Verizon, AT&T defend text messaging price policies

Executives from the nation's two largest carriers defended their respective text messaging rates at a Senate hearing yesterday, denying allegations of collusion among Tier 1 carriers to raise text messaging prices.

Randal Milch, Verizon's executive vice president and general counsel, said in testimony before the Senate Judiciary Committee's subcommittee on antitrust, competition policy and consumer rights that it was "absolutely false" that carriers conspired to raise rates on certain types of text messages.

Milch said that most Verizon customers buy their text messaging plans in buckets, instead of "by-the-drink" text messages, meaning text messages purchased outside of bundled plans. Customers pay a fee per text message in those cases. He also said that individual text messages not purchased through post-paid plans represent less than 1 percent of the text messages Verizon provides.

An AT&T representative made similar pronouncements. "The faulty notion that prices for text messaging have risen derives from an unduly narrow interest in the trend of a single pricing option for text messaging services, the pay-per-use option, when the vast majority of AT&T's customers do not choose that option," said Wayne Watts, general counsel of AT&T, according to Reuters.

Not surprisingly, industry association CTIA echoed the sentiments. "The U.S. wireless industry is the most competitive and innovative in the world. Third party organizations and influentials--from Consumer Reports Magazine to Former Vice President Al Gore--have echoed this statement," CTIA chief Steve Largent said in a release, which cited association figures showing 270.3 million U.S. wireless subscribers sent more than 1 trillion text messages in 2008, up from 2007 when 255.4 million subscribers sent 363 billion text messages.

Last fall, shortly after Sen. Herb Kohl (D-Wisc.), the subcommittee chairman, sent letters to AT&T, Sprint Nextel, T-Mobile USA and Verizon asking them to justify raising rates on "by-the-drink" text messages, the carriers were hit with lawsuits claiming the carriers conspired on test-messaging pricing. Verizon's Milch, in his testimony, said there was a great variation in the four carriers' prices for these messages for prepaid customers:

  • Verizon charges 1 cent, 5 cents or 10 cents per message, depending upon the plan.
  • AT&T charges 20 cents per message.
  • Sprint charges 10 cents per message (or can have all of their text messages included for free, depending upon the plan).
  • T-Mobile charges 5 cents per message on incoming messages, and 10 cents per message on outgoing messages.

These variations, as well as variations in how the carriers price bundled messages, show that there are more differences than similarities in how the carriers price text messages, according to Milch.  "Nor is there any coincidence in the timing of price changes for the narrow category of post-paid 'by-the-drink' text messaging," Milch said in his testimony. "Different carriers changed prices for this product over a period of almost two years. There was no collusion or price-fixing."

For more:
- see this release
- see this Electronista article
- see this Reuters article

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