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Congress asks phone companies: Why are text prices rising?

By / September 10, 2008



With text-messaging rates doubling over the past three years, Sen. Herb Kohl has started asking questions.

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The Wisconsin Democrat and head of the Senate’s antitrust subcommittee sent a letter to the four major cellular companies on Tuesday with some interesting points.

In 2005, the industry charged about 10 cents per text. Now it’s 20 cents. All four carriers upped their rates at about the same time. The number of nationwide competitors slipped from six to four. And the remaining big-timers are gobbling up regional carriers.

“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,” Senator Kohl wrote to Verizon Wireless, AT&T, Sprint, and T-Mobile.

These letters were not an attack on the cell companies, more like an offer to convince him that he’s just imagining things.

The cellular industry is still young, of course, and its business practices are still evolving – especially with a growing number of phones now offering Web access. But, if you do the math, text messages cost about $1,310 per megabyte. That seems a tad high.

Then again, Kohl’s job is to stop collusion, not price-hiking. Companies may charge whatever they want, they just can’t coordinate such deals.

To ensure that there's no sketchy business here, the senator asked each carrier to explain itself. What are "the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008," he wrote. In addition, he wants to know how text usage fluctuated over that time, how their text prices compare to other cell phone services (calls, emails, web, etc.), and whether their rates differ from that of their "main competitors."

Answers are due October 6. If Kohl doesn't like the responses, this could turn into an interesting fight.

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