Class action targets text-message charges
Litigation follows Senate panel letter
September 15 2008 - 1:46 pm ET | Jeffrey Silva | RCR Wireless News
A class-action antitrust lawsuit accuses AT&T Mobility, Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc. of acting together to hike the price of wireless text messages. The new litigation comes on the heels of a Senate lawmaker’s probe into rising text charges and adds to the mounting litigation on texting practices by national cellular carriers.
“Plaintiffs allege that during the class period the defendants conspired to fix, raise, maintain or stabilize prices of text-messaging services sold in the United States. Because of defendants’ unlawful conduct, plaintiffs and other class members paid artificially inflated prices for text-messaging services and, as a result, have suffered antitrust injury to their business or property,” stated the 16-page lawsuit filed in U.S. District Court in Illinois.
The lawsuit, which defines the class period as Jan. 1, 2005, through the present, appears to have been prompted by Senate Judiciary antitrust subcommittee Chairman Herb Kohl’s (D-Wis.) probe into why the cost of text messages levied by the four national wireless operators has risen from 10 cents per message a few years ago to 20 cents per message today. The lawsuit was filed two days after Kohl made public his letter to the four CEOs of AT&T Mobility, Verizon Wireless, Sprint Nextel and T-Mobile USA and makes detailed reference to Kohl’s inquiry.
Kohl, who asked wireless executives to respond to questions on text-message price increases by Oct. 6, strongly suggested higher charges are related to increased consolidation in the cellular industry and thus greater market power by the four companies.
“We just received the lawsuit and are reviewing it,” said Marty Richter, a spokesman for AT&T Mobility. Richter noted the wireless industry is intensely competitive and that rates for a variety of text-messaging plans offered by the No. 1 operator are driven strictly by market forces.
Matthew Sullivan, a spokesman for Sprint Nextel, said the No. 3 wireless provider has not yet reviewed the class-action complaint.
Verizon Wireless did not immediately respond to a request for comment.
“T-Mobile believes this lawsuit is without merit,” stated the No. 4 wireless operator. “Wireless consumers enjoy a dynamic market that offers many choices in communications carriers, and plans and services. T-Mobile is extremely proud of the great value we provide to our customers every day.”
In addition to the new antitrust lawsuit and Kohl’s investigation, national wireless operators face a slew of class-action lawsuits on unexpected monthly charges on consumers’ bills for allegedly unauthorized services , including texting. The most recent lawsuit of this kind was filed late last month against Sprint Nextel in U.S. District Court in Kansas City.
Texting constitutes an increasingly important revenue stream for cellular operators. According to mid-year figures by industry association CTIA, 75 billion text messages are sent every month. Overall, CTIA said wireless operators generate $27.5 billion a year from wireless data, a big chunk of which is generated by text messages.
September 16, 2008 06:01 am
C. Cook, you are both right and wrong. The same resources are used to deliver a text message as to deliver a call. The only difference is the text message doesn't require a continual communication channel to be open for any length of time as a voice call would. It still however is delivered as a call and will use the same resources on the cell site and at the switch. It just won't use them for as long.Also, some of you forget the sheer scope of text messaging. Billions are sent each day, and in order to support that kind of traffic, with less than 10 second delivery times, takes a serious amount of equipment that is constanly being upgraded and capacity increased as text messaging usages increases.As for cost, 20 cents is only charged to individuals who don't have SMS plans. $10 for 1000 is pretty standard and that is a penny a text. As for prices doubling, well its simple economics, supply and demand. Even a business major can figure that one out. As for us engineers, well I am angered more over Subway getting rid of $2.99 Tuesdays for $5 foot longs. The same sandwich that cost me $2.99 now costs me $5. And frankly, food is more important to me than text messaging. Maybe Senator Kohl sould be sending letters to Subway and Quiznos. Just a thought.
September 15, 2008 01:52 pm
Charging even 10 cents is too much for text messages. Even a full 160 character message is less than 1K of data. If I can buy an unlimited phone only data plan on T-Mobile for $5.99 how is it that the basic messaging plan (400 messages) costs $4.99. With this lowest package messages are barely over 1 cent and yet they are still making money proving the point they are price gouging.I agree with C Cook's statement. I shouldn't have to pay the same rates when I don't buy my phones from my carrier as the person that does.
September 15, 2008 01:52 pm
Charging even 10 cents is too much for text messages. Even a full 160 character message is less than 1K of data. If I can buy an unlimited phone only data plan on T-Mobile for $5.99 how is it that the basic messaging plan (400 messages) costs $4.99. With this lowest package messages are barely over 1 cent and yet they are still making money proving the point they are price gouging.I agree with C Cook's statement. I shouldn't have to pay the same rates when I don't buy my phones from my carrier as the person that does.
September 15, 2008 01:52 pm
I agree with C. Cook. I don't mind the service providers making some money from text messages, but I think it should be more reasonable compared to the cost of delivering the service. Another improvement would be to charge only for outgoing messages, which Sprint used to do (not sure if they still do). I cannot control how many text messages other people want to send me; only how many I send out. With spam messages, having to pay for incoming messages gets even worse. My solution is to block text messaging on my phone completely, but it would be nice if I didn't have to do that to avoid being charged for undesired messages.
September 15, 2008 01:52 pm
While I can appreciate the state and federal governments'interest in protecting their constituents from abusive anti-trust practices, the allegation that the "fix is in" is speculative and circumstantial at best.The Monthly Recurring Charges (MRC) for rate plans have remained largely static and consistent among the three major carriers - with each simply touting its network and alternative advantages as the reason to switch. This is very much what a competitive marketplace, free of anti-trust influcence, is designed to accomplish. Offer the consumer a variety of choices at a reasonable rate. However, consumers are quick to forget that the carriers aren't offering service out of the goodness of their hearts. There are profits to be made - or revenues to recoup. To compensate for the stagnant trend in MRCs, carriers have been leveraging the strengths, features, and advantages of their data services to bolster income. The increase in text messaging rates is likely not the result of an anti-consumer conspiracy, but an attempt to capitalize on market trends and a new consistent revenue stream. The carriers, however, are trying to steer their subscribers to cost-effective messaging plans to cover a variety of messaging needs.The bottom line - if you don't want to pay $.20 a message - don't text. If you want to text - get a plan that will drive down the cost per message and get your thumbs ready for action.
September 15, 2008 01:52 pm
I have been unhappy with what wireless carriers charge for Texting for years. Texting is almost pure profit and only requires a small fraction of the bandwidth resources needed for a 1 minute voice call (which currently costs 5 cents per minute with some prepaid plans). During a 1 minute voice call, a wireless carrier can transmit dozens of Text messages. The true cost of a Text message, plus a reasonable profit margin, is well under 1 cent and likely under 1/10 of a cent. There are other charging practices that wireless carriers are likely to be sued for in the near future. For example, the practice of charging a subscriber that has fully paid for their phone the same rate as a subscriber that is having their phone subsidized. There is definitely room for some clean-up in how wireless carriers charge for their services.