Prices for phone text messages have risen 100 percent in the last three years, and Congress wants to know why.
In a letter to the top four wireless providers this week, Sen. Herb Kohl (D-Wis.) asked for their answers by Oct. 6.
'Identical Price Increases'
Text-message prices have climbed from 10 cents per message to 20 cents in three years while the carriers' costs for sending and receiving messages has reportedly decreased. The four major carriers, which some analysts say control nearly 90 percent of the market, have raised prices at nearly the same time.
For these reasons Sprint, Verizon, AT&T and T-Mobile received the letters from Kohl, chairman of the Senate Antitrust, Competition Policy and Consumer Rights subcommittee.
His letter says, "Text-messaging files are a fraction of the size of e-mails or music downloads. Also of concern is that it appears that each of the companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace."
Gang of Four
The committee also expressed concern about recent consolidations in the marketplace from six to four carriers, leaving Sprint, Verizon, AT&T and T-Mobile dominant.
Kohl said the last major price increase was kicked off by Sprint, followed shortly by identical increases by the other three carriers.
He added, "The large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example. As chairman of the antitrust subcommittee, I am concerned with whether this consolidation, and increased market power by the major carriers, has contributed to this doubling of text-messaging rates over the last three years."
Kohl wants the carriers to cough up data on the cost of delivering services to customers. He's asking for hard numbers on music, video, voice, Internet access, and e-mail. Many consumers would probably love to get a look at those numbers as well, to see how much the services are marked up from the actual cost of delivery.
It's not illegal for companies to charge whatever the market will bear. Competitive market forces, however, would be expected to keep prices down.
The letter from the committee clearly intimates that although there may not be outright collusion among the big four to raise prices, they certainly don't feel any pressure to compete. The raw data and the carriers' responses will likely be closely scrutinized.