AT&T, Sprint, T-Mobile, Verizon Still Owe Senator Kohl (And their Customers) Some Explanations
There’s a reason costs for text plans have skyrocketed recently, and it’s not due to increased overhead. From Randall Stross’s What Carriers Aren’t Eager to Tell You About Texting:
“…text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network. That’s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted.
Senator Herb Kohl would like to talk with the wireless carriers about that.
So far they haven’t been very forthcoming. Stross writes:
The written responses to Senator Kohl from AT&T, Sprint and T-Mobile speak at length about pricing plans without getting around to the costs of conveying text messages. My attempts to speak with representatives of all three about their costs and pricing were unsuccessful. (Verizon Wireless would not speak with me, either, nor would it allow Mr. Kohl’s office to release publicly its written response.)
The carriers will have other opportunities to tell us more about their pricing decisions: 20 class-action lawsuits have been filed around the country against AT&T and the other carriers, alleging price-fixing for text messaging services.
We should All listen to what they have to say.
I wonder if they’ll get around to talking about what Common Carrier means. Does the bus company charge You to use the bus’s rest room while enroute? It’s there, on the bus, whether or not any passenger uses it. And You’ve paid for it in the cost of the ticket.
From Ars Technica Sept 10 Article Senator to cellular carriers: UR TXTS R 2 XPENSIV:
Kohl’s office is asking each carrier to explain the method behind the text message rate madness, including any cost, technical, or other factors that justify the 100 percent increase between 2005 to 2008. Kohl also wants data on how text messages are utilized, comparisons of how text message packages stack up against competitors, and—perhaps most importantly—price comparisons against per-minute charges for voice plans, and per-KB charges for mobile Internet and tethering plans. It should be fun to hear AT&T defend why it charges over $1,300 per megabyte for text messages.
Again, Kohl’s office made it clear that this letter is more of an conversation starter (though a fairly forceful one) in what could turn out to be an embarrassing (for the carriers) discussion over high cost of text messages. The staffer did, however, hold out the possibility of further investigation, and even a request that antitrust regulators to look into the matter, should the situation call for it.
Donald Melanson at Engadget filed this report at the time.
Here is Senator Kohl’s letter:
For Immediate Release:
Phone: (202) 224-5653
KOHL CALLS ON CELL PHONE COMPANIES TO JUSTIFY RISING TEXTING RATES
In Three Years, Text Message Charges Have Doubled for Wireless Customers
WASHINGTON, DC — Today, US Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, asked the presidents and chief executive officers of the four largest wireless telephone companies to justify sharply rising rates for its customers to send and receive text messages. In a letter, Senator Kohl requested an explanation from Verizon Wireless, AT&T, Sprint and T-Mobile, which collectively serve more than 90 percent of the nation’s cellular phone users. The text of Senator Kohl’s letter follows below.
September 9, 2008
Lowell McAdam President and CEO Verizon Wireless
Randall Stephenson Chief Executive Officer AT&T
Dan Hesse Chief Executive Officer Sprint
Robert Dotson President and Chief Executive Officer T-Mobile
Dear Messrs. McAdam, Stephenson, Hesse and Dotson:
I am writing to express my concern regarding what appear to be sharply rising rates your companies have charged to wireless phone customers for text messaging. 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.
Your four companies are the nation’s leading wireless telephone companies, collectively serving more than 90% of the nation’s wireless subscribers. Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100%. Text messages were commonly priced at 10 cents per message sent or received in 2005. As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers. Sprint was the first carrier to increase the text message rate to 20 cents last Fall, and now all of its three main competitors have matched this price increase.
What is particularly alarming about this industry-wide rate increase is that it does not appear to be justified by rising costs in delivering text messages. Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit. Text messaging files are a fraction of the size of e-mails or music downloads. Also of concern is that it appears that each of companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.
What has changed in recent years is the level of consolidation in the wireless telephone industry. The number of major national competitors has declined from six to four. And the large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example. As Chairman of the Antitrust Subcommittee, 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.
Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period. Please provide a comparison of prices charged for text messaging as compared to other services offered by your companies, such as prices per minute for voice calling, prices for sending e-mails, and prices charged for data services such as internet access over wireless devices, from 2005 to the present. Finally, please state whether your text messaging pricing structure differs in any significant respect from the pricing of your three main competitors. Please provide this information no later than Monday, October 6, 2008.
If you have any questions regarding this request, please contact Jeff Miller or Seth Bloom of my Antitrust Subcommittee staff at (202) 224-3406. Thank you for your attention to this matter.