Last September, U.S. Senator Herb Kohl of (D-Wisconsin) chairman of the Senate Antitrust Subcommittee expressed his concerns that the big cell phone companies may be taking advantage of consumers by upping the price of text messages in cell phone plans. He sent a letter to AT&T, Verizon, Sprint, and T-Mobile:
“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,” Kohl wrote in his letter. “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.”
Over the last few years, telephone companies have been hiking up the price for text messages from as little as one-cent per message to 25-cents or more depending if the text is plain text or a multimedia text with photo, video, or audio.
Text messaging can be cheaper if consumers add them as part of their cell phone plans. T-Mobile for example charges $19.95 extra a month for unlimited text messaging with most plans. But for consumers who opt to not bundle text messaging in their cell plans, they’re stuck paying steep charges for sending and receiving text messages.
According to a report by Information Week in September:
Kohl noted that Sprint doubled the rate of its text messages [in the fall 2007] 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.”
Text messaging use in the United States has increased from 17 billion text messages in 2000, to 500 billion in 2004. Microblogging sites like Twitter which reach users by cell phone and web may possibly had an impact in increasing text message use even more in the past two years.
Senator Kohl is not going to be easy on the cell phone executives given his calls to toast GM and Chrysler executives earlier this month for consumer concerns that dealerships weren’t getting any help from the automakers.
Advocates with the Consumers Union have raised complaints to Congress about the unregulated cell phone industry. Joel Kelsey, a policy analyst, with that organization will also be at the hearing on behalf of US consumers, testifying before the committee. Here is an except from the Consumer Union’s website about rising phone bills:
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What’s at stake is your phone bill. The average price of telephone service for residential customers in urban areas increased to $24.75 per month in 2003, a jump of more than $4 in just three years. We’re not getting more service for our money, just more add-on fees and surcharges. Consumers can expect to see continued price increases, due to the failure of public policy to promote robust competition, and proposed changes at the state and federal levels that will result in new price increases of several more dollars per month.
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