Text Messaging Rates Questioned Again - InformationWeek

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12/29/2008
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Text Messaging Rates Questioned Again

Industry watchers and politicians say the cost to transmit the growing number of SMS messages isn't in line with the rising fees.

The CTIA said the volume of text messages has grown tenfold over the last three years, and SMS continues to be a major revenue generator for wireless carriers.

The four major U.S. wireless telecoms have doubled the price of individual text messages during that span, and some industry watchers and politicians suggest that operational costs are not tied with the increase in volume.

In an interview with The New York Times, Srinivasan Keshav, professor of computer science at the University of Waterloo, Ontario, said text messages are sent using space reserved for operation of the wireless network. Because of this, Keshav contends that sending massive amounts of SMS costs wireless telecoms very little once they've invested in staff and centralized storage equipment.

"Operating costs are relatively insensitive to volume," Keshav said. "It doesn't cost the carrier much more to transmit a 100 million messages than a million."

Earlier this year, Sen. Herb Kohl, D-Wis., sent a letter to the four largest U.S. carriers expressing concern over the pricing of text messaging.

"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," Sen. Kohl said in the letter. "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."

Representatives from AT&T, Sprint, T-Mobile, and Verizon Wireless didn't respond to press inquiries on the cost of transmitting SMS messages by press time. The carriers have argued that the individual cost of text messages have grown, but the majority of customer buy SMS in package plans that offer cheaper bulk rates.

"Although your letter states that carriers' prices for text messaging appears to have increased since 2005, the opposite is true," T-Mobile's CEO Robert Dotson said in response to the senator's letter. "Since 2005, the prices that T-Mobile charges for text messages -- 90% of which are purchased in texting packaging plans -- have fallen by more than half. Not only have our prices for text messages fallen, T-Mobile leads its competition in bringing lower prices to consumers."

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