Doubling Of Text Message Rates Provokes Senate Inquiry
Sen. Herb Kohl asked the top four U.S. wireless providers to explain why they raised text message prices almost simultaneously last year.
The nation's four largest cell phone service providers are being pressed to explain why they doubled the price of their text messages almost simultaneously. They companies said they are preparing to answer questions on texting rates asked by U.S. Senator Herb Kohl, chairman of the Senate Antitrust Subcommittee.
The firms, which together deliver wireless service to more than 90% of U.S. cell phone subscribers, are AT&T, T-Mobile, Sprint Nextel, and Verizon Wireless.
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"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," Kohn said in a letter to the top executives of the four wireless service providers. "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."
The senator also expressed concern over the consolidation in the industry, taking note of the current proposal by Verizon Wireless to take over Alltel. Said Kohl: "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."
Kohl noted that Sprint doubled the rate of its text messages last fall and that the other three large cell phone service providers quickly followed suit. "It appears that each of (the) companies has changed the price for text messaging at nearly the same time, with identical price increases," he wrote in his letter to the companies. "This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace."
The senator's request for a thorough accounting also seeks data on price comparisons for text messaging compared to prices for transmitting e-mails, data, and voice calls. Kohl also asked each of the cell phone executives to explain whether its text-pricing structure differs significantly from that of competitors.
The letter was addressed to Lowell McAdam, president and CEO of Verizon Wireless; Randall Stephenson, chief executive officer of AT&T; Dan Hesse, chief executive officer of Sprint; and Robert Dotson, president and chief executive officer of T-Mobile.
The executives said they would work to answer Kohl's request, according to media reports.