Press of Atlantic City

Senate Panel Calls For Probe Of Texting Fee Hikes By Largest Cell-Phone Companies

Press of Atlantic City — Wednesday, June 24, 2009

By ERIK ORTIZ
Staff Writer

When Milagros Ruiz received a new Blackberry a month ago, her father decided it was time for a cell phone plan that included unlimited texting. He pays the bills, the 20-year-old said, and was astounded to find how many text messages she could fire off in a month.

"I'd be at like 1,500," said Ruiz, of Pleasantville, who is working this summer at the Shore Mall. "And we'd only have 500 (through their Sprint plan). It was costing him more money."

But avid texters without a regular texting plan are having to scrutinize their bills even closer as the nation's four largest carriers decided to raise their per-message texting rates again last year. In response, the chairman of a U.S. Senate panel on antitrust issues said last week he wants the Federal Communications Commission and the Justice Department to look into whether less competition in the industry has allowed for unfair price hikes.

AT&T, Sprint, T-Mobile and Verizon Wireless, which collectively serve 90 percent of U.S. cell phone users, each decided to raise rates from 15 cents to 20 cents for sending or receiving a text outside a regular plan. Four years ago, the companies were charging 10 cents per message, before increasing the cost to 15 cents.

Sen. Herb Kohl, D-Wis., who chairs the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, convened a hearing June 16 to discuss how the companies each came to raise rates around the same time at the same price. Since last fall, the companies have been hit with private class-action lawsuits claiming collusion.

Representatives from the various companies were present at the hearing and denied price fixing.

Randal Milch, Verizon executive vice president and general counsel, said that about 99 percent of Verizon Wireless users have a plan that includes texting, therefore they are not subject to the per-message cost.

And while the wireless companies might charge similar per-message texting fees, they each have other plans that show "differences in pricing outnumber any similarities," Milch said in written testimony.

For instance, prepaid customers of Verizon pay as low as a penny and as much as 20 cents per message depending on their plan. AT&T charges 20 cents per message for prepaid customers, while Sprint charges 10 cents, and T-Mobile charges 5 cents for incoming messages and 10 cents for outgoing messages.

Milch said text messaging rates in general have decreased over the years to an average 1 cent per message — the result of "vibrant" competition within the wireless industry.

But industry watchers, such as BroadbandReports.com, allege the carriers are driving up prices as a way to push customers onto plans that bundle talking with text and Web browsing, which could end up costing another $5 to $20 more.

In addition, the size of text messages are so small that the cost to carriers to transmit them — virtually nothing — does not justify the rate increases, according to ConsumerReports.org.

The act of texting, meanwhile, has grown immensely. The Gartner Group, a research firm, estimates about 3.3 trillion text messages are expected to be sent this year, up from 2.5 trillion last year.

"Texting is the new phone call," said Maryori Rios, 18, of Pleasantville, who might send as many as 300 texts in a single day. She said she pays her own bill and signed up for a $95-per-month plan through T-Mobile that includes unlimited texting.

Some analysts say the rising cost of cell phone usage — the average consumer paid $506 for their service in 2007 — could be a boost to low-cost, no-contract carriers, such as MetroPCS and Cricket Wireless, which both entered the southern New Jersey market this year.

Cricket has an unlimited talk and text plan starting at $35 per month.

"With us, they can text until their fingers fall off," said James Byrnes, indirect accounts manager with Cricket Wireless in the Philadelphia region.

To protect consumers, Ev Liebman, a director with New Jersey Citizen Action, a watchdog coalition, said there needs to be better oversight of cell phone companies.

"Our worry is price gouging," she said. "With more and more people going to cellular phone service exclusively, we're concerned that it's going to cost them more."

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