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DOJ Ends Inquiry Into Soaring SMS Prices
200% industry-wide markup for service that costs carriers nothing? No problem.
by Karl Bode 11:29AM Friday Jan 15 2010 Tipped by hoyleysox See Profile
The price of sending text messages via the nation's largest wireless carriers has skyrocketed in the last few years, jumping from five to twenty cents, per message, both directions. If not on a bulk plan, that's a forty cent fee every time someone sends or receives a 160 character, 140 byte communication. It's a pretty dandy profit margin when you're charging (by some estimates) around $1,310 per megabyte for a service that doesn't actually cost anything to provide -- given text messages travel over tower control channels for free.

The particularly curious bit is how an industry that is supposed to be so competitive (at least according to carriers) somehow allowed all carriers to simultaneously jack up SMS prices 200%. In a truly competitive market, you'd assume one of the carriers would have competed on low (or even free!) per-SMS price, but nobody did. Some in Congress picked up the faint scent of collusion, so last year both Congress and the Justice Department started poking around to see if SMS revenues weren't just a little too spectacular.

Carriers like Verizon and AT&T quickly responded to the inquiry, arguing that if you look at the numbers they'd like you to -- SMS prices have actually decreased. Both carriers argued that because they offer consumers bulk SMS packages now -- most users ultimately wound up paying less for SMS. Still, if every single carrier is artificially jacking up the cost to send individual SMS rates -- just to push users toward these bulk plans -- without any competitive repercussions, isn't there still something fishy going on?

Not according to well-lobbied Uncle Sam.

According to the Wall Street Journal, insiders say that the Justice Department has concluded their probe into high SMS prices. They're not getting into specific findings, but indications are that the DOJ's antitrust division couldn't find evidence of collusion (somebody forgot to save meeting minutes!), or didn't think there was anything worth further investigation. Either way, there's not going to be any action taken, and the DOJ's moving on to not punishing carriers for other things they supposedly didn't do:
The Justice Department has informed several wireless carriers that it has concluded an inquiry into whether the carriers colluded to set text-messaging rates and has no plans to take action on this issue, according to industry and government officials with knowledge of the agency's inquiry.
Granted, consumers were dumb enough to overpay for the service, but that still doesn't make collectively over-charging for a service any more ethical, especially if there was collusion. Fortunately, the evolution of open wireless networks and the continued rise of the smartphone will quickly make SMS services irrelevant anyway. As phones evolve into fully-functional computers, and users migrate to a myriad of instant messaging and other communications platforms, carriers will turn toward more expensive data plans to try and counter this lost revenue. Still, it was certainly a nice cash cow for carriers while it lasted.

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