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.