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The True Cost of SMS Messages
nilbog writes "What's the actual cost of sending SMS messages? This article does the math and concludes that, for example, sending an amount of data that would cost $1 from your ISP would cost over $61 million if you were to send it over SMS. Why has the cost of bandwidth, infrastructure, and technology in general plummeted while the price of SMS messages have risen so egregiously? How can carriers continue to justify the high cost of their apparent super-premium data transmission?"
Next up on Slashdot: Why do cars cost so much?
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
They can justify the cost because we continue to reward them with lots of our dollars.
-Ryan
AUWYHSTOT (Acronyms are Useless When You Have to Spell Them Out Too)
SMS is the byproduct of the GSM standard. It was never designed to actually be a customer product. It was more or less thought to be some stderr of sort.
When SMS was introduced at the beginning of the 90ies in Europe, it was basicly free. There were SMS gateways all over the Internet. But then the carriers were recognizing the marketing potential of SMS, and slowly the prices per single message were rising until they reached 49 ct (in Germany at the end of the 90ies). Only when parents were stunned by the SMS cost of their children, protests started to mount, and then the diverse regulation offices in the different countries were trying to limit SMS prices, so there were actual plans which included for example 1000 short messages per month.
SMS is a prime example for the difference between price and cost of a product. The cost is nearly zero, but the pricing is expensive.
Just use
T-Mobile: phonenumber@tmomail.net
Virgin Mobile: phonenumber@vmobl.com
Cingular: phonenumber@cingularme.com
Sprint: phonenumber@messaging.sprintpcs.com
Verizon: phonenumber@vtext.com
Nextel: phonenumber@messaging.nextel.com
Just buy the cheapest data-plan and it's still better if you're a heavy user.
They've invested a crazy amount of money in technologies customer's don't care for (3G, all the different ways to get the Web on phones), so now they have to charge a lot for the two things people actually use (SMS and ringtones).
Cellular air links don't have "net neutrality". The pricing for voice, web browsing, SMS, video, and non-Web data connections is totally different. That's what it's like without net neutrality.
There is probably some air on the prices, but not as much as the author of the article makes you think. Development, maintenance and hardware costs must be covered (service providers don't get the system for free). Then there is support you need to provide for customers. And billing. And marketing consumes some money also. And obviously managers need to get paid.
And have you ever wondered how is it possible that simple text messages can jam the system every New Year? Sending 10 byte sms 1000000 times isn't equal to sending 10x1000000 bytes of data using data transfer. Every time you send an sms, the system needs to open a connection and it consumes a lot more resources.
Having to pay to send and receive SMS.
Imagine if the postal service did that: I have to pay to mail you a letter, and then you have to pay to receive it. Better yet, you have no choice but to receive it and the postal service will bill you for it. Imagine all that spam you get in your mailbox costing 10c each. This is how SMS is charged on most US carriers.
With the ludicrous fees associated with SMS (dollars per byte), if I pay several cents for a 160 character message it ought to get delivered without charges on the other end (including that persons bundled SMS "allowance").
The fact that people use text messaging services doesn't exactly make them morons. You could just as easily say that using the phone for voice comms makes you a moron. It's all about the level of service and convenience you want.
Let me put things a different way: When I pay a buddy to help me fix my car, that doesn't make me a moron. I set a price for his assistance, and he agrees to it. Could I learn how to fix my car myself? Sure. That would be a major time investment, though, and I'm willing to trade currency for time in this case. So it goes with every other product and service we buy in a capitalist society.
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
Pay anything for instant gratification. :-)
"Flyin' in just a sweet place,
Never been known to fail..."
Score one for you on the textbook definition of reasonable profit in a professional service provider sense (i.e. an engineer or architect). Now try this: How about incorporating loss leading products and services, multinational issues, public trading levels, etc into an overall picture of profitable operations, from the start of the telecom supply chain to the handset that's chirping in the customer's hand?
Do you personally know people who do in-depth cost analysis calculations on the profitability of their web hosting provider before forking over their cash? Seems like a big waste of time to me; most people seem to primarily care about the reliability and long-term track record of the company. Look at what the market as a whole is willing to pay, and compare that with your personal cost in time and money to use the service to arrive at a decision.
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
Idiots. I remember somebody saying there was a "sucker born every minute". Some people just have no clue what they are spending when they cannot see a price tag or look someone in the face when that person asks them 1$. They just don't think about the big picture, what their bill is at the end of the month, and what they are getting for their money. I have a mentally challenged friend, which I love to death. I take care of him as much as I can. I actually pay some of his bills for him. He cannot handle the money. He can do basic math and figure out that the drink costs 2.50$, and he can pay for it and makes sure he gets the right change. He CANNOT figure out how many drinks he can afford on his paycheck. I don't want to sound condescending, but I am not sure most of the people getting stuck with high SMS charges are that much smarter than he is.
I always knew SMS was a scam. 160 characters per message and I was getting 25 gratis? WTF? Were they communicating these messages with 300 baud modems over phone lines? I was instantly aware there was an extreme difference in the actual overhead of sending the message and the price point being set for the market. I did not understand the technology that much, but nobody could make me believe the cost of broadcasting a small message was that high. They do OTA programming all the time. The signal cannot take that much of the bandwidth on the cell tower. It would have to be equivalent to a 1 second conversation maximum, and since it is more like a UDP packet than a TCP packet, there would be less communications "overhead" to send it. Maybe I am wrong, I don't know if a cellphone sends an ACK type packet when it receives an SMS. Anyways, the technical aspect of it could not make me believe it cost that much.
What made it far far worse as well was that early on, some systems like Exchange Server would use SMS as part of their delivery system. Try getting nailed for an SMS message for every 15 minutes for the whole day. Wheeeee. The SMS cost alone made enterprise email exchange on smartphones or pda phones cost prohibitive. Hence part of the real reason why that technology has moved to Direct Push and uses the WAP gateways instead. The other reason, IMO, is that Direct Push does not depend if your on the phone or not. You spend 30 minutes on your phone without it and email/contact/task synchronization stops during that time period.
Please DON'T get me started on SMS messages that cost the person 1$ just to send them. American Idol? Deal or No Deal? Mofo Puhleeeze. The sheeples wonder why they are being charged 45$ at the end of the month in just extra charges.
So that's what it really boils down too, sheer idiocy on the part of a lot of consumers... and many of them tend to be of the younger "hipper" generation that coincidentally does not pay their bills.
In any case, its all over now. Verizon has started offering unlimited texting plans with all types of messages included, not just SMS. Included gratis in just about any voice plan. Recently switched 6 lines over to it and saved 30$ doing it. So if Verizon is doing it, and they are the WORST at plans, then everybody else must be doing it already.
Admittedly, I can only see the summary because the site has been Slashdotted, but it seems to imply that $61m of SMSes cost about $1 to actually deliver.
Given that people in the UK send, in total, about 50 billion SMS per year, and pay approximately 12 cents per message (we'll forget the freebies, let's go really conservative to see how silly the summary of the article is), for about a total market of $6bn. So, if $61m of charged SMSes cost $1 to deliver.. $6bn / $61m = $98. So.. the cost, to the providers, of delivering 50 billion text messages in the United Kingdom is $98? I'm not buying it.
Bit a cologne... A blazer... Listenin' a bit more than talkin'. Goes a long way, mate. Sometimes into the next day!
Yer pal, Alfie.
"Flyin' in just a sweet place,
Never been known to fail..."
In the Philippines, widely considered the SMS capital of the world, where the three major carriers among themselves handle over a billion messages a day, prices have always been relatively low as well. They have generally been, for as long as I can remember, priced at PhP 1, which is about 2.5 US cents at current exchange rates, also with no charge for incoming messages. The basic rates go even lower when you factor in things like the carriers giving you a certain number of free SMS per month for monthly plans and per prepaid load, unlimited text messaging for a day for a fixed rate deals and other similar things. And even at these rates it can't be said that the carriers are losing money. In fact, they're making scads of it.
Qu'on me donne six lignes écrites de la main du plus honnête homme, j'y trouverai de quoi le faire pendre.
IIRC it had cost about a million Euro (most of which was the price of SW) and just sits there, generating a revenue of roughly a million Euro per day. Maintenance costs: almost zero. Network load: almost zero, because messages are transmitted only in pauses between calls. Modulo New Year, nationwide televoting or football world cup, of course, where the assumption of a few messages between a few calls is no longer valid.
Say out loud: I'm an Aspie and I'm somewhat proud, I guess. Uh. Can I write an email in all caps instead? Hm...
I just found out that AT&T (A-fee&fee?) is raising their text message pricing. When I first signed up for AT&T 6 or so years ago it cost 10 cents to send an SMS message, and it was free to receive them.
When AT&T switched to Cingular the price of sending a message dropped to 5 cents, but they started charging for incoming texts - also 5 cents. Assuming you send a message for every message you receive, this works out at about the same price as before.
AT&T came back online and phased out the CIngular brand name, and prices were again changed. This time to 15 cents each way.
More changes have taken place that I can't quite remember. At one point text messages were 10 cents either way, and at another point they even included MMS (multimedia messages) at the same price as SMS.
As of March SMS messages on AT&T will cost 20 cents and MMS will cost 30 cents - both to send a receive.
So let's do some math here, and figure out how much this simple transmission is actually costing us.
A standard SMS message contains up to 140 bytes (1120 bits) of data - this takes care of the 160 characters allowed in your text message. This might not make sense at first, until you realize that SMS uses 7 - not 8 - bit characters - leaving you with 128 possible character values instead of the normal 256. So 1120bits/7bits = 160 characters.
So our total message length is about a tenth of a kilobyte (.13671875 Kbytes). In terms that the iPod generation would understand - if you had an iPod with a tenth of a kilobyte you could fit 1/4000th of a song on it. I assume here and for the rest of this article that 1 song = 4 Megabytes.
If you divide 140 (the total number of bytes available to you) by 20 (the cost per message), you find that you are paying 1 cent for every 7 bytes of data. This leaves you with a cost of $1,497.97 for the 1024Kbytes contained in a single megabyte. iPod users: It would cost you $5,991.88 to transfer - not even to buy - a single song via SMS.
By comparison, I pay $50 a month for a soft bandwidth limit of 500 gigabytes through a local ISP. That comes out to 512,000 megabytes or 10,240 megabytes to the dollar. This allows me to transfer 2,560 songs for the same price as a Junior Bacon Cheeseburger off the value menu at Wendy's: $1. I will use this my standard measurement for the rest of this article.
So far I can make the following statements concerning the costs of bandwidth:
Cost to transfer 2560 songs:
From my ISP: $1
Via SMS messaging: $15,339,212.80
But wait, there's more!
When calculating SMS charges, most people don't take into consideration that the message is really being paid for twice! If I send a message to another AT&T user, I am paying to send it AND they're paying to receive it! This should probably be illegal, but that's for another discussion.
So how much does an SMS message actually cost? Not 20 cents - but 40 cents! This doubles all of my numbers above.
Furthermore, my above figures estimate that people actually use all 160 characters available to them. Say people on average actually only used half of that (which is still being generous) - then their price of data has again doubled from the numbers I gave above!
Making adjustments for both of the above statements, we realize that our above number isn't even close to correct! Corrected, the comparison looks more like this:
COSTS OF TRANSFERING 2,560 MP3s:
via my ISP: $1
via SMS: $61,356,851.20
Phew! THAT is premium data! It's no wonder that SMS texting alone is a 100 Billion dollar a year industry!
How big is that? Take all of hollywood movie box office revenues worldwide. Add all of the global music industry revenues. And add all of videogaming revenues around the world. Even all those three together, we don't reach 100 billion.
Let's even go more premium - how much would it cost to hand deliver data?
The U.S. Postal service is currently cha
512 MB RAM, 20 GB disk, 200 GB transfer, five datacenters. $19.95/month.
You've got it right there.
The reason that the real cost is actually quite high is the fact that the GSM air interface is miniscule compared to the demands of the all the people using the system in each cell.
If an SMS were free, the air interface would get clogged up.
So it's quite sensible to economize the use of the interface using price to depress demand.
From memory (from my work with Detecon/D-1 in Bonn, Germany) in 1991/92, the SMS data goes over something called an SDCCH channel, which uses 1/8 of the bandwidth of a normal 13 kbit/sec voice channel (or half-rate 6.5 kbit/sec). The SDCCH channel is devoted to one user for a few seconds during the transaction. Potentially you can have 64 SDCCH channels open on a single physical frequency (using TDMA) at one time. But there are also bottlenecks in the signalling system (control channels).
Additionally you require the whole infrastructure for storing and delivering the SMSes. Store-and-forward has complexities that connection-oriented traffic does not.
I know the true cost of SMS messages!
I made a paper for the univeristy some years ago. The marginal cost of a SMS is 0.
They do have a little cost/opportunity. As a matter of fact SMS messages are sent on the control channel. Initially SMS were implemented in the GSM standard as a control system, just like the ICMP protocol of the IP stack. Then NOKIA though to implement a actual instant message function using SMS. The Contol channel is the channel that your mobile listens to in order to receive calls. So for receiving a SMS a control signal is sent. Since bandwidht is somehow limited on these channels it could happen that in a situation of massive usage of texting the control channel gets saturated and normal voice protocol initiation is disrupted. To prevent this carriers nowadays apply a kind of QoS delaying SMSs until there is no risk of congestion. So we can state that the marginal cost is 0 and the cost/opportunity is also 0
Another story is for the MMSs. Their cost/opportunity is even lower since they run almost enterely on GPRS thus using most bandwidht on normal data channels. Thus a MMS with pictures sounds and maybe video SHOULD cost less than a SMS.
So you wonder, why do I pay so much for a SMS or a MMS or even a Call: after the debts for the initial hardware infrastructure have been paid by the carrier you are still paying because of market segmentation (You won't change the carrier on the fly) and a little monopoly (Almost impossible to start a new carrier from 0).
I hope ou liked the summary!
- Also, the author takes an average of 80 characters for the cost of SMS and compares them with the max number of words/characters you can send via US mail. An unfair comparison.
All in all, all fallacies skew the numbers towards the point that the author is trying to make, which is quite unethical. It is also stupid because a fair comparison would totally support his point, just with slightly less astounding numbers.It's even more dangerous to be reading text messages while driving(or anything other than sitting down),
Some of us like to live dangerously. On the rare occasions when I get text messages, I read them standing up.
> Development, maintenance and hardware costs must be
> covered (service providers don't get the system for free).
> Then there is support you need to provide for customers. And billing.
The infrastructure is exactly the same as that used for voice calls.
In building the voice network, they DO get the SMS facility for free (or very nearly so).
There is pretty much no reason why SMS and for that matter, data charges are so high. Even if they only charged quarter of what they do now for texts, they would still make a healthy profit on each one. People would probably also write more often and not stick to the 160 character message size so much so they might make a similar amount of money anyway.
The article promises to tell us about the "true cost of SMS" but never actually does this.
Cellular networks are very different than the data networks. One big difference is that while our data networks are connectionless, the focus of cellular networks is on connections. Operators must balance the use of SMS messages with the normal call traffic. Perhaps SMS use is disrupting normal call traffic and the operators are using the free market to curb SMS volume?
Modern cellular protocols are reducing the connection-centricity of the networks and the price of text messages will likely come down, but at that point the messages will probably be run over 3G instead of the SMS mechanism.
"10x1000000 bytes " you mean a whole 10 MB accross the system??? Yeah these consumers are insane!
GSM Voice is 9.6Kb per sec. A minute of voice is 72KB of data, compared with 160 characters which shouldn't be much more than ~30bytes, or ~2500 times less data than a minute of voice data. Yet a minute of voice communication is usually cheaper than sending a SMS, at least with European carriers.
Any more suggestions?
Artificial intelligence is no match for natural stupidity
Why do so many people seem to have to phone someone just to shout "Hi. I'm on the train...yes the train ....now Its leaving the station.... bye".
And then on the intercity trips there is always someone next to you that obviously uses his phone for business but has that really loud ringtone of Abba singing "Waterloo". He always puts his phone back in his pocket after each call and then takes 20 seconds to get it out again when he's called two minutes later.
Xfce: Lighter than some, heavier than others. Just right.
In India, we don't pay for receiving SMS. The cost of sending SMS is very cheap. Carriers make money, not with SMS alone, but what they call as Value Added Services (VAS). Many people subscribe to get daily horoscopes, cricket alerts etc., which is really the cash cow for carriers. Yes, we do get spams, but also get valuable community messages, like asking us to take our kids to get free polio drops etc.
In Indonesia, people use text messages since they're much cheaper than calling. A single message could cost you Rp250~350 ($0.03) compared to a phone call which could cost Rp1000/min. (US$1 ~= Rp9000)
it depends on the price too, not just habit.
You should ask Kwame. He's learning the true price of text messages. =)
http://www.abcnews.go.com/US/wireStory?id=4196564
"also they advertise through sms"
That's great isn't it? It costs money to receive spam. If the cost of sending SMS is lowered, I'll start receiving more SMS spam.
Today I receive an occasional spam message via SMS, probably because it's so expensive. If they lower the price to 1 cent, I'm sure I'll start receiving thousands of such messages every day, rendering mobile phones as useless as e-mail has already become, and bankrupting me in the process through the fee for receiving the messages.
If it were up to me, SMS would cost nothing to receive, and $100,00 to send.
I just checked my family plan with Sprint (though I doubt it's different from a individual plan) where I know my wife text messaged me yesterday (she sent, I received and replied). On her phone it shows one text message used (not two if the receipt of my response were to count). Mine account shows 18 messages used (I have no data plan, so these are 10c apiece), but I know I've received more messages within the last month and that 18 reflects only the ones I've sent.
I don't know where people get the notion that Sprint charges for incoming text messages because they don't. They also don't charge you for minutes spent listening to voicemail or charge you roaming charges at all inside the U.S.
Say what you will about Sprint being one of the big bad telcos (and they are), but they certainly are doing a good job of steering clear from all the other crap the Verizon and AT&T do to their customers which keeps me locked into Sprint out of sheer audacity that a phone company would do such things to their customers and expect them to stay.
I'm also waiting to see what Sprint/Nextel have to offer in the way of Android-enabled phones this year. Believe me, if Sprint started pulling the stunts Verizon and AT&T are pulling, then I would go without a cell phone.
...and that's the way the cookie crumbles.
The real reason the price for single text messages has skyrocketed is because the carriers don't want you paying per-message. They want to drive you into getting a monthly bundle of X messages for Y dollars. Maybe you'll save money, maybe you won't, they don't care. What they care about is a steady income.
Having people paying for five messages one month, then fifty the next, then ten the next is lousy for their bookkeeping. They don't like the unreliability. But if you're giving them $10 every month instead, their accountants are able to sleep at night.
One can text multiple people at the same time while talking is one-to-one communication. Texting is like IM. There's no reason to use IM when there's a phone on your desk right?
11 was a racehorse
12 was 12
1111 Race
12112
Your post surprised me as the advantages of texting seem very obvious to me. As I see it, they are:
It's less intrusive to the recipient than a call. It's not demanding immediate attention, it doesn't make them stop what they're doing, it can be replied to at their convenience or not at all.
It's perfect for sending information that you would otherwise have to find a pen and paper and write down, which aren't always immediately to hand.
It's less annoying to people around you, if you're in a public space.
Sometimes you don't want to have a full conversation on the phone with somebody - sometimes you just want to let them know something, or ask something, that's not important enough to go through the ritual of interrupting whatever they're doing with a call, making small talk, etc etc.
First, I want to agree that I think SMS service costs too much, and I think being charged for receiving a message is ridiculous...
But one of the main costs is transaction cost. I worked at a large internet ad delivery company back in the day and we had an anecdote describing what we were trying to do with our business. This is from a few years ago, so just take the numbers as approximate:
Take the stock exchanges. They have millions of transactions a day and they try to keep the transaction cost down below $5 per transaction. Hence the $5 transaction fees, etc. Before Etrade and others, $5 wasn't even an option, but they brought the efficiencies of that market down below $5 so that they could actually make money there. Now take the telecom industry. They have tens of millions of transactions a day and they try and keep the costs down to $0.10 per transaction, hence the 'connection fee', 'rounding up' for calls less than a minute, etc. In the ad serving and reporting industry, our goal was to process billions of transactions a day at a cost of less than $0.0001 per transaction.
Obviously there are different requirements involved at each level of transaction cost, so that was a little bit of an aside I guess. I think there was a credit card transaction one in there at around $1 too, but the point is that there are real costs involved in per transaction tracking and reporting, and historically they have been accounted and processed in a particular way by the telecom industry. For more reasonable pricing, the telecom industry would need to develop new methods to do this, probably taking from the ideas that the ad serving industry has been using for years now.
But this may be also one of their excuses for charging for receiving a message, because they are required by statute to provide a certain level of tracking/paperwork/etc. for each transaction, and while one company (sending the sms from their customer)may have streamlined their reporting, another (the receiving customer's provider) may not, so since there is no standard transaction fee, they charge whatever they need to/can get away with.
I'm not saying this isn't twisted logic, just that this may be part of the equation.
http://blog.slaingod.com
You never know how many hidden words are in a conversation like that.
Translation: "Honey, I know you've been seeing somebody, but I don't want to know about it. Please get him out of our bed---MY BED---before I get home."
I once had a signature.
I work with some satellite based systems that cost less than the SMS rates AT&T is apparently charging. For example:
Iridium (yes, they are still around): $1.50/minute (prices vary). This buys you a 1200 bps link (they claim 2400 bps, but your actual throughput is closer to 1200). This means to send a megabyte of data would cost you (1048576 / 1200 / 60 * 1.5 == $21.85). According to the article a megabyte of SMS would cost you $1,497.97. Iridium was generally considered to be grossly expensive when it came out.
Now lets compare against a real (even more expensive) satellite connection. Inmarsat BGAN charges by the megabyte, a common plan is $7 for each modem/satellite hop, so in the worst case scenario you're sending modem to modem for $14/meg.
I read the internet for the articles.