02 July 2008

US SMS prices to increase

According to this article in CNet, the cost of "a la carte" text messages is due to increase to $0.20 and bundled plans are to increase as well. This seems to apply to all of the major US carriers, though the price increase announcements have been staggered in time. Thus, according to the article, the price for an SMS message will have increased 100% since 2005.

Is it because the cost of text messages have increased? Hardly. A more reasonable conclusion is that carriers are charging more because they can. Apparently, text message demand is fairly inelastic. Is this a case of implicit collusion among the larger carriers? Possibly, though not necessarily. Even though Sprint led the price increases this time, I would imagine that one strategy they could pursue to regain market share would be to decrease the price and become the preferred carrier of the text messaging fans (demographically younger).

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