Text Message Price Prompts Antitrust Inquiry From Senator

U.S. Senator Herb Kohl, a Democrat from Wisconsin and chair of the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, has written a letter to the heads of Verizon Wireless, AT&T, Sprint Nextel and T-Mobile asking for an explanation as to why the price of text messaging continues to rise.

Kohl, citing experts in his letter, writes that the cost of delivering text messages to customers has not risen in a way that reflects the rising cost of the service. Instead, Kohl thinks that the increase in the cost of the service may be due to a lack of competition.

"Your four companies are the nation's leading wireless telephone companies, collectively serving more than 90 percent of the nation's wireless subscribers," Kohl wrote. "Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100 percent."

The fact that these four companies, as Kohl notes, server 90 percent of the cell phone market provides explanation enough as to why the chair of the antitrust subcommittee would be interested in the price hikes.

Kohl goes on to point out that in 2005 text messages were usually priced at 10 cents. But once Sprint increased the price of texts last fall to 20 cents per message, the other three carriers raised their prices to match.

"As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers," Kohl wrote.

Text messages are small files, Kohl argues, and cost little to transmit to users. Yet each carrier raised prices nearly at the same time, creating questions about the fairness of each company's business practices.

"Also of concern is that it appears that each of companies has changed the price for text messaging at nearly the same time, with identical price increases," Kohl wrote. "This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace."

With the letter issued to Verizon, Sprint, AT&T and T-Mobile, the question remains on how each company -- either separately or as a group -- will respond to the Senator's inquiries, something he has asked each company to do.

"Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008," Kohl wrote.

Additionally, the Wisconsin Democrat has challenged each mobile carrier to provide specific data relating to usage; charges compared to other services, such as email and the cost of voice; and the price of data services from 2005 to 2008. He concludes by asking each company to disclose whether or not their pricing structure differs significantly from their main competitors.