Text Message Price Fixing – How Wireless Providers Rip You Off

January 6, 2009 at 12:00 am · Filed under Technology

In response to growing concerns over the increased text messaging costs, US Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, sent a letter to the heads of each of the four major wireless providers requesting information about the 100% price increase per text. He asked for justification for these increases, such as proof of increased cost to the companies. He asserted that the increases seemed to be more the result of a “decrease in competition, and an increase in market power” rather than an actual increase in costs to the providers (1). Each of the companies responded with explanations of the pricing of their text messaging plans, but failed to address the reasoning for increased cost to customers.

The four major companies, TMobile, AT&T, Verizon, and Sprint have all instead chosen to side-step the issue and have made excuses for the price increases. They have identified the increasing numbers of text messages sent in recent years as reason for increasing per text charges. However, when the issue is explored a little deeper, we find that costs to the providers have not increased due to larger text volumes. In fact, text messages are a “free-rider” tucked into control channels, which is space reserved for operation of the wireless network (2).

Text messages are very small, and are limited to 160 characters to qualify them as free-riders. Despite costing the provider virtually nothing to transmit, customers are charged an incredible amount to send very little data. According to Consumers Union, the nonprofit publisher of Consumer Reports, “600 text messages contain as much data as a one minute phone conversation. At 20 cents a pop, 600 text messages would cost $120.00,” (3). This is just one example of the gross overcharging of customers at the hands of the major wireless providers.

According to physorg.com, “texting is four times more expensive than receiving scientific data from space,” (4). So it costs four times more to send and receive texts than it does to receive information from the Hubble Telescope! According to Techcrunch.com, AT&T’s text messages cost $1,310 per megabyte. This means that texting for TMobile, Verizon, and Sprint also cost $1,310 per megabyte, as each of the four major companies charge twenty cents to send and receive texts (5). At this rate, downloading one 4MB song would cost over $5,000. I recently saw calculations someone had done on an AT&T forum (of all places) – if broadband internet cost as much to transmit data as texting, it would cost about $1.2 million per month. All of these calculations further prove what I have been claiming for years – that texting is a major rip-off!

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