More antitrust class-action texting lawsuits threaten national wireless providers
September 16 2008 - 4:10 pm ET | Jeffrey Silva | RCR Wireless News
The mobile-phone industry may be facing a legal texting tsunami in U.S. courts with the filing of two new antitrust class-action lawsuits against the nation’s largest wireless carriers — filings that come on top of a separate price-fixing suit in Illinois federal court and scores of class-action complaints over extra charges for text messages and other content consumers claim they didn’t authorize.
The filing of two additional antitrust class-action lawsuits in Ohio and Kansas federal courts further raises the financial stakes and legal exposure for AT&T Mobility, Verizon Wireless, Sprint Nextel Corp., T-Mobile USA Inc. and, in one case, Alltel Communications L.L.C.
The class-action antitrust texting suit brought against the four national wireless carriers in Illinois federal court attracted nationwide media attention. But that suit — which alleges conspiracy among top wireless providers to increase the price of text messages over the past three years from 10 cents to 20 cents each — may just be the beginning.
The two other antitrust class-action texting lawsuits identified today by RCR Wireless News strongly suggest the mobile-phone industry has a much bigger legal problem on its hands. At a minimum, the swiftly materializing antitrust class-action lawsuits appear to signal that trial lawyers across the country believe they have zeroed in on a legal vulnerability among service providers in the $143 billion mobile-phone industry, and that those plaintiffs’ attorneys may very well decide to pool resources to do battle against well-heeled cellular operators in the courtroom.
All told, the mushrooming of antitrust and billing class-action lawsuits against top cellular operators has begun to take on the appearance of the kind of massive litigation on early termination fees that resulted in settlements and court judgments costing wireless carriers tens of millions of dollars.
All three antitrust texting lawsuits against the industry (which all cover include essentially the same arguments) were filed shortly after Senate Judiciary antitrust subcommittee Chairman Herb Kohl (D-Wis.) announced a probe earlier this month into text message price hikes by top wireless operators in recent years. Kohl has asked the CEOs of the four national wireless carriers to respond to written questions by Oct. 6.
In addition to the three antitrust lawsuits 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 suit of this kind was filed late last month against Sprint Nextelin 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 19, 2008 06:08 am
Okay I've read every comment some good views and some that made no sense at all... If you don't work for a cell phone carrier and are just speculating don't have any business commenting, due to the fact you have no idea what you're talking about. Is it ridiculous that pay per use txts keep raising in price? Yes it is... I've worked for three different carriers and I've learned all the same thing... Texing is all profit to each carrier.. there is no big cost in sending a txt over a cell tower compared to a voice call... While a certain carrier offers free incoming txts (which is brilliant by the way) some don't and make you pay a charge for not even looking at it.. that's ridiculous. One of the writers on rcr wrote about carriers rasing pay per use costs to get customers into packages... I couldn't agree more.. It should stay at the 10c rate it once was... there's no loss to cell carriers, only profits earned... Moral of the story... stop w/ the rasing of txts!
September 17, 2008 03:37 pm
Redirecting a class action lawsuit at oil companies simply because prices are almost identical is not enough. Oil is a simple commodity with a common delivery process for all sellers. Looking outside your window as a gas station operator and pricing at the same level as your neighbours is not antitrust. What IS antitrust is having a private gas station operators meeting where you all agree to raise prices in concert then go do it. Big difference: the first is gouging (legal) and the second is cartel/oligopoly behaviour (illegal).The cell operators use game theory to predict each other's pricing strategies based on anticipated demand (high for SMS), guesses of what their competitors will do (raise prices because demand is high), and the threat of alternative messaging technologies (what's cheaper and easier than SMS?). It's a perfect opportunity to gouge, just like a gas station operator.
September 17, 2008 03:44 pm
A wireless carrier does tell you upfront how much a text will cost. Now what I don't agree with is how a phone that NEVER (speaking about most of the elderly users) uses text is getting charged for a message that was sent to them by mistake.
September 17, 2008 03:37 pm
Today's OxyMORON:"Honest Lawyer"
September 17, 2008 01:40 pm
What everyone misses in the argument is that it costs operators upwards of $200 to acquire a customer, and as much as a year to break even. Second, class actions will ultimately raise the cost of service. We all lose. Sigh.
September 17, 2008 01:40 pm
I find it difficult to understand the naive attack on class actions when we're in the midst of possibly the worst financial crisis in the history of our country. Capitalism is a great and effective economic system but left unchecked it naturally leads to uncontrolled greed. It was for this reason that the the antitrust, securities, and consumer protection laws were originally passed. In the past 8 years the regulation of the banking and brokerage industry has been substantially reduced if not outright repealed and the ability to bring consumer class actions reduced by tort reform legislation and anti-consumer judges. You can see the result and you will soon personally feel the effect and yet you all seem to believe that more unfettered, unregulated pure capitalism is the answer. We've learned this lesson before as a result of the Great Depression which resulted in the protections that have been decimated in the past 8 years and to continue to assume we can do the same thing and expect a different outcome is truly naive. Yes i am a class action lawyer so you now have a place to focus your personal attacks though i would much prefer a substantive response.
September 17, 2008 01:40 pm
Seems like most of you are really missing the point but most of you may work for operatorsI'm from Europe and I'm not a friend of law suits but this one is most welcome.In Europe the price for an SMS is around 5-10c within a country and there is no cost to receive. The same transaction here in the US would today be billed at 20+20c= that is a whopping 40c! This is gouging and overcharging in the extreme and it already was at previous 10+10 levels. How can you charge for an incoming message in the first place? There is not really a choice of accepting them or not is there? The cost for an operator for an SMS perhaps 0.1cThe US operators continues to make mistake after mistake that eventually hurts their bottom line and put US equipment vendors out of business. One recent example is ATTs one way video calling contracting to all other WCDMA operators using 3GPP two way video calling. When I asked ATT representatives at CTIA why? The answer was that two video way calling has not been very successful elsewhere, it unclear why ATT believes one way calling would be more successful. I understand ATT is also planning to launch one way voice shortly so keep your eyes open. 15+ years of TELCO experience, operator and vendorStefan
September 17, 2008 06:03 am
I agree with those who think the class action suits should be against the oil companies and not the wireless carriers. Choices and plans abound among the national and regional wireless carriers but when every single gas station in a city has the exact same price for gas, why aren't the legal hounds going after them? Is there any more outragious and obvious price-fixing than that!?
September 17, 2008 06:03 am
Why is text messaging so expensive here in the US? In other countries--Europe, Japan, etc--it's incredibly cheap.
September 17, 2008 06:03 am
I hate stupid people. I have worked for a wireless company for years and we tell our customers the pricing of text messages,its in their contract, its in their welcome guide. People pick up a contract and read what your signing!!! Grow up gret a job and stop trying to milk companies for your stupidness. Reallly, your child did ask for those supposed free ring tones, and if you dont believe it then your blind and your children have one over on you. Lets be real!