THE consumer watchdog says it will now regulate the price telcos charge each other for text messages, hoping it will lower the cost for consumers.
The decision to begin regulating SMS "termination costs" follows an Australian Competition and Consumer Commission inquiry that received submissions from consumer groups who said consumers were being gouged by telcos.
In a submission to the inquiry, the Australian Communications Consumer Action Network said some Australians were paying unreasonable SMS prices because telcos inflated the price they charged one another to pass texts between networks.
"Telcos are currently setting whatever outrageous wholesale price they want and then that gets passed onto consumers," ACCAN deputy chief executive officer Narelle Clark said as the inquiry was underway.
"This level of profit margin is astronomical."
In announcing its decision to regulate SMS costs, ACCC Commissioner Cristina Cifuentes said it "should lead to lower SMS prices for consumers”.
“The ACCC is concerned that mobile network operators are able to keep wholesale SMS termination rates significantly above cost.” Ms Cifuentes said.
“The ACCC considers that this is having a negative impact on competition in wholesale and retail markets. In particular we are concerned that these rates are affecting SMS prices available to low income consumers."
Macquarie Telecom told the inquiry $0.000083 was the true cost for a telco to send an SMS. ACCAN multiplied this cost by two (to take into account the receiving cost) to arrive at $0.00016 as the total underlying wholesale cost of a single SMS to the telcos.
If they then charge 15 cents for a single SMS it represents an almost 90,000 per cent mark-up for consumers.
Telstra previously told the inquiry it did not support termination costs being regulated.
"There is no evidence of market failure in the provision of SMS termination services," it said in a submission.
"Mobile service providers are offering a large number of retail plans incorporating different options for SMS as well as competitive SMS pricing and/or bundling."
While most major telcos offer unlimited text messages on a number of their plans, they still charge for them on many prepaid and some monthly plans.
Yatango Mobile charges 12 cents a text on some of its plans, while Virgin Mobile charges between 15 and 28 cents.
On some Telstra packages the telco charges 29 cents an SMS. Vodafone also uses a 30-cent per text charge on some of its plans.
The ACCC already regulates the price mobile operators must pay if a customer calls another network – 6¢ a minute and falling to 3.6¢ a minute next year – but has never regulated SMS prices.
In annoucing the review of pricing in December, the ACCC said Telstra, Optus and Vodafone Hutchison Australia could not bargain lower terminating fees out of each other and that retail prices would remain "inefficiently high" if wholesale prices were not regulated.