Why SMS Message Prices Are Going Up?

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Sprint that started it all

First it was Sprint increased the SMS messaging price to 15 cents per message for all subscribers that haven't bought a SMS Messaging bundle plan. Effective from 21st of Jan, 2007 Cingular customers also must pay 15 cents per Message unless they subscribe to one of the messaging bundles. Now its turn of Verizon to follow the suit. Effective 1st of March, 2007 Verizon customers, unless subscribe to a messaging package, must pay 15 cents per message.

 Verizon's Notice of Text Messaging Increase:

Notice of Text Messaging Increase, which only applies to customers without a Messaging Package.
If you are not currently subscribed to a Messaging Package, beginning March 1, 2007, the price for sending TXT Messages to the U.S., Puerto Rico, Canada and Mexico - as well as the price for receiving TXT Messages from anywhere - will increase from $0.10 to $0.15 per message. The price to send an International TXT Message will remain $0.25 per message. If you do subscribe to a Messaging Package, your package rates will stay the same. Please consult your Customer Agreement for information about rate changes.

Source: Legal Notice - Notice of Text Messaging Increase

Key Reasons Why Carriers Are Increasing SMS Pricing

  1. With the decline in Voice Revenues, Carriers are making desperate attempts to earn their revenues on Data, for which there is no competition from Internet companies like Skype. This could act as a key differentiator and strategic advantage.
  2. To Force Subscribers buy Message/Multimedia Bundles with hope that customer's reliance on Multimedia/data/internet usage can turn customers Loyal to the carriers and stick to them. Particularly avert threats from VOIP/Internet based companies.
  3. Profits on Data Services are significantly Higher than Voice services. 
  4. Customers using Data Services is a key and warm up to introduce new Networks and Applications that rely on Data Networks, which bring more revenue to the carriers.

For a good analysis of How US carriers are doing in terms of Data Services, have a look at a report from Chetan Sharma Consulting, a Mobile Consulting and Advisory firm.

Can I Terminate my Contract without paying Early Termination Fee due to this hike?

Some discussions and blogs said that You Could. But based on my understanding, You Can not. There were instances it seems some people cancelled contract but got away without paying the Early Termination Fee. But since SMS is not part of the Plan that a typical customer is subscribed to and its a pay-per-use for SMS, it will not be considered as a hike in price. But if you are quite unhappy with Cingular and hope that some other carrier is better than Cingular, you might give it a try.

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