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Senator Questions Rise In US Texting Prices 592

Posted by kdawson
from the competition-what-competition dept.
vimm writes "Senator Herb Kohl (D-Wis.) has started an inquiry on the rising prices of text messaging (up 100% since 2005) that has occurred almost in sync with the consolidation of 6 major carriers down to 4. In a letter sent to Verizon Wireless, AT&T, Sprint Nextel, and T-Mobile, Kohl said the increase 'does not appear to be justified by rising costs in delivering text messages.'"
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Senator Questions Rise In US Texting Prices

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  • O RLY? (Score:5, Funny)

    by Anonymous Coward on Wednesday September 10, 2008 @05:46PM (#24953133)

    This message just cost me $427 to text.

  • by eldavojohn (898314) * <[moc.liamg] [ta] [nhojovadle]> on Wednesday September 10, 2008 @05:49PM (#24953171) Journal

    Senator Herb Kohl (D-Wis.) has started an inquiry on the rising prices of text messaging (up 100% since 2005) that has occurred almost in sync with the consolidation of 6 major carriers down to 4.

    Well, it could be that the competition was driving prices down to a lower level and then after the two consolidated, this (money losing) price reduction natural re-adjusted back up.

    Another reason could just be that it's just as easy to sell plans at 10 cents a txt as it is to sell them at 5 cents a txt. We simply don't realize the cost adds up as consumers.

    It could also be that people use text messages about twice as much now as they did in 2005 and the hardware just can't take it, so they adjust the price to reduce usage.

    I think we've discussed this absurd price before [slashdot.org]. I am quite naive about the whole electrical engineering side to this but well versed in the software of it. If it costs nearly nothing for me to talk for a minute, why couldn't they wrap the txt into a digital signal identical to what our vocal signal is wrapped up in and just let the receiving unit decode it as a special text message across the same audio range (like the old phone modems)?

    • by Like2Byte (542992) <Like2Byte@@@yahoo...com> on Wednesday September 10, 2008 @06:00PM (#24953403) Homepage

      I used to work for one of the large telecommunications companies. 161 bytes plus a little bit of HTTP header overhead is nothing. Practically everything performed on today's cellphones is completed via HTTP commands - most are clear-text. Usually, the only thing NOT encrypted is the NAI of user of the phone.

      It just doesn't ring true to me that text messages are eating up their bandwidth even if the scale of their customer base is increased with the next purchase of the next cell-co.

      It's greed - plain and simple.

      That's my 2 cents.

      • by JordanL (886154) <jordan.ledoux@gm a i l . com> on Wednesday September 10, 2008 @06:11PM (#24953591) Homepage
        You mean your 25 cents.
      • by C10H14N2 (640033) on Wednesday September 10, 2008 @07:12PM (#24954415)

        Yeah, I find it hard to believe that the 11GB I burn through for $70 on my HSDPA card equates to the 112KB the same $70 would purchase for SMS. That same 11GB would thus cost me $7.3 million per month if billed as SMS.

        Perhaps someone with more protocol and hardware knowledge than me can explain how that's remotely reasonable.

      • Re: (Score:3, Informative)

        by wolenczak (517857)

        SMS messages are sent over a control channel, not the voice channel, which is pricier, more controlled and critical to the health of the network.

        RF communications for a mobile telephone network are quite different from the TCP/IP networks you are familiar with. The UDP/TCP abstractions shown to applications running on top of the mobile, to make life easier to developers, are just the tip of the iceberg.

        First read about the layers in a CDMA/EVDO/GSM/UMTS network and the components that handle them, and then

    • Re: (Score:3, Informative)

      by negative3 (836451)

      For GSM, it takes less time to send a regular text message than set up a call and wait for the other side to ring. In order to do both, the phone first requests a channel from the base station. It is then assigned a signalling channel on which the phone and the base station negotiate what's going to happen next. For a text, its simply transmitted as a set of messages on the signalling channel and then then phone leaves the channel. For a call, the mobile exchanges messages with the base station as to wh

  • Cynical (Score:5, Insightful)

    by Hatta (162192) on Wednesday September 10, 2008 @05:50PM (#24953177) Journal

    Sounds like the Cellular industry hasn't been contributing enough to a certain Senator's campaign.

  • by Gizzmonic (412910) on Wednesday September 10, 2008 @05:50PM (#24953179) Homepage Journal

    If so, text "Text" to 8398 for updates! Standard text messaging rates apply!

    • by Aphoxema (1088507) * on Wednesday September 10, 2008 @06:08PM (#24953537) Homepage Journal

      Holy crap, just imagine if you had to pay for every comment on Slashdot, even the anonymous cowards that don't say anything useful, much like the advertisements I get about four times a week now because some assholes thought it would be +1 Funny and +1 Informative to randomly stick my cell phone number into all those stupid sites.

  • off-peak? (Score:5, Insightful)

    by Dolohov (114209) on Wednesday September 10, 2008 @05:50PM (#24953181)

    Another interesting question: my phone service (through Verizon) has free after-hours calling, but I pay the same rate for text messages and other data services regardless of time of day. Surely if the data from my phone call is cheaper to transmit at 10pm, then the data from my SMS message is too?

    • Re:off-peak? (Score:5, Insightful)

      by retchdog (1319261) on Wednesday September 10, 2008 @05:57PM (#24953327) Journal

      Why do intelligent people persist in applying rationality to these questions? Is it purely a strategy to re-frame the public debate in vain hopes of changing the situation?

      Text messages are either marked-up several thousand percent or infinitely, depending on your analysis. What is the point of expecting the consumer price of texts to respond at all to real costs, when the provider cost varies by at most thousands of a cent?

    • Re:off-peak? (Score:5, Insightful)

      by maxume (22995) on Wednesday September 10, 2008 @06:00PM (#24953411)

      They didn't promise to charge you based on their costs.

      The problem with cellular competition in the US isn't collusion or some other nonsense, it is that people are happy to participate in a model where they are always paying (at a pre-negotiated rate) for more than they are using.

      If people weren't happy to shovel $1200 a year to the phone companies for unlimited use, the price would be a lot more reflective of what it costs to provide.

      • Re:off-peak? (Score:5, Insightful)

        by CopaceticOpus (965603) on Wednesday September 10, 2008 @06:38PM (#24953985)

        Do you really think people are happy with overpaying? Or is it that they have no choice?

        I've been avoiding owning a cell phone for years because of the costs and the pricing models. However, it's becoming more and more inconvenient not to have one.

        There are no good options. If I get a pay-as-you-go phone, the minutes cost much more than a monthly plan if I use the phone often. If I get a monthly plan, I am forced to guess how many minutes I will use. If I choose a plan with a lower number of minutes and go over, those extra minutes are charged at a vastly higher rate. It's all very unfriendly and designed to extract as much money as possible from the customer.

        If a provider would come along and offer a more fair plan, I think people would flock to it. If there was genuine competition in this market, providers would be forced to offer better plans in order to compete. There may not be collusion in the "smoky back room" sense, but the reality is that nothing changes because there is no market force driving these companies to change. They are happy to sit around and keep making money at everyone's expense.

        If the nature of the cellular marketplace is that the normal laws of competition do not apply, that is the point at which the government needs to step in. Redefine the market so that the companies must compete. Allow people to switch providers easily and take their phones with them. Regulate pricing for services like texting which cost next to nothing to provide. I don't know the best answer, but it is high time that something be done.

        • Slowly Getting There (Score:4, Informative)

          by ZxCv (6138) on Wednesday September 10, 2008 @07:32PM (#24954631) Homepage

          While the big boys are charging $100 or more for their unlimited calling plans, there are a couple smaller providers that offer unlimited calling and texting and everything else for less than $50 (even down to $30 if you just want unlimited talk). And more importantly, there are no contracts involved. Hell, here (in Vegas) they're even offering the first month or two free (depending on which provider).

          It took a while, but the general populace is finally getting fed up with the nickel-and-diming that the big wireless companies are so fond of, and the small providers out there selling unlimited services at a reasonable price are growing by leaps and bounds because of it.

  • by eln (21727) on Wednesday September 10, 2008 @05:50PM (#24953191) Homepage

    Herb, we told you the check was in the mail, why can't you be more patient? I have to warn you if you continue on this track future checks may be even slower to arrive. I'm sure you'll start to see things our way very soon.

    Sincerely,
    AT&T

  • Price-fixing? (Score:4, Interesting)

    by langelgjm (860756) on Wednesday September 10, 2008 @05:52PM (#24953219) Journal

    Kohl said he is particularly concerned that all four of the companies appear to have adopted identical price increases at nearly the same time. "This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace," he wrote.

    I wonder if things will get as far as a price-fixing investigations?

  • by smellsofbikes (890263) on Wednesday September 10, 2008 @05:52PM (#24953237) Journal

    Yeah, that sucks. Text messaging should be dirt cheap. Yeah, they're making an enormous profit off it.
    But text messaging is voluntary. You can stop any time you want. They're clearly charging what the market will bear.
    Sure, it makes them look like scum when they're getting paid huge amounts for not doing very much... but c'mon, Senator Kohl, that's the American Dream! If y'all don't like it, get rid of your cellphones and use email.

    • by BlackGriffen (521856) on Wednesday September 10, 2008 @05:55PM (#24953283)

      Except you get charged whenever somebody sends you a txt. Not cool.

    • by Hatta (162192) on Wednesday September 10, 2008 @06:04PM (#24953483) Journal

      Usually it's conservatives who argue for the free market to sort things out, and liberals want increased regulation.

      Anyway, it would be good to let the free market sort this out. The fact that it hasn't implies that the cellular market is not free. Free markets work because of competition, the high prices of text messages indicate that there's no competition in that market. That's not a good thing, regardless of which side of the aisle you identify with.

      • The fact that it hasn't implies that the cellular market is not free.

        Says who? There are four providers of text messages, and several other means of communicating data. Would you believe that for many people, the VERY SAME DEVICE that sends text messages for $0.10 can be used to send a one-minute voice communication for ZERO INCREMENTAL COST to the customer, but the customer chooses to pay the $0.10 anyway?

        Not to mention the myriad of other ways people have to share information OTHER than text messages.

        The high prices of text messages indicate that there's no competition in that market.

        Except that YOU don't get to decide whether the price is high or not. The market does. And the *MARKET* has decided that the price of text messages is reasonable. People are willing to pay $0.10 to send a text message. What it COSTS to provide the message is irrelevant.

        Did you know that people sell oil and gold for more than the cost to mine it? Did you know that that soft drink you pay $3.50 for at the movie theater costs the movie theater pennies worth of syrup and cold water?

        Did you know that you can get a cell phone plan that lets you talk on your phone from nearly anywhere in the country and to anywhere in the country for *LESS* than it used to cost for a landline and long distance?

        Did you know that many drugs sold for $10 or more a pill cost mere pennies to manufacture? All you have to do is invest a few billion in finding one that works.

        And while the incremental cost of sending a text message may be $0, all you have to do to send them is invest a few hundred billion in a cell phone network....

        At the end of the day, if people are willing to pay $0.10 a minute and $0.10 a message, then that's what people are willing to pay. Which one provides the better margins to the cellular company is irrelevant, as long as people are willing to pay the price charged and the company has enough revenue to stay in business.

        • Re: (Score:3, Insightful)

          by im_thatoneguy (819432)

          It's not a free market because I can't purchase AT&Ts text messages if I'm a TMobile customer and vice versa. If your car could only buy gas from one company then you would see extravagantly priced gasoline.

        • by edp (171151) on Wednesday September 10, 2008 @08:38PM (#24955349) Homepage

          "People are willing to pay $0.10 to send a text message. What it COSTS to provide the message is irrelevant."

          The cost is not irrelevant. If consumers are willing to buy for $.1 and the providers are willing to sell for $.01, economics says the price should be between $.01 and $.1. But why should it be $.1 and not $.01? Why is it clamped at what the consumers are willing to pay and not what the providers are willing to sell for?

          It is because the providers set the stage. They have control of the market. They operate together, not necessarily directly through collusion, but possibly indirectly through using the same marketing research companies, industry organizations, et cetera.

          In a healthy market, the price floats somewhere between the minimum price the providers are willing to sell for and the maximum price the sellers are willing to buy for. There is a give-and-take. Prices may hit one end of the clamp or another from time to time due to natural fluctuations, but when it is grossly disproportionate to actual costs, then there is something wrong. The market is unhealthy and is being unfairly manipulated.

          That is why cost is relevant.

        • by gregbot9000 (1293772) <mckinleg@csusb.edu> on Wednesday September 10, 2008 @08:43PM (#24955415) Journal
          Are you joking or stupid? You obviously have no idea what a price co-ordinated economy is. The market doesn't work on giant companies telling you what you're going to pay based on what they think they can get because all competition is gone due to oligopoly.

          Did you know that people sell oil and gold for more than the cost to mine it?

          Did you now the Oil companies are watched like hawks for trust violations? and that a large part of oil prices are set by the largest cartel in the world? Hardly a free market.

          Did you know that that soft drink you pay $3.50 for at the movie theater costs the movie theater pennies worth of syrup and cold water?

          Sounds like vendor lock in, which last time I checked was considered a coercion of the free market.

          Did you know that many drugs sold for $10 or more a pill cost mere pennies to manufacture? All you have to do is invest a few billion in finding one that works

          NO, bad idiot, read some facts. drug companies spend more on ads then R&D, it's just they get the govt. to strong arm everyone through intellectual property laws to pay more, Complete failure of the free market.

          In the competitive free-market advocated by Milton Friedman, not The oligopolistic-market advocated by the modern republicans, the consumer demand and the cost of supply set prices, not the whims of some giant company that has strong armed govt. support and stifled competition.

          It's basic morals, universalize the maxim: if every company did the same you'd only have on company left after a while, it would be the one who controlled the food and you'd have to sell your life away for just enough food to survive. It happened in the past, it was called feudalism, and is basically what your view of business advocates at it's extreme.

    • Free Market (Score:5, Insightful)

      by copponex (13876) on Wednesday September 10, 2008 @06:23PM (#24953809) Homepage

      Companies only believe in the free market when it suits them, so they don't deserve it. The only way to keep prices low is to intelligently regulate and keep the corporations small and relatively powerless so they don't have the resources to buy their way into the government's good graces.

      Without stiff and proper rules keeping corporate interests separate from government interests, you always end up with corrupted governments relaxing regulations and robbing public resources for private profit, or as they like to call it, privatizing. Notice under the Bush administration that all of the deregulation and plundering of public property has resulted in a highly unstable economy. When you eliminate so many rules that the only thing stopping the resulting mega corporation from ripping people off are the inherent ethics guiding a company, you'll quickly be reminded that the only moral standard they answer to is the bottom line.

  • by erroneus (253617) on Wednesday September 10, 2008 @05:53PM (#24953257) Homepage

    Issues that matter to people will always get raised during election time. The price of gas will drop dramatically pretty soon just before the election and there will not be any connection to world events. It happened times before and will happen again. Everyone knows Oil Industry == Republicans and the easiest way for them to gain favor is to relieve people with lower gasoline prices for a short while.

    But these tactics aren't limited to the price of gasoline... we will see more issues like the price of texting or all sorts of other nonsense that people can rally behind. It is unfortunately a part of the game and typically, even though people get excited about the apparent intention to reign in some justice and sanity, almost nothing ever really happens... except, perhaps, additional contributions from the accused industry.

  • by BlackGriffen (521856) on Wednesday September 10, 2008 @05:54PM (#24953263)

    The amount of data in a txt, maybe a kb or so with overhead, should be virtually free to transmit compared to voice traffic. This is especially true since the voices are digitized and handled as data.

    In other words, they've been a price gouge from the start, and we're surprised when the companies try to push the envelope to get as much out of the gouge as people will put up with?

    I've got a bridge to sell you...

    • by RickRussellTX (755670) on Wednesday September 10, 2008 @06:30PM (#24953895)

      The amount of data in a txt... should be virtually free to transmit compared to voice traffic... they've been a price gouge from the start

      You're talking to a society of people that will spend $1.25 for a bottle of water out of a vending machine which is sitting right next to a water fountain.

      Prices will go down when people stop using the service.

      • by joNDoty (774185) on Wednesday September 10, 2008 @07:07PM (#24954373)

        Prices will go down when people stop using the service.

        That's exactly what I just did last month with my new iPhone. I asked AT&T to completely cancel my texting service.

        I can still be reached via email, and I can even text other people at no extra cost using various internet services, but I can no longer be reached via text.

        I encourage you to do the same if you have unlimited internet on your phone. I understand that not everyone's phone can send and receive email very easily (or at all), but why not start making that push now?

        When people ask me if I got their text I explain my stance on absurd texting charges (for both sending and receiving) and tell them I canceled my texting service. People have been surprisingly understanding and I haven't had any problems so far.

        Of course, I'm substituting an expensive internet plan for a cheaper texting plan. But I feel that unlimited internet on a good cell phone is worth the price, whereas texting is not.

      • Re: (Score:3, Insightful)

        by MorePower (581188)
        You're talking to a society of people that will spend $1.25 for a bottle of water out of a vending machine which is sitting right next to a water fountain.

        I hate when people use this as some kind of statement of stupidity. Water from water fountains tastes gross, mainly because it is heavily chlorinated and chlorine has such a sharp, nasty taste to it. So if I'm not on the verge of dehydration and just want something cool and refreshing to enjoy I sure as hell am not going drink nasty tap water.

        How much I'm

  • by bill_mcgonigle (4333) * on Wednesday September 10, 2008 @05:56PM (#24953309) Homepage Journal

    SMS prices are not based on what they cost to deliver they're based on what the market will bear. Downloading an mp3 over SMS would cost over 5 grand [mobilemessaging2.com].

    I'm not sure there's so much collusion as a majority of people willing to pay insane prices for texting, and cell phones in general. I recently found a cell phone bill from about 10 years ago - it was $9.99 per line (times 2) plus tax (I got a local big-employer discount, the regular rate was $14.99 per line). It came with, I think 120 minutes, which is all I ever use anyway. My current Verizon bill is now easily $85/mo for two lines with a basic text package. Sure, there's been inflation, but there's also less competition.

    I understand that in countries where the service providers are separated from the equipment providers the competition is fierce. I'm not sure but I'd guess that it's because people can jump from provider to provider on their non-crippled phones.

  • The answer: (Score:4, Informative)

    by faedle (114018) on Wednesday September 10, 2008 @05:56PM (#24953315) Homepage Journal

    "Because we can."

    My employer pays huge text messaging bills, mostly because they view the 10 cents a text message costs to be a non-starter. Even with the average user sending 100-200 messages, that only tacks on $20 to the average cell phone bill.

    And believe me, at my company, each phone is easily a $150/month bill.

    When you're billing out engineers at $200/hour, another $20 on the monthly bill is nothing. I'd guess that the average high-volume cell user is typically not watching the nickels and dimes on the statement.

  • Q & A (Score:3, Insightful)

    by fahrbot-bot (874524) on Wednesday September 10, 2008 @05:57PM (#24953329)
    Q: Please justify the "sharply rising rates" you're charging people to send and receive text messages.
    A: Choose one or more:
    1. Because we can.
    2. Because we're greedy.
    3. See: Capitalism [wikipedia.org]
  • by drewzhrodague (606182) <drew@zhr[ ]gue.net ['oda' in gap]> on Wednesday September 10, 2008 @06:03PM (#24953459) Homepage Journal
    I for one welcome our Questioning Senator Overlords!
  • by Caboosian (1096069) on Wednesday September 10, 2008 @06:04PM (#24953467)

    We respectfully take your concerns into consideration, and present you with this money basket. We hope that this free donation to your re-election campaign, brand new BMW, and lakehouse are enjoyed thoroughly by you! Thank you for ceasing your inquiry - err, we mean, thank you for invariably enjoying our gifts!

    Love,

    The Telcos

  • by Joe The Dragon (967727) on Wednesday September 10, 2008 @06:07PM (#24953519)

    In coming needs to be free as well having 1-800 text numbers that are 100% free and the 1-900 based ones should just have there fees not fees + the standard rate.

  • by Nerdposeur (910128) on Wednesday September 10, 2008 @06:34PM (#24953949) Journal

    As things like Android phones emerge, I wonder if there will be ways to hack around stuff like absurd SMS costs? Like:

    • Write a program to run on the phone at each end
    • Have it send a text message as a "call" with a code that tells the other phone to "pick up" silently and receive a text message encoded as voice (like the old modems)
    • Profit!

    The idea of getting IP-over-voice despite the carriers' rules strikes me as hilarious, even though it would be obscenely slow for anything bigger than text messages.

  • by nilbog (732352) on Wednesday September 10, 2008 @07:08PM (#24954377) Homepage Journal

    What is really amazing is that people seem to come out in droves to defend the carriers. I wrote an article on the ridiculously high cost of text messages some time ago (which was also featured here on /. as well as several major media outlets - yes, I'm tooting my own horn) and couldn't count the people who came out and said "DUH! They're charging what they are because people are willing to pay it!"

    These are the kind of assholes who troll around the web looking for any discussion in which to insert their derogatory "I'm smarter than you - it's so obvious!" attitude while ignoring the issue at hand. No, prices are not justified by the markets willingness to pay them. Do you think it is justified that a friend of mine had to go $400,000 in debt because he got brain cancer while he didn't have insurance? His family was willing to pay it, so it must be a great deal, right? Do you think that higher and higher gas prices are justified even while the price of oil drops and oil companies post record profits quarter after quarter?

    No, of course those things aren't justified. Just like it wouldn't be justified if all the food manufacturers suddenly decided to charge 10x more for food. It's anti competitive and it's illegal for a very good reason. Price fixing ruins the free market and ensures that consumers get the crappiest possible product for the greatest price. It ruins innovation and takes a huge dump on everyone in the market. Several historical examples show this, but I won't get into that here. Two seconds of critical thinking will get you to the same conclusion.

    Text messaging is a 100 billion dollar industry in the U.S. That's bigger than all the movies, all the music, and all the video games in the entire world put together. The current cost of a single 140 byte text message is 40 cents (which is obfuscated by the fact that the sender AND the receiver are both paying 20 cents each). I can get a letter hand delivered to any doorstep in the U.S. for about the same price. The cost of a text message to the carrier is virtually ZERO. Yet somehow, they are saying that 40 cents is a fair price. I want to know why, and I'm glad someone in congress is doing something about it.

    My article on the subject is here, btw, for anyone interested or who hasn't already seen it: http://gthing.net/the-true-price-of-sms-messages [gthing.net]

  • fsck (Score:4, Insightful)

    by suck_burners_rice (1258684) on Wednesday September 10, 2008 @07:36PM (#24954661)
    What I don't fscking like is that they don't charge for SENDING text messages, they charge for RECEIVING them. If you don't want to pay for individual text messages received, you have to pay $5 each month for unlimited texts. So you either pay them 50 or 60 cents a month for some spam texts that you never wanted, or you pay them $5. It's theft. Imagine if the postal service charged you to receive mail. Think of all the junk mail out there that people would send you for free. Fsck that. They should charge for sending texts. Receiving should be free.
  • by Joebert (946227) on Wednesday September 10, 2008 @08:10PM (#24955057) Homepage
    The price of text messages is unreasonable. Proof can be found in the fact that during a disaster such as a hurricane the mobile companies urge people to use text messaging instead of voice communications. Either mobile companies are scalping people by suggesting the more expensive text messaging during times of emergency, or it is less expensive to maintain the text messaging network.

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