Washington digs in on text message pricing; asks about carrier exclusivity

Congress continued to take the wireless carriers to the mat over the wrong issue, specifically the cost of a text message. Now, it looks like there may be an effort to pin them down on a matter  that will likely resonate with a greater a number of people: carrier exclusivity for a specific device, notably AT&T's hold on the iPhone.

Yesterday, lawyers for AT&T and Verizon testified before the Senate Judiciary Committee's antitrust subcommittee on the allegations of collusion over the pricing of a single text message. Sen. Herb Kohl has been leading the charge on this matter since he learned that the price of a text message doubled from 10 cents to 20 cents for the major carriers.

He was right to smell a rat there but the wireless carriers did a good job yesterday of denying any sort of collusion between the carriers while highlighting the irrelevance of the pricing for a single text message, also known as a pay-per-use, or PPU. Most customers today, by far, subscribe to some sort of bundled plan that includes either a bucket of text messages or an unlimited plan for a flat monthly rate. In prepared remarks, AT&T general counsel Wayne Watts said in his testimony (PDF):

... less than 1% of AT&T’s postpaid text messaging volume is handled on a PPU basis. Instead, the vast majority of our customers take advantage of AT&T’s multiple messaging pricing plans, including those that provide a package of messages for a flat monthly rate. These plans include: 200 messages per month for $5.00, for an effective rate of 2.5 cents per message; 1500 messages per month for $15.00, for an effective rate of 1 penny per message; and unlimited messages for $20.00. For $30.00 per month, families can enjoy unlimited text messaging.

He went on to note that 99 percent of all text messages sent or received by AT&T customers are covered by one of those packages. As a result, he said, the per-message rate actually dropped  from $0.043 in January 2007 to $0.014 in March 2009, a decline of nearly 70 percent in two years.

Last fall, I chimed in on this by saying that Sen. Kohl was fighting the wrong battle with the wireless carriers. From my own experience, I have no complaints with the flat-rate unlimited text plan I have through Verizon. With teen and pre-teen kids on my plan, I feel like I come out ahead every month.

Instead, I'd like to hear more about the latest effort being launched by four Senators on the Commerce Subcommittee on Communications, Technology and the Internet who want to know whether carrier exclusivity agreements - such as the AT&T/iPhone deal - "unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."

Duh! That's a gimme, don't you think? As a consumer, my choice is restricted. I would rather have an iPhone but - even if I was willing to tolerate AT&T crappy service - I can't get one through my existing carrier, which has me tied to a two-year contract.

On the surface, it looks like the senators want the FCC to look at the impact of these agreements on rural customers. But there's an interesting line in a letter penned by the four senators that screams Apple/iPhone. The senators are asking the FCC to determine "whether exclusivity agreements place limitations on a consumer's ability to take full advantage of handset technologies, such as the ability to send multimedia messages or the ability to "tether" a device to a computer for Internet use."

You'll recall that Apple's latest iPhone 3G S allows MMS messaging and tethering - except in the U.S., where AT&T is still not ready to open those technologies to its customers.

On another related note: AT&T appears to be caving to the pressure of unhappy iPhone customers who are locked into a contract from the purchase of the iPhone 3G last year and are not eligible for upgrading prices on the new iPhone 3G S. John Paczkowski reports on his Digital Daily blog that the wireless carrier is adjusting those upgrade dates to allow some additional flexibility.

It's still a big confusing mess of dates and prices. And certainly not all iPhone customers will be satisfied. But such is the price you pay for being an early adopter, I suppose. Maybe those customers can find a way to petition Washington to next start scrutinizing the fairness of two-year contracts.