August 19th, 2011 20:04 EST
AT&T Texting Price Hike: A Customer Benefit?
On Thursday, AT&T confirmed it would no longer offer 1,000 text messages for $10 per month, leaving customers to choose between paying 20 cents per message or $20 per month for unlimited texts. This is the second time this year the company has eliminated lower-cost options, having removed the $5-for-200 text plan in January.
AT&T calls the elimination of a lower-priced option a move to "streamline" its offerings, but it`s really a price hike in sheep`s clothing. This unilateral move to gouge customers, by raising prices on a service where it earns a nearly 100-percent profit margin, calls into question AT&T`s claims that the wireless market is perfectly competitive. In a truly competitive market, no carrier could get away with raising prices on a service where it already charges a 10-million-percent markup.
A new report from wireless analyst Chetan Sharma reveals consumers send an average of 664 texts per month, meaning the typical customer is now forced to pay AT&T double for unlimited messages, or face severe bill shock. T-Mobile`s unlimited texting plan is $15 less per month than AT&T`s, and if the AT&T-T-Mobile merger is approved, that plan will no longer be an option for new customers. It also demonstrates that the elimination of T-Mobile as a viable low-cost alternative will leave consumers little to no choice in a post-merger world where AT&T and Verizon will control nearly 80 percent of the market and have free rein to raise prices and reduce choice at will.
Free Press Research Director S. Derek Turner made the following statement:
"Last week AT&T told America that one plus one equals three, and that spending $3.8 billion to expand and improve its network costs more than paying $39 billion to take over T-Mobile. Before that it said that reducing wireless investment by $10 billion equals increasing it by $8 billion, and that putting nearly 20,000 Americans out of work equals creating 96,000 new jobs. Now it is telling us that forcing customers to pay double for text-messaging plans is a better value. Apparently AT&T`s good at math only when it is multiplying its profits, subtracting jobs and exponentially raising prices.
"This move is simply another example of AT&T passing off a price increase for consumers as a benefit. If this were a truly competitive market, AT&T would offer its customers more choice and value, and no carrier would get away with a 10-million-percent markup on its services. This should serve as a warning to the Department of Justice and the Federal Communications Commission " if AT&T is already able to unilaterally increase prices, allowing the company to eliminate low-cost competitor T-Mobile will only make things worse."
Free Press is a national, nonpartisan organization working to reform the media. Free Press does not support or oppose any candidate for public office. Through education, organizing and advocacy, we promote diverse and independent media ownership, strong public media, and universal access to communications. Learn more at www.freepress.net