Business

Winnipeg Free Press - PRINT EDITION

Texting markup: 4,900%

Scientist says messages cost firms less than 0.3 cents

By: Sarah Schmidt

Posted: 06/17/2009 1:00 AM | Comments: 0 (including replies)

(CANADIAN PRESS ARCHIVES)

The consumer markup on some text messages is an estimated 4,900 per cent, according to a leading Canadian computer scientist who testified before U.S. senators on Tuesday.

Srinivasan Keshav, Canada Research Chair in tetherless computing at the University of Waterloo, told lawmakers probing text messaging rates and the state of competition in the wireless telecommunications industry that the maximum cost of a single text message "very unlikely" exceeds 0.3 cents.

In Canada, the large cellphone companies charge pay-per-use texters 15 cents to send a text message and, beginning next month, Rogers will join Bell and Telus with an additional charge of 15 cents to receive a text message.

In the United States, carriers recently increased their per-message rate to 20 cents for those without a text plan.

"I'm not here to judge whether the market is competitive or fair, I'm just telling you this is the price and this is the cost. Let people who are experiencing these plans decide whether it's correct or not," Keshav said in an interview before testifying.

Keshav was invited to Washington by the chairman of the U.S. Senate subcommittee on anti-trust, competition policy and consumer rights to testify as an expert witness.

"If that's what the market will bear, I don't have a problem with that, from any philosophical perceptive. The issue is -- are consumers aware that there is such a big gap? Maybe they are aware and they don't care."

During his testimony, Keshav also challenged a key talking point of the industry -- that the rapid growth of text messaging is driving the need for these charges.

In Canada alone, the number of text messages rose from about 174.4 million in 2002 to about 20.8 billion last year. And in the first quarter of this year, Canadians sent nearly 7.8 billion messages, compared to 4.1 billion in the first quarter of 2008, according to the Canadian Wireless Telecommunications Industry.

Last year, 280 cell towers -- out of the four million towers in the world -- were needed to carry the estimated 3.5 trillion text messages sent worldwide, Keshav testified, so there is no "congestion cost" associated with spectrum availability and the rapid growth in popularity of text messaging.

U.S. telecommunications executives, who testified alongside Keshav, dismissed his analysis.

Randal Milch, executive vice-president of Verizon Communications Inc., said the Canadian computer scientist failed to consider the long-term infrastructure investments and costs of spectrum to make it possible for billions of text messages and trillions of voice calls to be sent daily.

Calling Keshav's testimony "interesting but not relevant," Milch added, "I believe that the question of costs is not relevant to this," explaining "that is not how prices are set in an unregulated industry."

-- Canwest News Service

Republished from the Winnipeg Free Press print edition June 17, 2009 B5

(You must be logged in to post your reaction)

Your reaction?

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010; View the changes. New to commenting? Check out our Frequently Asked Questions.