Senate: Carriers Got Some SMS ‘Splaining To Do

Yesterday the U.S. Senate Judiciary Committee grilled carriers about alleged the price hike–and possible price fixing–of SMS rates. AT&T and Verizon reps spun the whole thing as a price decrease, citing bulk message plans that are more popular than per-message spending. But members of the antitrust subcommittee that conducted the hearing didn’t seem convinced.

“These sharp price increases raise concerns. Are these price increases the result of a lack of competition in a highly concentrated market?” said Sen. Herb Kohl, chair of the Senate Judiciary Committee’s antitrust subcommittee, who had previously expressed concern that the four largest cell phone companies doubled their text message rates from 10 cents in 2006 to 20 cents in 2008.

Sen. Kohl also said, “These lockstep price increases occurred despite the fact that the cost to the phone companies to carry text messages is minimal–estimated to be less than a penny per message–and has not increased.”

Carrier reps vehemently denied any illegal trust activity. Verizon general counsel Randal Milch said most Verizon Wireless customers subscribe to a texting plan, and as a result they “pay less than a penny per message,” a reduction of almost two-thirds since 2006. “As the result of the price cuts, usage has grown six-fold,” he said.

It’s not the first time that the major U.S. carriers have been accused of text-induced greed). Last fall, Verizon invited heaps of criticism after its plan to increase rates for commercial texts came to light. The company later backtracked.

I have to admit, I’m kind of torn. I agree with carriers’ claims that bulk messaging saves consumers gobs of money, and that such plans continue to grow in popularity–meaning increasingly more customers are enjoying the savings. But I also think it’s ridiculous to double their per-message rates, since this only dissuades consumers who are still just experimenting with texting. Wary or Luddite-leaning customers going to say, “See, it’s really expensive, so I’m not going to use SMS at all.” This, of course, can affect the growth of mobile marketing, particularly SMS marketing.

The carriers should consider lowering their per-message rates. This will not only generate positive PR, for a change. It will also encourage more consumers to send more texts–and in turn convince more of them to sign up for bulk message plans. And that would be a long-term win for cellular providers, and mobile marketers too.