Should the Federal Government Regulate Text Messaging?

Posted by Enrique on 01.01.2009

Gouging...



We begin 2009 on a somber note, as the latest Mid-East war has claimed nearly 400 lives as of this writing. Once again, we find ourselves gripped with the moral contradictions of the Israel-Hamas conflict. For example, what exactly is a "massively disproportionate response" to the indiscriminate firing of Qassam rockets? If one believes that Israel's existence is inherently illegitimate, does it have any right of self-defense? If Hamas was indeed democratically elected, can we fault them for giving the public what it wants?

But let's forget about all that, and turn now to this "text messaging" phenomenon that's all the rage with the kids these days. I'm not a cell phone user myself, but I understand there's a nominal fee associated with this text messaging service. Apparently, some people think this fee is excessive, but no one has been willing to stand up to Big Telecom. Until now. U.S. Senator Herb Kohl (D-WI) has put Big Telecom on notice that they better damn well be able to justify these texting charges, or else. For our first story of 2009, let's have a look at the role of government in setting text messaging fees, and examine the mythical idea of "price gouging."

The story so far…

In the interest of disclosure, I should reiterate that I don't have a cell phone. I've never wanted my friends and/or family to be able to get a hold of me at their own convenience. My view is, if I'm not home when you call, then call me later. I have no personal desire to text, and it's not something I would pay for.

That being said, I can understand why many people might find it useful. According to this article in last week's New York Times, about 2.5 trillion text messages were sent worldwide in 2008, and 3.3 trillion are expected in 2009. It certainly seems to be a high-demand service, from which a lot of money could be made. And where there's a lot of money, it's not long before the federal government starts intruding. Enter my home state's Sen. Kohl, one of the top five richest U.S. lawmakers. Despite his phenomenal wealth, Kohl is in touch with the daily pocketbook concerns of the working classes. In September, he wrote a stern letter to the chief executives of Big Telecom, politely asking them to explain how they set text messaging fees:

Your four companies are the nation's leading wireless telephone companies, collectively serving more than 90% of the nation's wireless subscribers. Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100%. Text messages were commonly priced at 10 cents per message sent or received in 2005. As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers. Sprint was the first carrier to increase the text message rate to 20 cents last Fall, and now all of its three main competitors have matched this price increase…

Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period.

With all due respect to Sen. Kohl, I think the answer to his question is fairly obvious. The reason Big Telecom increased the cost of texting to $0.20 apiece is that consumers are willing to pay it. After all, we're talking about ten goddamn pennies here. Anyone who has enough money to afford phone service can afford an extra ten cents to send a short, inconsequential message.

I can appreciate the argument that the government has a legitimate regulatory role in preventing monopolies. I'm a little less persuaded that the government has a legitimate role in regulating the price of a specific product/service to the tune of one stinkin' dime. If somewhere between two and three trillion text messages are being sent annually, it would seem to indicate a high level of demand. If I was Big Telecom, I'd charge as much as the consumer was willing to pay for this service – it seems like a handy way to increase revenue in this uncertain economic climate.

I'm sure Kohl's inquiry into the business practices of private corporations is motivated by good-faith antitrust sentiments. That said, and I don't mean to be too obvious, but the ability to send text messages is INESSENTIAL. This isn't health care, or public education, or a Medicare prescription drug benefit. It's text messaging. Humanity has survived at least two thousand years without it. I don't mean to be insensitive, but if you don't want to suck it up and pay the extra ten cents to send a text message, then just call the person instead. Leave a voice mail, send an e-mail, whatever. Be a man, for Christ's sake.

Kohl's stated concerns closely resemble the fear of "price gouging" that politicians routinely stoke when they want to demonize Big Business. But the truth is there's no such thing as price gouging. If you're a business that provides a product/service, you can charge whatever you want. The consumer has the option of paying as much for your product/service as they choose, or not paying for it at all.

In some cases, there are short term fluctuations in the market for certain products. If a natural disaster strikes, there could be a spike in demand in the local market for, say, bottled water. If a business raises prices on bottled water to compensate, they will inevitably be accused of price gouging. However, if that business doesn't raise prices, the bottled water will sell out quickly, and anyone who shows up after the fact will be s.o.l. "Price gouging" provides for an equitable distribution of commodities – although not everyone will be able to afford bottled water at an increased price, more people will be able to afford some bottled water, instead of just the people who got there first and bought it all up. (For a thorough examination of how prices are set, consult Walter Williams.)

I'm sure Sen. Kohl has good intentions, but I'm suspicious any time the government feels the need to render its judgment on the price of an unnecessary service. If consumers don't want to pay an additional ten cents per message, they won't. Text messaging is a convenience, not an entitlement. If you're not satisfied with your texting fees, or you're frustrated that you can't decline the text messages you receive, you can always go back to land lines and answering machines. Really – how important is it for everyone to be able to reach you right this minute? It's not a matter of life and death.

Happy New Year, dear readers.