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What Carriers Don't Want You To Know About Texting
An anonymous reader writes "Randall Stross has just published a sobering article in The New York Times about how the four major US wireless carriers don't want anyone to know the actual cost structure of text message services to avoid public outrage over the doubling of a-la-carte per-message fees over the last three years. The truth is that text messages are 'stowaways' inside the control channel — bandwidth that is there whether it is used for texting or not — and 160 bytes per message is a tiny amount of data to store-and-forward over tower-to-tower landlines. In essence it costs carriers practically nothing to transmit even trillions of text messages. When text usage goes up, the carriers don't even have to install new infrastructure as long as it is proportional to voice usage. This makes me dream of the day when there is real competition in the wireless industry, not this gang-of-four oligopoly."
The feckless youth I see texting in public do not appear to be the sort who employ reason or critical faculties. That's the kind of customer base dreams are made of.
The cost of that cleanup, of course, will be borne by taxpayers, not industry.
...but it's good to see this fact receiving some mainstream attention. I guess it's inevitable that people now tend to ask that if it costs x dollars to transfer y megabyte from my phone, why do text messages cost a lot more when they are so tiny? In the digital age text message fees seem more and more ludicrous even to ordinary people.
It takes a man to suffer ignorance and smile
Be yourself no matter what they say
Of when we'll be nickled and dimed for text messages instead of quartered.
As a service that the operators could milk their customers with. It was only when it started getting popular that they heard the cha-ching sounds and start charging outrageous fees.
Next you'll be telling me that when you buy Coca-Cola, you're mostly just getting sugar and water!
"Wise men talk because they have something to say; fools, because they have to say something" - Plato
Addictive behavior (texting) + Monopolistic cellular rule over addictive technology = obscene rates.
Even Larry Ellison is sitting back looking at his cellular bill going "Holy shit. And I thought I ripped people off."
The truth is that text messages are 'stowaways' inside the control channel â" bandwidth that is there whether it is used for texting or not â" and 160 bytes per message is a tiny amount of data to store-and-forward over tower-to-tower landlines.
From what I understand, the problem with SMS's sent on the GSM standard is that it is in the control channel - as the anonymous submitter stated. But there's only one control channel for each cell versus many data (voice, etc) channels, and it has a lot less bandwidth than even one data channel. It was only ever meant to handle connecting calls, phones moving from one cell to another, etc. Administrative stuff. SMS was never meant as a proper way to move lots of messages. But it's now a major form of communication and it's using a channel (the control channel) that is very limited.
When "text usage goes up", I'm guessing the only thing the carriers can do is to install more cells in order to get more control channels. But surely there's a limit to how many cells can co-exist in a given area. But everyone's moving to various "3G" networks and AFAIK they have proper means to send messages, photos, videos, etc. The anonymous submitter is still an idiot though.
In Japan there's this magic concept. The $30 plan actually costs $30! Go figure! A brand new cell phone is also free with no contact. And you can watch TV for free on your cellphone. But, don't let the Americans know or they'll want decent service too! ...oops!
No, apparently you failed economics.
If there is sufficient competition in the market profits will be driven to zero and the price of the service will approach the *actual* cost of providing it (which is close to zero, apparently). The fact that text messages cost 1000s of times more than they should indicates that there is insufficient competition in the industry, excessive barriers to entry into the market, etc.
Not really. In classical economic theory: the market price can be one of the following:
1. Essentially the cost of making the product (firm's economic profits are 0). This arises in the model of perfect competition only.
2. Each consumer pays the highest price this person can afford. This arises only in the model of monopoly with a perfect price discrimination.
3. Everyone pays a single price, but the price is set by the single producer for the purpose of maximizing this producers profits. This is the model of monopoly with no price discrimination.
4. Anything in between. Various models of oligopoly will render the equilibrium prices that are anything in between (1) and (3). There is no single model of oligopoly. So, each setting has to be analyzed separately (usually with the tools of game theory) based on the relevant assumptions.
SMS is just a special case of very low-bandwidth data traffic, which should be superseded by email or jabber anyway.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
In this case I believe "byte" is revalued at 7-bits. It's still 160 bytes, just now it's 1120 bits instead of 1280 bits.
"A witty saying proves nothing." - Voltaire
The cost involved in transporting text messages is not just the capacity in the network. These messages all end up on a SMSC, a carrier-grade system able to handle multiple-hundreds or -thousands of simultanious SMS messages and route them to other subscribers and operators. These systems are provided by a handful of suppliers that know what to charge for a decent cluster of these baby's... and somehow they need support as well! NB. Not in any way affiliated with telco's.
as long as it is proportional to voice usage
That's the reason for the pricing model. SMS has to be priced high enough to make sure its use doesn't grow faster than voice.
The telcos want to balance the profit they make from the use of both channels, voice and signaling, while being backward compatible and not having the expense of updating the protocol to use the data channel(s).
No, receiving calls/texts is free.
While there may be some price plans that allow for free incoming calls or free incoming text messages, the majority of US price plans charge airtime for incoming calls and charge the same for incoming text messages as outgoing - currently 20 cents per message.
You can also typically buy bundles of text messages, with say Verizon charging $5.00/month for 250 text messages (and other options as well)
Stupidity... has a habit of getting its way.
I was an exchange student in Finland back in '96. This was when *nobody* had a cell phone in the US. Shortly before I left for Finland, my sister and I were in a shoe store. We heard a guy walking down the isle talking to himself, and we both looked nervously at each other, because we were about to encounter an obviously crazy guy. Turned out he was on a cellphone.
:)
Anywho, when I got to Finland, everybody in the high school had a cell phone. Well, almost everyone, and if they didn't have one when I got there, they got one that year. And the thing was, *they texted all the time, because it was cheaper, much cheaper, than a voice call*.
Flash forward five years to the states, and then everyone is getting cell phones, but *without text service*. And now, text service is something that costs per text, or something ridiculous like that. In Finland, and I would guess most of Europe, you get some ridiculous amount of texting included in your plan, or you just have a straight-up bandwidth plan, which covers voice, text, media, etc.
I wish Americans would travel a little more often, to see how the US is becoming a technologically backwards society. Technological improvements which are more efficient are seen as opportunities to gouge customers, instead of compete and offer lower prices. The same thing was going on with banking about five years ago. American banks were charging fees to have people access their accounts online, while Finnish banks were giving it away for free, because then they didn't need to pay tellers. Oh yeah, and you could pay your bills and do banking by text service.
Computers are useless. They can only give you answers.
-- Pablo Picasso
"Texting is the closest thing to pure profit ever invented" - Sir Chris Gent, founder of Vodafone.
"I bless every day that I continue to live, for every day is pure profit."
While there may be some price plans that allow for free incoming calls or free incoming text messages, the majority of US price plans charge airtime for incoming calls and charge the same for incoming text messages as outgoing - currently 20 cents per message.
WTF? Does that mean the US telcos are double dipping?!
In Australia, depending on the plan, text messages generally cost around 10 to 20 cents to send. The receiver never pays to receive an ordinary call or sms. (There are exeptions for premium rate services though).
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How many participants in an industry do you need to have before you'll say that the goal of competition has been met? Four seems like it would be enough. If there was some advantage to be had by using a price structure that accurately reflects the true cost of text messages then I suspect one of the carriers would have already tried it.
WTF? Does that mean the US telcos are double dipping?!
Well, you have to understand the differences in evolution in telephone service. Traditionally in the USA, local phone calls are unmetered. That was never the case in Europe.
When the first radio phones started coming out(they weren't cellular yet), ALL calls were metered because you were paying for relatively expensive limited radio transmissions. Because such people were relatively rich, and didn't want to discourage calls too much with getting the equivalent of a 900 number, they accepted the charges.
Think of it as the tradition is that the owner of the cell phone pays for the radio transmission costs, outgoing or incoming. Thus the reason you get charged minutes for incoming as well as outgoing calls.
That's not to say that the charges for text messages aren't crazy. It's one of those things that I wouldn't be surprised that there's more bit traffic to charge for text messages than to send them. More expense to bill for a text message than to send one, etc...
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This has always been the case in Russia, though, but we don't pay for incoming calls & messages, either. We used to, but a few years ago the government intervened and mandated all cell providers to not charge for incoming (forcing them to strike up agreements to redistribute the payment to cover expenses on both sides in cross-network calls).
"WTF? Does that mean the US telcos are double dipping?!"
No, it is just a different model.
In the US/Canada, calling a mobile vs. calling a landline is the same price (often unmetered or very cheap). In most cases it costs just a few cents a minute to call anywhere in the US, landline or mobile, usually including Alaska and Hawaii. Some packages even extend that to Canada, and western Europe (non-mobile in the latter case).
That is not the case in Australia, the caller to a mobile is usually charged a hefty surcharge. Take a look at your international calling rates, you will see no special mobile rate for calls to the US. It is all the same rate, there are no special mobile area codes (a.k.a. city codes).
In many cases, you can even transfer your home number to a mobile if you are eliminating your landline.
One could argue which concept is better, fairer, or whatever. As with Australia (and almost everywhere) it really depends on the package you get.
The only athletic sport I ever mastered was backgammon - Douglas William Jerrold
To the UK, it's normally 4 cents a minute (free if you have an unlimited plan). But, if you are calling a mobile phone in the UK, it's 34 cents a minute.
In France, it's 4 cents a minute vs. 21 cents a minute.
In Germany, it's 4 cents a minute vs. 31 cents a minute.
Here it can depend on cell phones because there's a lot of services that charge a flat rate for X No. of minutes. Both parties can be charged when you call mobile to mobile. Charges can range from free (if the person is on the same network or in a network of friends) or the individual rates. IOW, you're charged depending on your plan, they're charged depending on theirs. In my case I prefer the pay-as-you-go plan. If you don't call all the time it works out pretty economically. On my cell plan, for example, I pay $1 a day on the days I use it and 10 cents a minute to anywhere or 0 if I call another member with the same service. I spend about $150 a YEAR. While fixed minute packages may run cheaper per minute, Being that most run $40/month for the cheaper packages, it's a lot cheaper for me to do the pay-as-you-go and I don't have to worry about running over minute limits.
If you have a land line, it doesn't cost you any more to call a person's cell phone if it's a local number. It does cost the cell phone owner as stated above. However land line companies also compete with cells by offering a flat rate per month cost for both local and long distance, usually around $50/month.
Our biggest cell problem in the US is coverage. It depends on where you are as to which service has the best coverage.
Regarding the texting, it should be obvious: The price is high, not because it taxes the systems more, it's because texting is popular. How is this surprising? When something is popular or needed, the price goes up. When it's not, the opposite is true. This popularity allows the telco's to rake in additional profits and offer package deals with a guaranteed income. Sorry, but a company is not require to responsibly price things according to their cost. If you want texting prices to go down, then texting needs to become less popular or more competition needs to come in that offers cheaper or included texting.
If you've never been modded as "flamebait" or "troll," you've never tried to argue a minority viewpoint here!
. There is the use of the arcane abbreviations used in texting. This is similar to the stupid use of the "10 codes" which was insane.
Those 10-codes were a carryover from standard police codes and anything but arcane. Early adopters of these radios were people who had training in enforcement or radio disciplines where this nomenclature was standard. SMS jargon is merely a bastardization of the English language that was not borne of efficiency, but most likely misspelling and novelty linguistic rebellion, and later adopted for efficiency. Modern phones could improve up on this by translating goofy l33t speak into actual english words, and some do.
The CB radio fad was expensive to get all of your equipment but once you had it, was cheap to operate. Texting is cheap upfront but very expensive to send messages. This having been said, both are expensive.
CB radios were never that expensive. They were necessary items for people who traveled a lot. They were in-effect a safety device and also early "radar detectors" (or should I say "smokey detectors" hehe). When the song "Convoy" became a hit, middle America decided they wanted to clog the airwaves with useless chatter, and THAT was a fad that screwed up the citizens band and forced them to open up a bunch of extra channels. Luckily the novelty use of CB radios did fade out and now once again, travelling/professionals use the system mostly, as it was always intended.
Many people just have to be on the bandwagon. Like CB radio, I think texting too is just a passing fascination.
People don't have to buy a special texting machine. SMS is built into almost all modern phones. Obviously if the telcos can't make a profit center out of it, they have no incentive to offer phones with this feature, but it's basically synonymous with mobile phones now. Your analogy might hold water if there was a CB radio sold with every new car, which there never was.
For these reasons, I believe texting will not last long.
The only thing that will kill texting is further evolution of the mobile web, and other cellular-based communications protocols, but there's no doubt "texting" in one form or another, is here to stay. If the telcos want to nickel and dime people to death then a tcp/ip phone-based skype or AIM-type messenging system will take over, but texting is here to stay. No doubt at all. It's way too efficient and desirable a feature. And it's most certainly not a fad. That's like saying "online chatting" is a fad when the first multi-user BBS offered such a feature. No. It was a revolutionary new way of communicating. It's better than voicemail and answering machines in that it can not only be passive, but also active. You can often send text messages when you can't get a normal voice call through -- this happened a lot during Hurricane Katrina... we were able to have text messages queued in our phones and when we hit service zones, the messages would be automatically sent - it was very useful.
No its not obvious... supply and demand economics, right? Well, the demand is high, but the supply is essentially infinite as TFA points out. N/infinity = zero for extremely large values of N. Therefore it should be practically free. What we are looking at is a price-fixing scam.