Posted: July 28, 2008

With the economy becoming increasingly unstable, Americans have invariably channeled their anger and frustration toward the oil companies; and with good reason. The oil companies are enjoying record profits while the price of gasoline has skyrocketed, almost doubling since 2005. And while the price of gasoline effects all levels of commerce, always trickling down to the consumer, there is another industry whose recent pricing practices are eerily similar and whose reach is just as broad as that of Big Oil; the wireless telecom operators.

Just as everyone relies on gas, be it for heat, transportation or power, cell phones have become an indispensable tool for both individuals and businesses of all sizes. And the penetration of mobile devices has assured that any significant increase in pricing will eventually affect everybody, even those who do not seemingly rely on mobile technology on a regular basis.

In the last two years, rates to send and receive text messages on all four major carriers have doubled from 10 cents to 20 cents per message, a rate of increase which actually outpaced the increase in gas prices during the same period. Similarly, AT&T recently announced that iPhone users will have to pay even more for text-messaging than they had before. The old plan included 200 text messages in the $59.99 voice and data plan, but plans for the new iPhone 3G will cost $5 extra for 200 text messages.

And just like the oil companies, this recent influx of price increases is occurring during a period of immense profitability for the carriers, especially surrounding data services such as SMS. Verizon’s data revenues grew 45.3% in the 2^nd quarter of 2008 when compared to the 2^nd quarter of 2007, and they now account for almost a quarter of all service revenues. While overall ARPU increased just 0.9%, data APRU grew an astounding 31.3%. AT&T saw an even bigger spike in data revenue growth, posting a 52% increase year over year.

And if anybody still thinks this simply came as a pleasant surprise to the innocent wireless companies, the COO of Verizon, Dennis Strigl, predicted 7 months ago that the weak economy would have little effect on the wireless business. In fact, a report by Informa Telecoms & Media has concluded that global data revenues will exceed 200 billion dollars in 2008, with revenues already reaching 49 billion in the 1^st quarter alone. And a separate report by ABI Research has concluded that SMS will remain the top revenue-generating mobile messaging service at least through 2013.

The cost to the carriers for providing and implementing text-messaging hasn’t changed during this period, and many people have estimated that this cost is almost non-existent anyway. At least the price of oil is actually rising, although the oil companies are clearly not hurting because of it. Yet, the carriers have taken a commodity which has not risen in price, and even in the face of increasing customer usage, have doubled its cost.

All of this is made even more ridiculous when you consider how much text-messaging costs in relation to other data transmitting methods. One blogger has actually figured out how the price of transmitting data via text-message compares with the price of downloading data on your ISP, or even sending a letter through the mail, which can be found here. His argument boils down to the fact that sending data through text messaging is roughly 200 times more expensive than standard mail, and 61 million times more expensive than sending through your ISP! That severely trumps any price-gouging the oil companies could ever dream of.

So the next time you get your heating bill and curse the heavens, or swear at the gas pump after filling up, perhaps you should focus some of that frustration on the wireless companies who seem to be doing the exact same thing and getting away with it with much less fanfare

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