US Senator Questions Rising Text Messaging Costs

U.S. Senator Herb Kohl examined today the state of competition in the cell phone industry and the causes of rising text message prices during a Congressional hearing in the Senate Judiciary Antitrust, Competition Policy and Consumer Rights subcommittee.

The use of text messaging has drastically increased. In 2008, more than one trillion text messages were sent, an increase of more than 250% from the year before. As the popularity of text messages has grown, so has the price charged on a per message basis. Senator Kohl said that from 2006 to 2008, the price of sending and receiving a text message among the four largest cell phone carriers increased by 100%, from 10 to 20 cents per message - although that figure ignored bundles included within the monthly tariffs.

Of note though was that the four companies increased their text messaging prices in two steps, first from 10 to 15 cents, and then from 15 to 20 cents, within weeks or even days of each other.

"These sharp price increases raise concerns. Are these price increases the result of a lack of competition in a highly concentrated market? Will consumers continue to see similar price increases for this and many other wireless services that they have come to increasingly depend on, such as internet connections and basic voice service? The concentrated nature of today's cell phone market should make us wary of other challenges to competition in this industry," Kohl said. "For example, smaller competitors raise serious questions about practices that prevent them from being able to fairly compete. These range from exclusive deals that deny competitors access to the most in-demand cell phones, to limitations on the ability of new competitors to roam on other providers' networks, to difficulties in obtaining needed spectrum. It is imperative that we work to remove undue barriers to competition to ensure consumers the best rates and services."

Kohl chairs the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.

Posted to the site on 17th June 2009