tv [untitled] CSPAN June 20, 2009 12:00pm-12:30pm EDT
watching that will signal it is time to start the exit process? how far into the exit process to you have to beat before you raise interest rates that can happen at the same time? >> it is a difficult question. divining the process is complicated. we have embarked on a series of programs. we did not pay attention to in number every moment of the time. we are well over $2 trillion. made representations under the right circumstances. that could increase to upwards of $3 trillion. .
>> win real interest rates are higher. when the cost of borrowing should be higher and the funds rate should be positive and rising because of that. we will have had to already address the size of our balance sheet and what that means for the implementation of policy. that is why we can either sell assets, we can do repos on them, we can do interest on reserves. that can all help but we will be working to get our bowman sheep
down to the right point so that we can respond -- working to get our balance sheet down to the right point. what it is we will finally get as to a time where interest rates are rising, i think it will be the normal sorts of things come out which is the unemployment rate should be coming down. -- the normal sorts of things, which is the employment rate coming down. i would say at the moment 2.5%. we have to go back and look at that. the structure is changing a bit. it could be a little bit lower than that coming out of this for some time. but it is hard to pick a particular set of indicators, but we will have to be in tune to inflationary pressures, too. a little bit of good luck would also be nice. that these things are coming along at a point where they are consistent and not getting out of hand. we will have to address that.
>> thank you very much. we have two sunny days in a row. that is the best luck i can see. >> up next, a senate hearing on rates phone companies charge for text messaging. later, a look at human trafficking with secretary of state khaled hillary clinton, followed by a briefing on the recent annual trafficking and persons report. >> today on america and the courts, a few commencement addresses at this year's graduation ceremonies, given by anthony kennedy and the georgia supreme court justice.
that is at 7:00 p.m. eastern here on c-span. >> tomorrow on "washington jounral, a look at iran and the debate. and tom davis talks about health care and republican politics. later, a look at the cover story in "harper's magazine," brock hoover obama, the best and brightest blow it again. -- barack hoover obama. >> people don't want to think that says as a policy as much of a passion. he put aside to under $40 million -- 240 million acres of wild america. now as people are talking about environmentalism, roosevelt is becoming the key figure to understand because he was the
only politician of his day who absorbed darwin and understood biology and birds migratory patterns, and mating habits of deer and elk, and actually did something. >> sunday on "q&a, the first of two hours with douglas brinkley. sunday night at 8:00 p.m. on c- span, or listen on xm satellite radio. >> the senate judiciary committee held a hearing on june 16 to discuss the rates phone companies charge for text messaging. witnesses include representatives of verizon and at&t as well as consumer representatives. this hearing was chaired by the summer consumer rights subcommittee. it is -- chaired by the consumer rights subcommittee. it is just under 90 minutes. >> good afternoon.
this hearing will come to order. today we will be examining the state of competition in the cell phone industry. the enormous growth in the use of self phones means that maintaining competition in this industry is more important than ever. -- the growth in the use of cell phones means of maintaining competition is more important ever. cell phone is unable instantaneous communication for millions where ever they are located, whether at work, home, in their car or anywhere in between. many americans have discarded traditional landline funds and depend entirely on their cell phones. the convenience of this service would not have been unimaginable just two decades ago. for many years as this industry developed, it was a competition success story.
when many rivals in the competition. in recent years the picture has changed. consolidation has left this industry highly concentrated. four national carriers now control 90% of the market. two of them, at&t and verizon, combined to have a market share of 60%. consumer choices have become limited and price wars seem to be a thing of the past. consumers pay more for wireless phone service than most other developed nations, an average of $506 per year in the year 2007. nowhere is the changed market more noticeable than in text message service. these instant messages delivered through cell phones are becoming enormously popular. in 2008 more than one trillion text messages were sent. as their popularity has grown,
so has the price charged on any per message basis. from 2006 to 2008, the price for sending text messages increased by 100%. the four companies increased their prices in two steps, first from 10 cents to 15, and then to 20. this occurred despite the fact that the cost to the fund companies to carry text message is minimal, less than one penny per message. the phone companies defend these price increases by asserting they have not been coordinated in any respect. they also point that the majority of customers do not pay for text message on a per message basis, but instead by plans for buckets of text messages starting at $5 for 200
messages. but these sharp increases raised concerns. are these increases the results of a lack of competition in a highly concentrated market? will consumers continue to see similar increases for this and other services they have become dependent upon, such as internet connection and basic voice service? do text message price increases represent a warning sign for the state of competition in the industry as a whole? a concentrated nation of this market should make us wary of other challenges to competition. smaller competitors raise serious questions about practices that prevent them from being able to fairly compete. these range from deals that deny competitors access to the most in demand telephones, to limitations on the ability of new competitors to rome on other networks, to difficulties in
obtaining needed spectrum. it is imperative we work to remove barriers to ensure consumers the best rates. we urge the fcc to take all necessary action to remove each of these barriers to competition. removing these barriers will insure that the cell phone market is open to competition and prevent the large carriers from gaining a stranglehold on this markets. we urge the justice department to scrutinize for richard -- to scrutinize future mergers. today's hearing comes at an important time for competition in the cell phone industry. we are looking forward to the testimony of our witnesses on this important topic. with respect to our panel, we will introduce our first witness who will be wayne watts. he is the senior executive vice
president of at&t. previously he served as vice president vicespc communications and -- as vice president for spc communications. he will be phan -- he will be followed by randall milch. he is from verizon communications and has been with them since 2000. when he was appointed senior vice president of the domestic telecom business. next we will be hearing from professor -- he has been a school professor at the university of waterloo since 2003. he focused his research on computing of bratt research fields that includes wireless networks and mobile devices. he has received a number of rewards for his research. next we will hear from laurie itkin. she has served as director of
government affairs for one company for nine years. prior to joining, she managed government relations for sprint and served as telecommunications policy advisor to the governor of oregon. finally, we will be hearing from joel kelsey. he as an international affairs policy analyst for consumers union. before joining them he worked as a new york city outreach director for the new york public interest research group. we thank you all for appearing at our hearing. after each of you give your testimony we will proceed to ask questions. will you all rise and raise your right hand? repeat after me. do you affirm that the testimony you will give will be the truth, the whole truth and nothing but the truth? thank you.
we will start with you, mr. watts. >> good afternoon and thank you for the gracious introduction. i appreciate your opening comments. they said committee's concern over prices for text messaging is based on a narrow -- this subcommittees' concern over prices for text messaging is based on a narrow concern. this refers to the charge for individual text messages that customers purchase on a single message basis. our current price is 20 cents per message. that rate did increase one year ago, and prior to that it was increased in january. but the vast majority of at&t customers do not choose this pricing option. this option does not apply to the overwhelming majority of messages. in fact, less than 1% of our
text messaging volume is handled on this basis. instead, the vast majority of customers take advantage of the package pricing plan, including those that provide messages for a flat monthly rate. 99% of our messages are handled under these plans. this includes 1500 messages for 15 million got -- for $15. the price of messages is far below 20 cents per message. at at&t for $30 a month a family of five can enjoy unlimited text messaging for the entire family. clearly, very low rates. as a result of this interest in the lower cost value plans, in the last two years the price for text messaging has fallen dramatically.
the average price for text messaging has dropped 70% in two years. that is 70% versus the suggestion made to our prices going up. at the same time, the volume of text messages has grown exponentially. in january 2007, at&t processed 4.5 billion text messages for the month. in january 2009 lee process 31.1 billion text messages. that is a success% increases in two years. among the reasons for this dramatic increase in usage is the equal matted -- equally traumatic prices paid by our customers. and the price of the ppu has increased, albeit 15 months ago,
but overall rates charged for 99% of our customers have dropped dramatically. the background here is very instructive. in making these patch plans the core of our message in -- in making these package plans the core of our messaging -- this often results in large and unpredictable swings in the customer's bill, leading to significant customer satisfaction. packaged plans, which are increasing in importance to the customer is as they find more the need to budget their expenses, it insures low prices, choice, predictability can be easy to understand bills. our customers have voted with their pocketbooks. as 99% of the text messages sent
or received by customers are billed under one of our plans. it should come as no surprise that the price of text messages has fallen off, given the dynamic and competitive nature of today's industry. more than 95% of the u.s. population lives in census blocks with three competing wireless carriers. more than half of the population lives in blocks with five competing carriers. for these reasons the fcc has confirmed that the u.s. wireless marketplace is and will remain effectively competitive. a recent merrill lynch report shows the u.s. enjoys the least concentrated wireless industry of 26 major industrial countries based on its hhi index. i have to pause to put to rest an underlying implication of the inquiry into this matter. that is whether or not wireless providers have somehow conspired
to fix prices. as you know, a great deal of litigation has been filed as a result of these hearings and this issue. i want to make it perfectly clear that at&t sets the prices for all of its products on a unilateral basis based on analysis. there is no evidence to support an accusation that anyone at at&t engages in any inappropriate behavior as alleged in these lawsuits. there simply is none. i trust that this more complete picture puts to rest any concerns you may have about a single pricing options and i look forward to your questions. thank you. >> mr. milch. >> good afternoon. it is a pleasure for me to appear before you on behalf of verizon. weaver brought here to discuss to -- brought here to discuss testing.
your letter of last year concerned pricing problems in the pay as you go textile market, which involves a 1% of verizon customers received. let me respond directly to the underlying issue. verizon did not collude with its competitors on setting prices for text messages. i believe the evidence shows any suggestion like that to be baseless. the evidence confirms the u.s. wireless industry is competitive in all its aspects. that meager through this with more detail. the tiny nature of this market makes any suggestion of collusion impossible. customers in this category send or receive only 21 texts per month. the other 99% are covered by a package bundles. in contrast, text users in
bundles average almost 1000 texts per month. because of this increased usage the overall price has dropped. in december 2006 the average price was 3 cents per message. since then we have cut the average price to cent per message. i have provided some charts with my testimony, and they show there is a wide variation in the prices. verizon prepaid customers are charged 1 cent or 10 cents or 20 cents per message depending on the plan. at&t's customers pay 20 cents per message. sprint's customers pay 10 cents per message and t mobil's customers pay 5 cents. i noted from the testimony that
they do not -- they have different plans for their text messaging. there is no coincidence in the timing for these price changes. different carriers change their prices over two years. in a competitive market you would expect there to be some increasing in prices. the evidence shows the fierce competition in the wireless market. the fcc to reiterated that customers are seeing no prices, new technology, anti-choice among providers from all the competition in the marketplace. -- and choice among providers. the industry average revenue per minute fell from 47 cents to 6 cents in 2007, a decline of 67%, while minutes of use have increased. american consumers fare far better than wyler's customers --
fare far better than wireless customers. u.s. customers have the highest minutes of use per month. i propose that americans pay more for wireless usage only in the sense that they have more to buy. finally, all this competition will come from increased customer satisfaction. consumer reports magazine has given for rice the highest rating on all of the wires -- has given verizon the highest rating on all of the wireless companies. complaints have been about eight in every 1 million customers, a rate of only 0.0003%. and the entire industry is doing better. last month the satisfaction index issued a press release finding susteren chazz faction -- finding customer satisfaction
reached an all-time high. we continue to move in the right direction. the american wireless industry continues to be an american competitive success story. the wireless industry has been blessed by left-handed regulation, and i suggest it is in the best interests of the american competitive telecom industry for it to stay that way. thank you very much. >> the next speaker. >> good afternoon. i am a professor of computer science at the university of waterloo in canada. my area of research is computer networking and mobile networks. i have been steady -- i have been studying this for the last five years. i was asked to give my opinion on two questions. what is the cost to transmit a
text message? second, are the recent price increases sent by consumers who do not subscribe to a plan cost- justified? based on an analysis, my answers are as follows. i believe the cost to the carrier to transmit a text message is unlikely to exceed 0.3 cents. i will first address the cost of a text message. [unintelligible] the average revenue a carrier makes on a text message must exceed its costs. representatives from at&t and verizon indicate the average revenue from a text message is 1 cent. 1.0 4 cents for verizon. that is the maximum cost of a text message.
i have come to the same conclusions using independent evidence. a second way to estimate the cost of a text message is to cost at each component of the technology. it has many resources such as a wireless channel, and billing systems, storage systems. each of these costs money. i have estimated the costs of each component. the two causes of the billing systems. [unintelligible] i establish that in one minute a wireless can carry either one of those cult or 18 text message -- it wireless carrier can carry one voice call or 18 text
messages. estimating the billing cost is difficult. [unintelligible] it should be the same as the cost to carry the call itself. i presume that the cost of building a text message is twice the cost of carrying it. that would make the cost of text messaging to be 0.3 cents. this portion of analysis makes a strong assumption about billing costs. to sum up the cost of a text message is smaller than 1 cent based on testimony from at&t and verizon. it is likely to be swallowed and 0.3 cents based on my analysis. -- is likely to be smaller than 0.3 cents based on my analysis. i believe the only possible
reason to raise the price per message would be if the amount of radio spectrum used by the traffic was so great as to cost [unintelligible] in this case the price increases would dampen [unintelligible] but the total worldwide traffic of 3.5 trillion text messages carried in 2008 account for the radio spectrum available to just a few hundred cell phone towers. i have estimated [unintelligible] however, in 2008 alone 300,000 were sold. so is unlikely that text message traffic is congesting the network. therefore, the price increases cannot be cost-justified. i have tried to answer the questions to the best of my abilities. my analysis has a few
presumptions. i would like to thank you for giving me a chance to present my conclusions. i welcome input from a technical experts that will correct any of my mistakes. thank you. >> ms. itkin. >> thank you for the invitation to testify. my name is laurie itkin and i am with cricket communications. cricket has been around for 10 years and we have become the seventh largest carrier in the united states. what that means is that we have invested billions of dollars in building our own network. we currently have over 4 million subscribers. cricket serves consumers who have been left behind by the larger carriers. our customers tend to be more ethnically diverse and lower income than the larger customers. cricket pioneered the unlimited flat rate all you can eat
service with no long-term contract, no credit check and no early termination fee. our customers talk and text much more than the average. i think that is what happens when you offer all you can eat pricing. for an example, or $40 plant includes unlimited local and long-distance calling and unlimited text messaging. i am also -- i want to state that i believe that cricket puts pricing pressure on carriers in every market we enter. i am pleased to announce next week creek it will be launching service in d.c. and baltimore. the subject of this hearing is text messaging. i think we can relate to the story of hearing a parents' shock when opening up a phone bill and seeing a large charge after their child has discovered after their child has discovered text messaging.