four carriers upped their rates at about the same time. The number of nationwide competitors slipped from six to four. And the remaining big-timers are gobbling up regional carriers.
“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,” Senator Kohl wrote to Verizon Wireless, AT&T, Sprint, and T-Mobile.
These letters were not an attack on the cell companies, more like an offer to convince him that he’s just imagining things.
The cellular industry is still young, of course, and its business practices are still evolving – especially with a growing number of phones now offering Web access. But, if you do the math, text messages cost about $1,310 per megabyte. That seems a tad high.
Then again, Kohl’s job is to stop collusion, not price-hiking. Companies may charge whatever they want, they just can’t coordinate such deals.
To ensure that there’s no sketchy business here, the senator asked each carrier to explain itself. What are “the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008,” he wrote. In addition, he wants to know how text usage fluctuated over that time, how their text prices compare to other cell phone services (calls, emails, web, etc.), and whether their rates differ from that of their “main competitors.”
Answers are due October 6. If Kohl doesn’t like the responses, this could turn into an interesting fight.
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4. Miggity | 09.11.08
What are “the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008″ ….
I will take the “because people keep paying it” factor for $1000 please Alex.
/I have text messages blocked
5. SDuffy | 09.18.08
Yes Bob, but you forget we pay the government taxes to be able to drive on our roads. Income tax, vehicle registration, and tolls are just a few ways we pay. While all those copper wires are paid for, they still have to be maintained by someone and I don’t see anyone offering to do it for free, unless you want to.
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1. Bob Frankston | 09.10.08
This could be exciting. Once you start questioning why we have to pay for transporting bits the industry’s basic definition as a service business is open to question. Next we’ll ask why we have to pay every month a high fee to just use the existing copper wires to carry data when these same wires cost far less when used for phone calls and used to cost $1/month when used as alarm wires. Most of the wires have long since been paid for.
The basic problem is that we treat telecommunications as if it were a business like railroads where we have to buy rides and pay for networking as a service. It’s much more like highways where we do our own driving and aren’t force to pay others for the service and aren’t limited to routes profitable to the carriers. The Internet has changed networking from a service we must pay for to someone we can do with any facilities available and we must not be forced to pay carriers a tax just to communicate.
More at http://www.frankston.com/public. For starters: http://www.frankston.com/?name=Railroad and http://www.frankston.com/?name=AssuringScarcity.