Verizon and AT&T deny collusion over text message pricing

June 17, 2009

Verizon and AT&T deny collusion over text message pricing

The United States Senate is actively investigating the prices consumers pay for text messaging, and they aren’t liking what they’re finding.

According to Reuters, the Senate Judiciary Committee’s antitrust subcommittee chair, Sen. Herb Kohl, is concerned by the fact that text message pricing increased from 10 cents in 2006 to 20 cents in 2008.  "These sharp price increases raise concerns. Are these price increases the result of a lack of competition in a highly concentrated market?" he asked.  The general counsels of both AT&T and Verizon responded that it shouldn’t even be a concern because the increases only effected 1 percent of customers as majority buy volume texting plans.

Wayne Watts, general counsel of AT&T replied, "The faulty notion that prices for text messaging have risen derives from an unduly narrow interest in the trend of a single pricing option for text messaging services, the pay-per-use option, when the vast majority of AT&T’s customers do not choose that option."  Mr. Watts and Randal Milch, general counsel of Verizon, also denied that there had been any price collusion between the two companies to drive the pricing of text messages up.

While price collusion is a very serious offense, this writer has to wonder if you couldn’t say there is another reason why prices doubled for the pay-per-use option.  While it is certainly hard to prove, I have worked in retail since I was 8-years-old, and one of the oldest tricks in the books is to try to make the consumer believe they are receiving a value for purchasing a package deal.  When you put a contract in front of a consumer and say “If you go with the pay-per-use option it will be 20 cents a message, or we can sell you 500 texts a month for ten dollars,” which method is going to be more attractive to a price-minded consumer? 

Yes, you do have a small percentage of folks who will forgo the package deal because they feel they won’t use text messaging that much, but that is when another layer of the text message mystery gets involved.  Back in Dec 2008, the same Senate subcommittee heard evidence from Srinivasan Keshav, a professor of computer science at the University of Waterloo, in Ontario that the cost for a company to transmit a text message is so small that it is incalculable.  This is due to the fact that his research discovered that text messages are transmitted on a system called the control channel which is something that wireless carriers have to have in place to keep the system running.  The text messages get pushed in to that channel and they receive a free ride along with the essential data of the network.  “It doesn’t cost the carrier much more to transmit a hundred million messages than a million,” said professor Keshav.

This investigation in to the wireless carriers and the rates for text messages has now gone on for over six months, and there is no hint as to when they will end, but it is certain that it is not casting a very nice light on just how much the American consumer has been gouged for when it comes to text messaging.

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4 Responses to “Verizon and AT&T deny collusion over text message pricing”

  1. Jolene:

    If the consumer is too stupid to buy text messaging in bulk, they should be charged $.20 a text. Sorry, the congress has better things to deal with than this right now.

  2. Andy Glad:

    i think everyone is getting a little fedup with text messages being so expensive. I use to send text messages for free. I also can set it up to send to groups which is handy for work, group meetings and for sports teams.

  3. DaveW:

    They charge up to 6000% more than the actual cost of sending a text just to force people into buying texting plans. They know most people will buy a bigger plan than they think they will use (otherwise you end up right back where you started, paying 20c per text on overages). And that means more money in their pockets. This time for something you DIDN’T use.
    I refuse to bow to this kind of manipulation and instead opted for a StraightTalk prepaid plan from Tracfone, where texting costs 1c each and talk is 2c a minute. Much better!

  4. Jeremy:

    ” If the consumer is too stupid to buy text messaging in bulk, they should be charged $.20 a text. Sorry, the congress has better things to deal with than this right now. ”

    Lets analyze who is too stupid here.

    A text message costs the companies next to nothing to transmit. The cell phone companies universally raised their rates from .10 to .20 at the same time. This is a clear sign that there is collusion going on here. The consumer is stuck with no options, it has nothing to do with the intelligence of the texter. What they all decided to to as well is charge you for incoming text messages, all at the same time. Hmm… this should be throwing red flags all over the place but someone is turning a blind eye here, and it’s very frustrating to the consumer.

    Jolene, you sound like you dont use text message communication or else you would be outraged as well. Let me use this analogy that you might understand: If you take a letter to the post office, they make you pay $0.40 cents to deliver the mail to the recipient. The letter goes through a processing center, to a mail carrier who walks by foot and puts it on the recipient’s door step. That’s alot of logistics going on for $0.40. Now, imagine you go to your mailbox and there is a bill from the carrier that says you owe him $0.40 cents for delivering the letter, even though the sender already paid to have it delivered. Now imagine if non of the human logistics were required to get that letter to your door. That would be analogous to text messaging.

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