sms

• There’s no doubt that text message prices have doubled between 2005 and 2008, a time when 6 major mobile telecoms consolidated into only 4. As the NYT reports, Senator Kohl (WI) sent a letter to Verizon Wireless, AT&T, Sprint and T-Mobile, inviting them to answer some basic questions about their text messaging costs and pricing.
• All four carriers, who refused to talk to the Senator, are all guilty of unanimously changing their text message pricing from 10 cents to 20 cents and with little to no reasoning. 2.5 trillion text messages were sent this year, up 32% from last year, and 3.3 trillion messages are expected to be sent next year (up over 1000% since 2005). T-Mobile blames the fact that their revenue per-text message has gone down 50%, and others say that the prices are not actually $0.20 per message if someone is to use all the text messages allotted in their $10 or $15 package.
• Neither response is valid. Pricing per message may be going up slightly due to bandwidth (or is it?), but the volume of text messaging is going up significantly, offsetting any downturn in single SMS revenue. In any case, there is no justifiable explanation for a 100% increase in pricing over the last 3 years unless the carriers think that ignoring overall revenues and just focusing on revenue per text is acceptable. Give me a break.

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• In any event, we will find out their reasoning soon enough. 20 class-action lawsuits have been filed in the US against the 4 carriers, all claiming collusion over price-fixing for text messaging. Number one issue at hand will be whether or not the increase in text message volume over the last few years had actually caused an increase in price per message for the carriers. Question 2 will be, if prices have gone up, is it enough of a rise to equally justify the price jump? Srinivasan Keshav, a professor of computer science at the University of Waterloo, in Ontario, said: “Messages are small. Even though a trillion seems like a lot to carry, it isn’t.”.
• Text messaging is the most top secret business in the telecom industry. No one knows how the network operates and just how much if anything the carriers are paying for its use. This business has become their bread & butter over the years, with nearly every TV show, commercial and billboard asking for you to text message something in for a prize, information, purchases, etc. We have even seen businesses like ChaCha build a whole mobile search engine business based on texting in a question and receiving a text back with the answer. AT&T just struck a deal with them.
• So, what will be the outcome of the lawsuits? Hopefully the black box will be opened and the truth behind the SMS operation will be revealed. It will most definitely lower pricing, and maybe it will mandate pressure be lifted from third-party application developers from launching competing services. Example: my iPhone currently is unable to keep applications live running while I don’t have them open. If my Facebook application or another third-party app was able to stay live, I could just as easily send an instant message to another one of my hundred friends with an iPhone, saving myself the hassle of waiting for it to send and then waiting to receive it back. Back when I had a Blackberry, I used Blackberry Messenger, a very similar service, which I could use in any country I went to and instantly message friends back and forth for free. It’s quite mysterious that the Apple, projected to sell 45 million more iPhones next year doesn’t have this capability. These lawsuits may be able to resolve it.

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