Senator Questions Rise In US Texting Prices

vimm writes "Senator Herb Kohl (D-Wis.) has started an inquiry on the rising prices of text messaging (up 100% since 2005) that has occurred almost in sync with the consolidation of 6 major carriers down to 4. In a letter sent to Verizon Wireless, AT&T, Sprint Nextel, and T-Mobile, Kohl said the increase 'does not appear to be justified by rising costs in delivering text messages.'"

Comments

I Can Think of Possibilities ...

[eldavojohn]

Senator Herb Kohl (D-Wis.) has started an inquiry on the rising prices of text messaging (up 100% since 2005) that has occurred almost in sync with the consolidation of 6 major carriers down to 4.

Well, it could be that the competition was driving prices down to a lower level and then after the two consolidated, this (money losing) price reduction natural re-adjusted back up.

Another reason could just be that it's just as easy to sell plans at 10 cents a txt as it is to sell them at 5 cents a txt. We simply don't realize the cost adds up as consumers.

It could also be that people use text messages about twice as much now as they did in 2005 and the hardware just can't take it, so they adjust the price to reduce usage.

I think we've discussed this absurd price before. I am quite naive about the whole electrical engineering side to this but well versed in the software of it. If it costs nearly nothing for me to talk for a minute, why couldn't they wrap the txt into a digital signal identical to what our vocal signal is wrapped up in and just let the receiving unit decode it as a special text message across the same audio range (like the old phone modems)?

off-peak?

[Dolohov]

Another interesting question: my phone service (through Verizon) has free after-hours calling, but I pay the same rate for text messages and other data services regardless of time of day. Surely if the data from my phone call is cheaper to transmit at 10pm, then the data from my SMS message is too?

Re:off-peak?

[retchdog]

Why do intelligent people persist in applying rationality to these questions? Is it purely a strategy to re-frame the public debate in vain hopes of changing the situation?

Text messages are either marked-up several thousand percent or infinitely, depending on your analysis. What is the point of expecting the consumer price of texts to respond at all to real costs, when the provider cost varies by at most thousands of a cent?

Re:off-peak?

[maxume]

They didn't promise to charge you based on their costs.

The problem with cellular competition in the US isn't collusion or some other nonsense, it is that people are happy to participate in a model where they are always paying (at a pre-negotiated rate) for more than they are using.

If people weren't happy to shovel $1200 a year to the phone companies for unlimited use, the price would be a lot more reflective of what it costs to provide.

Re:off-peak?

[CopaceticOpus]

Do you really think people are happy with overpaying? Or is it that they have no choice?

I've been avoiding owning a cell phone for years because of the costs and the pricing models. However, it's becoming more and more inconvenient not to have one.

There are no good options. If I get a pay-as-you-go phone, the minutes cost much more than a monthly plan if I use the phone often. If I get a monthly plan, I am forced to guess how many minutes I will use. If I choose a plan with a lower number of minutes and go over, those extra minutes are charged at a vastly higher rate. It's all very unfriendly and designed to extract as much money as possible from the customer.

If a provider would come along and offer a more fair plan, I think people would flock to it. If there was genuine competition in this market, providers would be forced to offer better plans in order to compete. There may not be collusion in the "smoky back room" sense, but the reality is that nothing changes because there is no market force driving these companies to change. They are happy to sit around and keep making money at everyone's expense.

If the nature of the cellular marketplace is that the normal laws of competition do not apply, that is the point at which the government needs to step in. Redefine the market so that the companies must compete. Allow people to switch providers easily and take their phones with them. Regulate pricing for services like texting which cost next to nothing to provide. I don't know the best answer, but it is high time that something be done.

Re:Okay, so I'm a crabby liberal

[Hatta]

Usually it's conservatives who argue for the free market to sort things out, and liberals want increased regulation.

Anyway, it would be good to let the free market sort this out. The fact that it hasn't implies that the cellular market is not free. Free markets work because of competition, the high prices of text messages indicate that there's no competition in that market. That's not a good thing, regardless of which side of the aisle you identify with.

Re:Wag the dog

[Austerity Empowers]

Or maybe a showy issue that most americans can identify with, will help non-technical americans realize how badly monopolies are robbing them? You know, and I know, that the cost of sending a text message is so incredibly small charging any amount of money beyond voice service is essentially highway robbery. But many people think it's new, and thus must be a huge complicated thing.

Yeah, text messages themselves are stupid secondary problems. But waking people up, and forcing them out of the idiocy of news tv talking heads, and forcing them into the cognitive dissonance caused when they realize businesses are hurting them because capitalism ISN'T working as designed... that helps a lot. Otherwise it sounds like a bunch of pompous academics in suits talkin fancy words and talkin smack about god and the president.

Re:And we're suprised by this why?

[RickRussellTX]

The amount of data in a txt... should be virtually free to transmit compared to voice traffic... they've been a price gouge from the start

You're talking to a society of people that will spend $1.25 for a bottle of water out of a vending machine which is sitting right next to a water fountain.

Prices will go down when people stop using the service.

Re:Wag the dog

[Blkdeath]

Capitalism works just fine ... text messaging is too expensive, so I don't use it.

There ... capitalism at it's finest. If someone using text messaging is complaining it's too expensive, then maybe they should look at alternatives or STFU. THAT is what capitalism is all about.

Oh. So when I get a message telling me that Zoltan has prepared my fortune for me, or that my Perfect Crush is waiting for me, or I can find out my top five Perfect Lovers and I get dinged $0.10 apiece for receiving them, just exactly how is that "capitalism at its finest" and how, pray-tell, am I supposed to stop 'using' it?

Per-text messaging rates exist to punish those who send or receive the occasional message. It has nothing to do with the big "problem" the telecom companies are talking about - the power text users who're "clogging" the network with their flurry of messages. Those, you see, are on low-priced fixed-rate unlimited message plans so they remain unaffected.

It's simple math. At $0.10 apiece, unless and until I start sending/receiving more than 50 messages consistently each and every month it's not worthwhile for me to sign up for a plan - even though it's a mere $5.00 per month. However any time I talk to a rep from my phone company they tell me my option is to do just that.

This isn't capitalism; it's extortion.

Re:Wag the dog

[dj245]

"Or are you implying that all Senators are in collusion and fighting only for lower text-messaging costs?"

No. They are all going after populist minor problems that everyone can agree on, but aren't major issues. Most of the time, the problems they examine aren't solvable by congress directly anyway and its a huge waste of time. Congress has examined Exxon multiple times, but usually only in an election year. They are letting the real problems slide in order to get re-elected more easily. The entire process has become circular. "If I vote for this my critics will tear me apart and I won't be re-elected to solve problems in the future". Sound familiar?