US Customers Overpay for SMS Messages

According to the New York Times, one Senator decided to figure out what costs carriers incur when it comes to their customers sending and receiving text messages.

Herb Kohl (D-Wisconsin), the chairman of the Senate antitrust subcommittee, submitted a short questionnaire to the USA's cellular providers. The inquiry, send to Verizon Wireless, AT&T, Sprint, and T-Mobile, wanted a breakdown of message costs and pricing. While Verizon Wireless would not allow the Senators office to release its response to the inquiry, letters from the other carriers did not have promising answers.

The responses were quick to show the pricing structure for text messaging, but they did not convey any information about how much it actually costs a carrier to send a message. Since the responses from AT&T and T-Mobile were published by Sen. Kohl's office, the carriers have become involved in 20+ class action lawsuits regarding price-fixing on text messaging services.

Quick to defend themselves, T-Mobile "called Mr. Kohl’s attention to the fact that its average revenue per text message, which takes into account the revenue for all text messages, has declined by more than 50 percent since 2005.” However, according NYT's Randall Stross, the amount of texts sent since 2005 has increased ten-fold. An estimated 3.3 trillion text messages are to be sent in 2009. If figures from the Times and organizations like CITA are true, then the cellular industry will make more money off of texts alone than the U.S. spends in two years fighting the war in Iraq. That may be hard to imagine, but 3.3 trillion texts at 20 cents a pop... you do the math.

According to Stross, there is little to no cost to send and receive text messages. The wired connection between cell towers has ample bandwidth for the messages, so some would think it's the wireless aspect? Wrong. "Perhaps the costs for the wireless portion at either end are high--spectrum is finite," says Stross. "But text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network. That’s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted."

So where does the mentality of "the more, the better" fit into all this? Well, since many cell phone users have an unlimited texting plan attached to their monthly bill, they probably think they are getting a great deal. Wrong, again. "Customers with unlimited plans, like diners bringing a healthy appetite to an all-you-can-eat cafeteria, might think they’re getting the best out of the arrangement. But the carriers, unlike the cafeteria owners, can provide unlimited quantities of “food” at virtually no cost to themselves--so long as it is served in bite-sized portions."

While all the facts have yet to be seen, its seems as though the cellular carriers are making like bandits when it comes to texting. Hopefully one of class action lawsuits will bear some consumer-friendly fruit.