Rising text message prices a cause for concern (Sen. Herb Kohl)

With more than 270 million subscribers, cell phones are a vital means of communications for the vast majority of Americans. The enormous growth in the use of cell phones means that maintaining competition in this industry is more important than ever.

In recent years, however, consolidation has left the cell phone industry highly concentrated. Four national carriers now control over 90% of the cell phone market. AT&T and Verizon combine to have a market share of 60%. Nowhere is the changed market for cell phones more noticeable than in text message service. In 2008, more than one trillion text messages were sent, more than triple the number just two years before. As their popularity has grown, so has the price charged on a per message basis.



From 2006 to 2008, the price of sending and receiving a text message on a per message basis among the four largest cell phone carriers increased by 100%. The four companies increased their text messaging prices within months or weeks of each other. These price increases occurred despite the fact that the cost to the phone companies to carry text messages is minimal – estimated to be less than a penny per message – and has not increased.

At the Antitrust Subcommittee hearing I convened last week, the phone companies defended these price increases by asserting that they have not been coordinated in any respect. They also pointed out that the majority of cell phone customers do not pay for text messages on a per message basis, but instead buy plans for “buckets” of text messages. But is this simply a method to force consumers into expensive plans they would not have needed if the per message rate hadn’t gone up? And are they a warning sign of future price hikes to come on other parts of consumers’ cell phone bills?

The concentrated nature of today’s cell phone market should make us wary of other challenges to competition in this industry. It is imperative that we work to remove undue barriers to competition to ensure consumers the best rates and services.