Whether it’s avoiding talking to an overly verbose relative or trying to figure out party plans during a night class, texting has become the go-to method of communication.The total number of text messages people send and receive has increased at a dramatic rate the last several years. This year, Americans are expected to send nearly 1.4 trillion of them — a 24-fold increase from the rate in 2005. Carriers have embraced their popularity, providing phones which now sport full QWERTY keyboards, which make it possible to fire off a text message in no time.Along with the increase in popularity has come an increase in the off-plan text messaging rate (the amount users pay if they don’t have a plan or go over their messages). From 2006 to 2008, all four major cell phone carriers doubled their price for these types of texts to 20 cents per message.To put this into perspective, at this rate it would cost about $4,500 to send a 3.5 megabyte mp3. A far cry from the rate they used to charge: Nothing.That’s right, when they were intitially made available to customers, texting was completely free — and incidentally, not very popular.The reason carriers could provide this service for free is because of the nature of cell phone technology. Cell phones are always in communication with the tower on a special low-bandwidth channel. Text messages are slipped into this channel without increasing congestion (hence the 160 character limit).This may also explain why text messaging works better than phone calls on game days while the cell network is in gridlock.Even though it doesn’t cost them anything to send a text message, it seems reasonable a cell phone company would want to charge for sending messages. After all, they must maintain the network and, in theory, some text messages may be a substitute for voice calls (therefore eroding the company’s profit potential).But many watchdogs believe the industry’s doubling of off-the-plan prices for texts — and that they all did it around the same time — has not been reasonable.Sen. Herb Kohl (D-Wis.) recently sent a letter to the carriers asking them a simple question: Given the fact text messaging costs have not changed, why have your prices doubled?The prodding elicited a Congressional inquiry in June to address the possibility of price collusion and the apparent lack of market competition — both forbidden by the Sherman Antitrust Act.Representatives from Verizon Wireless and AT&T were both present at theproceedings. Of course, they denied any appearance of collusion and painted a picture of healthy competition in the market. They also downplayed the significance of the charge increase, saying it only affected 1 percent of text messages because most people have text messaging plans.First of all, 1 percent of 1.4 trillion is a lot of text messages. The number is also misleading — the two wireless carrier representatives testified about 16 percent of their customers chose the pay-as-you-text approach.The carriers also glossed over basic logic in their statements. They justified the price increase because most people are on plans. But isn’t picking a plan a logical choice given the high price of sending text messages?Wireless companies still appear to be taking advantage of customers by overcharging them on a service which costs them little to nothing. The high price of text messaging seems to be justified only by their great market power.Have prices gone up because of an increase in demand, or a decrease in competition in the wireless market? Have cell phone companies tacitly colluded on the price of text messaging? Our government needs to work for its people and formally investigate these allegations.Mark Macmurdo is a 22-year-old history and economics senior from Baton Rouge. Follow him on Twitter @TDR_mmacmurdo.—-Contact Mark Macmurdo at [email protected]
Murda, He Wrote: Rising text message charges point to price collusion
October 14, 2009