Friday, September 12, 2008

Why Is Congress Involved In This At All?

This is exactly why I believe in part-time legislatures--at all levels of government.

That’s the question that Senator Herb Kohl, chairman of the Senate's antitrust panel, is asking the four big U.S. cell carriers—and SMS rates have, indeed, doubled since 2005. What gives?

In a letter to AT&T, Sprint, T-Mobile, and Verizon Wireless execs, Kohl wrote that text messages still have the same length restriction—160 characters—as they did in 2005. If that's the case, Kohl asks, why do the big four carriers now charge 20 cents per message, compared to 10 cents just a few years ago (this according to InternetNews)?

Somehow, I doubt the Founders ever intended for Congress to get involved in the price of methods of communication. I'll grant an exception for postage here, as the Constitution specifically gives Congress authority over a postal system.

But I'm serious here; does Congress really need to concern itself with 20 cent text messages?


Scott McCall said...

well....who else is supposed to stop companies from raising prices for no reason?

ie. gas prices

e-d said...

Because abusive behavior and price gouging are elements of antitrust law?

Darren said...

Abusive? Price gouging? No, those aren't loaded words. What you call abusive and price gouging, others might call "reasonable business practices" or "making a profit". I don't think it should be up to Congress to determine how much profit private companies should be allowed to make.

Who "is supposed to" fix such "problems"? Why, Adam Smith's invisible hand.

Seriously, Congress is getting involved in 20 cent text messages. Should they also get involved in the prices of designer furniture?

e-d said...

Loaded or not those are the words used by the FTC in discussing antitrust laws.

Those 20 cent (red herring) text messages yield 90% profit. $15 billion in revenue in the US.

I'm for free markets too and have bundled service so I'm not paying 20 cents apiece.

When was the last time there was a startup Ma or Pa Bell to provide competition?

allen (in Michigan) said...

> Because abusive behavior and price gouging are elements of antitrust law?

Har! How can there be abuse if there's no coercion? No one's forced to use SMS. No one's life depends on the availability of SMS. If every last thumb-athlete were to stop using SMS today would there be any casualties?

If anything, a strong case can be made for SMS pricing being too low since it's popularity is due, in part, to the mis-pricing of SMS.

Raising SMS pricing is abusive only in the sense that a spoiled rich kid who was expecting a Porsche ends up stuck with a Mustang.

Darren said...

Unless you think that the four companies mentioned in the link, and the myriad others across the country, are colluding, and have some evidence of that, then this is not an anti-trust issue.

orominuialwen said...

This is exactly why those of us in Wisconsin call Kohl "the bland billionaire." The only reason he keeps getting reelected is that nobody has anywhere near enouh money to run a successful campaign against him.

Anonymous said...


You know I love you, man, but e-d is totally correct.

The phone companies do not operate in a free market environment, and as such, are content to price fix. You haven't let me show you the graphs yet, but I will be happy to show you how much extra profit they garner through their oligopical market structure.

Government intervention in the market is rarely good, but this is one of the cases where it would be clearly good. And I suggest socialism not -- just promote the free marke and prosecute violations.


Darren said...

Sending text messages isn't, nor should it be considered, a "necessary public utility".

Congress should butt out of this one.

Anonymous said...

I would tend to agree, but that's not the argument here -- I don't favor the government providing the service, but rather the government forbidding the mergers taking place. The problem here is not socialism, but rather unfettered capitalism. There is absolutely no reason why you couldn't have 100 companies providing this service, except for the fact that the government has allowed the power to consolidate within just a few. As such, they get to price set to maximize profits at a rate much higher than if they were forced to compete. This isn't an argument for government stifling the market, or controlling it; it's an argument for letting it flower.


Darren said...

Yet government *is* stifling the market.

Anonymous said...

Yes -- by not allowing it to regulate itself. It was a crowning achievement when they told the Bell companies that they had to split up. This is the same deal.