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Home » Hardware

The Reason Behind The Rising Text Messaging Rates

Submitted by on September 10, 2008 – 3:25 pm2 Comments

cell phone
Since 2005, consumers have seen a 100% increase in the cost of incoming and outgoing text messages.

Senate Judiciary Committee member and Democrat Herb Kohl, has asked the nations wireless carriers to justify the large price increases of text messaging. Kohl is concerned that this is an indication of decreasing competition between the Big Four and is suspicious as companies all have implemented price increases at relatively the same time.

This has not only been an issue in the United States but also in Canada and in Europe. Just last month, Telus and Bell, two of the largest wireless providers in Canada started to charge for incoming text messages to those who did not already have a texting plan.

Kohl has stated –

“This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace”

I agree completely with this statement and this is why. If you think about it from the wireless companies perspective, there is much less competition for new clients then there was 10 years ago. Once the cellphone company gets a customer for the first time, they most likely have them for the long term, 6-10 years.

While in university, I conducted a study that looked at customer sanctification among the 3 largest cell phone providers in Canada. I discovered that many cell phone users rated their provider poorly in customer satisfaction, price and features, but only a small percentage did actually change companies after their 2-3 year contract expired. Of those surveyed, the majority said they did not bother to switch providers because it would require extra effort and time. Even those who where dissatisfied where almost as unlikely to switch providers then those who where satisfied. Keep in mind that my sample was university students but this may be a good generalization of what is really going on.

If this is true, we can assume that due to the slowdown in new customers and the habits of existing customers, wireless providers have to do one of too things(or both) to keep their bottom lines growing. Find ways to cut internal costs or increase monthly cell phone bills. Seems to me that its the latter in this case.

In Canada, Telus spokesman AJ Gratton, says the rapid growth of texting as the reason for the new charge:

“This volume places tremendous demands on our network and we can’t afford to provide this service for free anymore.”

Either way the higher prices are here for good so there’s really not much we can do.

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2 Comments »

  • Justin Gill says:

    Hey great site. The reasoning of text messages putting a strain on cellular networks is a load of crock.

    I have the iPhone and pay $30 CAD per month in Canada for 5GB of data. I am a fairly heavy phone user and in the two months I’ve had this phone haven’t hit 2.5GB of data usage.

    Let’s see, a txt message is about 10k in size (or less).
    1MB of data = 100 text messages
    5000 MB x 100 txt messages = 500 000 text messages with $30 per month plan

    So they will charge me $30 an I get a data plan capable of sending 500 000 or more text messages. Last time I saw the text message plans I wasn’t getting a 500 000 allocation..

  • Coast says:

    Your right. If the majority of cell phone users knew the going rate for transmitted data then maybe these companies wouldn’t have the nerve to increase rates.

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