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Operators’ SMS Price Hikes Come Under Senate Scrutiny

Operator price hikes in text messages have come under scrutiny by a member of the Senate Judiciary Committee, who has asked the country’s top four carriers “to justify the “sharply rising rates” they charge customers to send and receive messages, reports AP.

Wisconsin Democrat Herb Kohl chair of the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, said in a letter sent Tuesday to the big four that he is “concerned” that the price hikes “reflect a decrease in competition.” Since 2005, when the cost of a text message was 10 cents, the price has increased 100 percent, to 20 cents. Sprint (NYSE: S) was the first to up its rate to 20 cents last fall, with the remaining three carriers quickly following suit.

“Particularly alarming,” noted the senator, was that the industry-wide increase, did not appear to be justified by rising costs in delivering the messages, as texts files are very small and cost carriers very little to transmit. He was also “concerned” that the top four carriers appear to have increased prices around the same time, all at identical price increases. Kohl said, “This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.”

Kohl, who noted that the big four provide service to 90 percent of all US cell phone customers, has requested that the carriers provide an explanation by October 6, 2008.

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Sep 10, 2008 7:50 AM ET

Posted In: Legal, Companies, AT&T, SprintNextel, T-Mobile, Verizon

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