Are Text Messaging Prices the Biggest Wireless Issue?

How much do you pay for a text message? In case you didn’t know, the cost of a text message has doubled in the past few years - from 10 cents to 20 cents - and suddenly Sen. Herb Kohl wants to know why. (Techmeme)

I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period. Please provide a comparison of prices charged for text messaging as compared to other services offered by your companies, such as prices per minute for voice calling, prices for sending e-mails, and prices charged for data services such as Internet access over wireless devices, from 2005 to the present. Finally, please state whether your text messaging pricing structure differs in any significant respect from the pricing of your three main competitors. Please provide this information no later than Monday, October 6, 2008.

These are legitimate questions and the wireless carriers should answer them. And I applaud the Senator for asking them. But I have to wonder - as the U.S. becomes more like a third-world country, instead of a world leader when it comes to things like broadband speeds and advancements in mobile technology - is the fight over text messaging prices really the right fight?

Maybe it is. I go out on a limb here and run the risk of being ridiculed because my perception might be warped. I pay a flat $30 extra every month for a plan that provides unlimited text messaging - as well as picture and video messaging - for all five phones on my family plan. With all of the SMS alerts I get throughout the day (I love the news headlines that come via Twitter), as well as all of the texting that my pre-teen kids do, I am sure that I come out ahead at the end of the month. But if not, oh well. It’s $30 and I don’t have to worry about watching the itemized charges.

When it comes to mobile technology, I’m more interested in the advancement of mobile technology - speeds, applications and services that make the mobile experience as welcoming as the desktop/laptop experience, devices that aren’t tied to a single carrier (iPhone/AT&T, for example) and privacy on the mobile Web.  I’m not trying to downplay the investigation of the dollars and cents of SMS text messaging. I just can’t help but yawn and wonder if there are bigger battles out there.

Comments

[Nextel Acce...:]

rate plans keep going down, wireless companies need to recoup this loss of revenue. its as simple as that

2008 Sep 10 06:23 PM

[kyndyll:]

Unfortunately, rate plans aren't going down. Quite the opposite. Even incentives to sign for 1 (or more) year deals have been scaled back. Text messaging pricing is nothing but a naked money grab.

2008 Sep 11 09:58 AM

[Stiletto:]

Why should any private, non-regulated enterprise be expected to disclose their marginal revenues, marginal costs, fixed costs, usage factors, customer behaviors, etc.? Why? Who are you to ask these companies to disclose proprietary information?

The end-user price for messaging has gone up for a couple different reasons: a) it's increasingly popular, demand is hot (why not charge whatever you can?); and b) carriers prefer 'predictable' revenues in the form of flat-rate plans (and would prefer to avoid 'metered' billing).

Your $30 'add-on' to support five phones sounds like a pretty good deal; stop complaining

And to Senator Herb Kohl: you've obviously forgotten that every single member of the US Congress (House & Senate) receives a totally free smart device with unlimited voice & data usage, graciously provided by all the major carriers - thank you very much; stop the grand-standing and re-direct your attention to much-much-much more pressing issues.

2008 Sep 11 04:51 PM

[Dean Bubley:]

Mobile operators around the world are trying to maintain their overall SMS revenues by playing with bundling, pricing elasticity and so forth. Volumes are going up, but (on average) prices are coming down. They are trying to encourage users to adopt large bundles (with a cheap "per message" rate but better revenue visibility) by increasing one-off message prices.

That said, some of the US carriers' pricing seems egregiously high when compared to prices of 1c or less in some countries in Asia which use essentially the same type of infrastructure.

There is a fine line between "value-based pricing", where the user willingly pays a premium for a service they really like - and "resentment-based pricing", where the user feels extorted, but pays anyway as it's a "must have" service. Resentment-based pricing leads to spectacular churn rates at a later date, when credible competition appears. It also leads to regulatory pressure if customers feel ripped-off.

From a European analyst's perspective, some of the North American carriers are now seriously miscalibrating the value/resentment balance on SMS pricing.

2008 Sep 11 05:34 PM

[squawk:]

Agree with Senator's request. 100% increase is ridiculous. Costs to deliver SMS should be going down, not up. It is clear that per text message pricing is going up to slowly push subscribers onto a "volume discount" prepaid plan.

$30/mo is a lot to ask a subscriber who does not use text messaging as a means to communicate, nor subscribes to a frequent alert system. Notwithstanding that subscriber is likely to get a few alerts per month, which amount does not substantiate subscribing to a prepaid text message plan. Instead the sub is "squeezed" a few bucks for essentially a service is worth 1/10 of what is charged.

Bottom line, it is clear the carriers want all subscribers to subscribe to a prepaid SMS plan, figuring by "slowing" increasing the price per message, will force unwilling subs onto such a prepaid plan.

All this, IMHO, is analogous to how cable companies keep on adding channels that customers do not want to program packages to substantiate ever increasing prices for cable (or satellite), and to build their cable-owned channels that would not make a dime but for market ownership of the distribution channel.

My question to Senator Kohl, why limit your request to the wireless carriers? Why not ask the MSOs the same thing? Why be "penny-wise & dollar foolish?"

2008 Sep 12 05:39 AM

[reality kno...:]

Why have the prices increased? You are kidding me. Here is yet another Democrat trying to capture media attention while promoting himself as a change agent. Senator Kohl’s letter does not even warrant a response.

2008 Sep 15 08:43 AM