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October 12, 2008

Congress questions high cost of texting

by @ 7:01 am. Filed under Business, Personal, Politics, Technology

I know this is a tad old, but I wanted to to make mention of it nonetheless. So much for a free market spurring competition.

Congress questions high cost of texting

By Stephanie Condon
September 9, 2008 4:25 PM PDT

The price of text messaging has doubled industry-wide in the last three years, and Congress wants to know why.

Sen Herb Kohl, chair of the Antitrust Subcommittee in the Senate Judiciary Committee, sent a letter Tuesday to the four major wireless carriers–AT&T, Verizon Wireless, Sprint, and T-Mobile–asking them to explain the dramatic price increases for text messaging services.

“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 said in the letter.

The cost of text messaging since 2005 has increased 100 percent from 10 cents to 20 cents for all four providers. Mobile operators have reaped huge profits from the increased prices, CNET reported in July.

Also, the number of major carriers in the United States has shrunk from six to four in recent years, while the remaining carriers continue to acquire their regionally based competitors, Kohl said in the letter. He noted that the four carriers combined currently serve more than 90 percent of wireless subscribers in the U.S.

“I am concerned with whether this market 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.

The senator from Wisconsin asked the companies to provide evidence of how their respective text messaging pricing structures differs from those of their competitors, along with evidence of what factors led to price increases. He also asked the wireless carriers to provide data on the utilization of text messaging from 2005 to 2008 and a price comparison of text messaging services to other services such as Internet access over wireless devices. Kohl asked for a response by October 6.

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.”

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