ARCHIVES: This is legacy content from before Marketing Dive acquired Mobile Marketer in early 2017. Some information, such as publication dates, may not have migrated over. Check out the new Marketing Dive site for the latest marketing news.

U.S. Senator questions carriers' rising SMS rates

Why have the four largest wireless service providers -- Verizon Wireless, AT&T, Sprint and T-Mobile -- simultaneously raised their text-messaging rates?

That is precisely what Unites States Senator Herb Kohl (D-WI) has asked the wireless carriers in a letter addressed to Lowell McAdam, CEO of Verizon Wireless; Randall Stephenson, CEO of AT&T; Dan Hesse, CEO of Sprint; and, Robert Dotson, president/CEO of T-Mobile. The move comes soon after the European Union questioned European carriers on their text-messaging rates, suggesting capped rates for consumer protection.

"What is particularly alarming about this industry-wide rate increase is that it does not appear to be justified by rising costs in delivering text messages," said Sen. Kohl in the letter.

"Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message and therefore cost carriers very little to transmit," he wrote.

"Text messaging files are a fraction of the size of emails or music downloads. Also of concern is that it appears that each of companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace."

The four companies are the nation's leading wireless carriers. All together, they serve about 90 percent of the mobile subscribers nationwide.

The cost to send a text message has gone up 100 percent since 2005. Text messages were commonly priced at 10 cents per message sent or received in 2005.

The sharp increase in rates could make consumers less accepting of mobile marketing via SMS.

As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers.

Sprint was the first carrier to increase the text message rate to 20 cents last year and now all of the other competitors have matched this price increase.

Sen. Kohl is also troubled by consolidation in the mobile industry.

"The number of major national competitors has declined from six to four," the Senator said. "The large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example.

"As chairman of the Antitrust Subcommittee, I am concerned with whether this consolidation and increased market power by the major carriers, has contributed to this doubling of text messaging rates over the last three years," he said.

Sen. Kohl asked the companies to explain why text messaging rates have dramatically increased in recent years.

The big four will need to explain the cost, technical or any other factors that justify a 100 percent.

They have also been asked to present data on the use of SMS, comparison of prices charged for text messaging as compared to other services offered and whether your text messaging pricing structure differs from competitors.

The deadline for the submission of this information is Oct. 6.

"Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text messaging services, but may instead be a reflection of a decrease in competition and an increase in market power, among your four companies," Sen. Kohl said.

To see a copy of the actual letter click here.