Competition and Text Messaging

By TChris, Section Other Politics
Posted on Thu Sep 11, 2008 at 04:33:30 PM EST
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This isn't the most pressing problem facing the country -- it isn't even in the top twenty -- but Sen. Herb Kohl nonetheless has a point when he wonders why it should cost 20 cents to text a question mark to a friend.

In his letter, Kohl points out that Sprint was the first major carrier to up its text messaging charges, increasing them from 10 to 20 cents. The others eventually followed suit. Kohl believes, as many others do, that text messages are so small that they do not warrant such a large rate increase. The senator also points out that since all four carriers raised the price around the same time, they have not engaged in the "vigorous price competition" that is expected in a free market. The big four wireless carriers serve more than 90 percent of the cell phone market, so the absence of competition for text message pricing is definitely worth looking into.

Examining the larger problem of lax antitrust enforcement -- the Justice Department's current philosophy that if two or three or four huge companies share an entire market, that's all the competition we need, even when it amounts to no competition at all -- might be a more productive use of the senate's time.

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Competition and Text Messaging | 36 comments (36 topical)

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Microsoft aside (5.00 / 3) (#3)
by Steve M on Thu Sep 11, 2008 at 04:44:14 PM EST

antitrust enforcement is one of those areas where I truly wonder how much of a difference there was between the Clinton and Bush administrations.

I worked on a couple of Big Oil mergers during the Clinton years (it's how I got a free trip to Wasilla, Alaska!) and gosh, I really didn't get the sense that the government was scrutinizing the competitive issues at all. In fact, it's my strongly-held belief that a lot of the problems we face in the domestic energy market today (including a lack of refining capacity) are the result of total vertical integration in the oil industry that our government really shouldn't have allowed to happen. Oh well, I guess I played my part!

Antitrust enforcement is probably one of the least sexy political issues in existence, but it really does make a difference. It's like we need to elect Teddy Roosevelt all over again.

I agree wholeheartedly (5.00 / 1) (#11)
by tree on Thu Sep 11, 2008 at 05:13:53 PM EST

Decades ago when I was very young and very idealistic, I planned to become a lawyer and go into anti-trust enforcement. Then I realized that there was very little anti-trust enforcement happening and I probably wasn't cut out temperamentally to be a lawyer. There are probably scads of lawyers working anti-trust for corporations, but its got to be a lonely and unrewarding job to be a government anti-trust lawyer. You've got my admiration if you spent time beating your head against that wall.


: Hehe (5.00 / 1) (#17)
by Steve M on Thu Sep 11, 2008 at 05:28:23 PM EST

Working in antitrust law is all about huge piles of documents. I spent a month in Alaska because someone stumbled across a warehouse with 50,000 boxes of documents that had to be reviewed for the merger approval.

"vigorous price competition" (5.00 / 2) (#4)
by nycstray on Thu Sep 11, 2008 at 04:50:19 PM EST

I believe is obsolete.

{just my jaded opinion}

Not on the black market is ain't..... (5.00 / 1) (#21)
by kdog on Thu Sep 11, 2008 at 05:33:37 PM EST

now there is your free market:)


: not really (none / 0) (#33)
by wystler on Thu Sep 11, 2008 at 06:11:52 PM EST

perhaps you were merely snarking, but the model free market features freely available price information. that's not a feature of a black-market bazaar.

Those price moves stink of (5.00 / 2) (#5)
by scribe on Thu Sep 11, 2008 at 04:53:18 PM EST

something called "conscious parallelism", which is when competing companies in a market raise their prices in parallel not in response to market conditions (e.g., b/c the price of raw materials for their product has gone up), but rather because they see one company can continue to get business at the higher price, so they decide to do the same.

It usually only happens in an oligopolic market, where there are a few competitors and not a lot of innovation, and relatively high barriers to entry against new competitors. In such a situation, the competitors can do pretty much what they want, price-wise, unless and until either the (1) government smacks them down, (2) an innovation comes along that makes them get off their fat behinds and compete, or (3) their executives finish sucking the last of the life out of the companies and into their own pockets and the companies collapse of their own weight.

Yes, it's an antitrust violation (at least in principle - IIRC, it's a Robinson-Patman Act violation, but it's been years since I worked one of those cases). The problem is proving it's conscious parallelism and not a legitimate response to a market condition.

One used to see a lot of this in the domestic steel manufacturing industry, before it collapsed under the weight of imports (endgame alternative 3 above). The steel companies devoted a lot of time, effort and money to making sure they got away with conscious parallelism while making sure they had good excuses for everything which involved someone else doing something which made their prices have to move.

Antitrust enforcement needs to happen, because it is an essential check and balance on the natural tendency of money to attract more money and flow into fewer and fewer hands. Given the Republican bias of the last years for that as the desired state of economic affairs, we can expect no change without a change of party in control.

: In the case of cell phones (5.00 / 2) (#30)
by nycstray on Thu Sep 11, 2008 at 06:04:30 PM EST

but rather because they see one company can continue to get business at the higher price, so they decide to do the same.
consumers are bound by contract. It's not like everyone can switch when the price goes up. And with cable, I only have one option. I think I only have a couple of dsl options, etc. Bottom line, in some cases, you can't vote with your wallet.

It's also the ... (5.00 / 1) (#6)
by Robot Porter on Thu Sep 11, 2008 at 04:54:12 PM EST

existence of multiple standards. This not only makes cell service less reliable, but gives the companies a lot of excuses to charge more.

And the multiple standards exist, supposedly, to increase competition.

Because they can? One credit (none / 0) (#1)
by oculus on Thu Sep 11, 2008 at 04:42:02 PM EST

card company started charging a percentage on charges made overseas. Now all do. Now my credit union charges for ATM withdrawals in foreign currency. What next?

while i wouldn't know a text (none / 0) (#2)
by jeffinalabama on Thu Sep 11, 2008 at 04:43:49 PM EST

message from Shinola, this looks like a case of collusion to me. That's anti-trust. However, IANAL, so my interpretation isn't legal, i suppose...

Easy solution.... (none / 0) (#7)
by kdog on Thu Sep 11, 2008 at 04:59:47 PM EST

stop sending text messages.

If they see their text message revenues crumble, the price will come down.

I've changed my view on this stuff over the years, from a pro-"regulate the hell outta every industry" guy to more of a free market, let the chips fall where they may as long as the game ain't rigged guy. I'm more concerned with the contracts and subsidies the telecoms get from the government, and if a start-up telecom would have the same access to same...not what telecoms charge for a text message no one is obligated to purchase.

Well (5.00 / 2) (#8)
by Steve M on Thu Sep 11, 2008 at 05:05:39 PM EST

the game is rigged when there are barriers to entry that prevent real competition. Consider, for example, how banks charge you all sorts of annoying fees, and then you have your smaller, local banks that try to attract your business by advertising that they have no fees. That's how competition is supposed to work.

But if there are no local banks, and just a handful of huge corporations controlling the market, there's much less incentive for them to innovate and try to attract your business with incentives like that. Did you ever think to yourself "hey, how come every single cell provider insists that I sign a 1-year contract?" It took a long time before someone finally broke into the market and decided to attract customers by offering service with no lengthy contract.

You don't have to regulate the hell out of every industry, you just have to make sure that two or three companies don't gobble up all the market power to the point where consumers are getting ill-served because there's no real competition any more. If there are significant barriers to entry - like, for example, if you have to lay a nationwide fiber-optic network to be able to offer phone service - then it's not so easy for you or me to just open up a shop and say "hey, I'm offering it cheaper, don't go to those big guys any more!" That's the key concept.


Hear what you're saying... (none / 0) (#13)
by kdog on Thu Sep 11, 2008 at 05:21:32 PM EST

Telecommunications is unique with the need for a network and satellites and all that. How much of what Sprint and the bigboys use is govt. owned or subsidized? I'm not googling the right words, I assume a good chunk.


: By the way (none / 0) (#32)
by Steve M on Thu Sep 11, 2008 at 06:11:45 PM EST

another good example of when it helps for govt to get involved was the recent ruling that providers have to ensure portability of numbers.
When you can't keep your number, that creates a barrier to entry, because you're less likely to switch for a better deal if it means you have to change numbers.
So by making this a requirement, they increased the opportunities for competition, which means LESS regulation is needed down the road in order to make sure things are fair. The big telecoms lobbied hard against this rule change, by the way, it's a wonder they lost.

kdog do have a point though. (none / 0) (#15)
by sarcastic unnamed one on Thu Sep 11, 2008 at 05:24:30 PM EST

You can chose not to text.

And, if the demand and fat profits remain, likely there will be tech-savvy start-ups that undercut Big Cell.

And, in fact, there already are, although I don't think any of them go phone-to-phone yet...


Yeah (5.00 / 1) (#19)
by Steve M on Thu Sep 11, 2008 at 05:32:06 PM EST

It's industry-specific, and even though I try to be a good liberal, I'm pretty much happy ensuring that there's an environment where startups can compete fairly and then just letting everyone go at it.

Telecommunications is challenging because, I mean, you need a network. It's kind of like trying to start up your own railroad.

Heck, text messages seem really easy for me to just dispense with, but maybe that's because I'm a certain age. I think if the kids couldn't text any more they would just wither up and die. Heck, when I was that age, nobody had a cell phone, and only the drug dealers had pagers.


: Flashback.... (none / 0) (#23)
by kdog on Thu Sep 11, 2008 at 05:37:13 PM EST

to sitting by a payphone waiting for the man to answer your page....and trying to keep a passerby from using the phone.
Thanks for that Steve:)

I'm (5.00 / 1) (#35)
by Ga6thDem on Thu Sep 11, 2008 at 06:48:39 PM EST

doing my part. I had text messaging taken off my cell phone. Mostly because my teenager thought it was the only way to communicate and did it in the dead of night when he should have been studying or sleeping. One huge bill with tons of text messages will tend to do that.


I admit (none / 0) (#9)
by Fabian on Thu Sep 11, 2008 at 05:09:17 PM EST

I don't see the attraction.

How many bells and whistles do we need?

As hand held internet devices become more prevalent, I expect texting to drop off. It's faster than email or voice mail, but it's an inferior technology. After all, I can send a text message with an attached document or image via email and it doesn't cost me a cent more. If I did that with a cell phone, they'd probably ding me for every byte of band width.

Economics rule.


I guess you don't have teenagers (none / 0) (#10)
by SomewhatChunky on Thu Sep 11, 2008 at 05:13:35 PM EST

D@mn youngsters today. (none / 0) (#12)
by tree on Thu Sep 11, 2008 at 05:18:34 PM EST

Why in our day, we had to walk uphill both ways to get to a pay phone.<snark>


Back in the day (5.00 / 1) (#16)
by Fabian on Thu Sep 11, 2008 at 05:28:13 PM EST

I would call for a ride home by using a pay phone to call home, letting it ring twice and hanging up.


I bet you called collect, too, and then hung up. (5.00 / 2) (#18)
by sarcastic unnamed one on Thu Sep 11, 2008 at 05:30:03 PM EST

We did, anyway...


Double flashback.... (5.00 / 3) (#24)
by kdog on Thu Sep 11, 2008 at 05:39:40 PM EST

when 1-800 Collect came to be, and you were supposed to leave your name on the recording, but you just said "pick me up" real fast.

This thread has become a time warp:)


Wow, now you've got me going. (none / 0) (#25)
by sarcastic unnamed one on Thu Sep 11, 2008 at 05:50:12 PM EST

Call a friend collect and then, before your friend tells the operator that he will accept the collect call from "SUO," you chime in and quickly tell your friend where to pick you up. Your friend then declines the collect call and doesn't get charged for it.

I told my mom about that trick once, and she let me know in no uncertain terms that it was stealing, and she was right.


I think my moms taught me.... (5.00 / 2) (#28)
by kdog on Thu Sep 11, 2008 at 05:58:26 PM EST

that trick after getting a bill with some collect calls on it.

And I've accepted a few collect calls from the pen, you know what they cost...so who's stealing from who?...:)


: Yep, many years ago, (5.00 / 2) (#31)
by sarcastic unnamed one on Thu Sep 11, 2008 at 06:06:51 PM EST

that's the last collect call I ever made. From the Orleans Parish Jail.
My friend said when the operator told him where the collect call was coming from, he couldn't wait to find out which of his friends was in there.
Apparently, despite the image to the contrary, cops in The Big Easy will bust you for drinking too much on Bourbon St...

Yeah (none / 0) (#20)
by Steve M on Thu Sep 11, 2008 at 05:32:38 PM EST

and the booths were smaller and the receivers were heavier.


Don't text.... (none / 0) (#14)
by kdog on Thu Sep 11, 2008 at 05:23:20 PM EST

and don't spoil your kids:)


I do. (none / 0) (#36)
by Ga6thDem on Thu Sep 11, 2008 at 06:49:27 PM EST

I told him to call them.


There's no way (none / 0) (#22)
by ChrisO on Thu Sep 11, 2008 at 05:34:04 PM EST

texting is going to go away in the near future. Teenagers and kids in their 20s often text much more than they talk on their phones. The reason for the price increase is that texting has become ubiquitous, and they see it as a gold mine. I'd be interested to know what the projected revenues are from this increase. I bet it's mind boggling.

i need a phone for two things: (none / 0) (#26)
by cpinva on Thu Sep 11, 2008 at 05:56:01 PM EST

make calls.
receive calls.

anything else is superfluous. unfortunately, getting a cell phone that only does those two things is not possible, none are made. when i had to finally break down, and get a new phone (because my old one finally croaked), i got one (for an actual out-of-pocket cost of $2.50) that does everything short of making dinner.

i never use any of this stuff, but there it is. my son, who does, forced me to get him on a monthly plan: $20 for up to 5K text messages a month.

sounds like a lot, doesn't it? heck, i thought it did. however, that is both going and coming (same as cell phone minutes), anything over is a .45 charge per unit. he dies if it goes over!

two tin cans and a string are starting to look really, really good at this point! :)

: Sounds like you're in the target market for the (none / 0) (#29)
by sarcastic unnamed one on Thu Sep 11, 2008 at 05:59:46 PM EST

Jitterbug. So am I, actually...

40 cents. (none / 0) (#27)
by bagelche on Thu Sep 11, 2008 at 05:57:35 PM EST

All other points aside, I'd like to note that it actually costs 40 cents per message. Most carriers in the US charge to send and receive text messages. On AT&T thats 20 cents to send and 20 cents to receive. 40 cents for 160 characters of data.

A short study was done that compared the cost of SMS messages to messages to the Hubble telescope. Guess which was more expensive.

Let the youngsters pay more so that (none / 0) (#34)
by MyLeftMind on Thu Sep 11, 2008 at 06:30:13 PM EST

our regular monthly cell bills will be cheaper.

Dream on!

BTW, I can get text messages by someone emailing my phone number @mycellprovider, which is quicker than typing text on a phone, and still accessible to me during meetings. Worth the 20 cents.