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?"

Adam Smith sez...

[palegray.net (1195047)]

How can carriers continue to justify the high cost of their apparent super-premium data transmission?

It's all about what the market will bear. Add in the fact that text messages are typically used for brief communication snippets and you have a more complete picture. Some providers offer unlimited texting plans... consumers are willing to pay for the convenience.

Next up on Slashdot: Why do cars cost so much?

Re:

[linzeal (197905)]

I had an unlimited texting plan from when I used it for server messages at work. When I switched to my own plan with the same cell phone I just kept the unlimited texting thinking I would use it for something. I never did. The only texts I have on there are from 411 calls.

Re:Adam Smith sez...

[jfim (1167051)]

This might be a cultural thing. In regions where mass transit is more frequently employed, such as Japan, people almost exclusively use text messages. Since the US is more car-centric, it makes more sense to talk while driving instead of trying to type a text message.

Re:Adam Smith sez...

[palegray.net (1195047)]

it makes more sense to talk while driving instead of trying to type a text message

Just curious, have you watched people drive recently? Maybe it's just Connecticut drivers...

Dumb kids.

[Jeremiah Cornelius (137)]

Pay anything for instant gratification. :-)

Re:Adam Smith sez...

[Gadgetfreak (97865)]

If you think CT is bad, try crossing the border to Rhode Island. I seriously think the reason the majority of them don't use their turn signals is because they don't want to reveal their plan to the enemy.

Re:Adam Smith sez...

[smooth wombat (796938)]

If it doesn't, then you are likely in non-populous areas where the drivers typically don't know how to drive (e.g. PA - which is better around Philly/Pittsburgh than the rest of the state).

What?!!!! I want what you're smoking. I can attest to the pathetic driving capabilities of people from Philadelphia. Forget about stopping at a stop sign when there's oncoming traffic. Red light? Sure, we can fit five more cars through as the opposing traffic advances.

Merging traffic? Naw, you don't need to merge. Just stick your nose in. If the guy hits you, keep driving.

and required response time may not leave time for signaling or other kinds of politeness.

The only excuse for not using your turn signal is in an emergency situation or if you are the only car on the road at 2 AM. Other than that, turn signals should always be used.

And yes, I do use my turn signal every single time no matter where I'm at.

Re:Adam Smith sez...

[Lt.Hawkins (17467)]

Wow, if you're constantly reacting last minute like that, then you must be part of the problem. Are you near-sighted or something? I grew up driving in New York, on Long Island, New York City, Queens. I've lived in DC and surrounding areas. I've driven in Miami, San Fran, Seattle. I haven't had a chance yet to drive in LA. I've also driven in 3rd world countries where people have habits that would utterly blow your mind (Right turns from left lanes, driving in reverse on major roads, no headlights, 6 cars abreast in 3 lanes, I saw all 4 of these just TONIGHT on my way home). I can count on one hand the times that I've had to do an emergency maneuver because something unexpected happened, and I'm a pretty aggressive driver. Every other time, I use my turn signals. Where I live now, I'm not just the minority; I'm the ONLY ONE who uses them; I can drive home from work and be the only person I can see who signals the entire way.

As far as I'm concerned, signalling is the easiest thing you can do to avoid accidents. Accidents are caused by something unexpected happening. If you telegraph your intentions, others know what you're doing, and have more time to react to you.

Its not like you have to reach anywhere. stick your finger out and flip it up or down. pretty easy.

I wish it was the same in the UK

[Chrisq (894406)]

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.

Re:I wish it was the same in the UK

[digitig (1056110)]

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".

Because it gives their SO at home an idea of how long they'll be, so they know when to put the food on.

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.

Because:
a. Abba's "Waterloo" is more work appropriate than, say, Johnny Paycheck doing "Take this job and shove it" or Rage Against the Machine's "Killing (In the Name Of)".
b. If they leave it out, someone will grab it and jump off the train when it gets to the station.
Next?

hidden words...

[pikine (771084)]

Because it gives their SO at home an idea of how long they'll be, so they know when to put the food on.

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."

Re:Adam Smith sez...

[MyGirlFriendsBroken (599031)]

Many countries (in Europe at least) have banned talking while driving

Does this mean that I am going to have to stop talking back to my Sat Nav in a vain attempt to find out exactly what language Ken understands?

Re:Adam Smith sez...

[Weh (219305)]

there was a study [tech.co.uk]done recently which showed that the difference in attention payed to traffic between drivers that were using hands-free phones and hand-held phones negligible. In other words it really doesn't make that much difference whether you're using hands-free or not (except for the law off course)

Re:Adam Smith sez...

[ePhil_One (634771)]

there was a study done recently which showed that the difference in attention payed to traffic between drivers that were using hands-free phones and hand-held phones negligible

I'd love to see a study that compared cell phone talking to having a conversation with a passenger and having your kids in the car. With luck we can get having multiple car occupants banned as a safety hazard. After that food, anything that can be read, the radio, etc... There's just no end to what we can ban!

Re:Adam Smith sez...

[joto (134244)]

Actually, talking on a cell-phone with handsfree is more distracting than talking to a real live person sitting in the seat next to you. The same thing can be said for pedestrians using their phones (or handsfree) in traffic. The reason is that the people you are talking to aren't seeing the same thing as you do, so they don't know when you are experiencing a situation that needs your attention. If somebody is sitting right next to you while you are coming up to a crossing or anything remotely dangerous, there will normally be a pause in the conversation untill the situation is resolved. Not so with cell-phones.

I've noticed this phenomenon myself, when I'm driving my mentally retarded brother. He can't really talk, but is fond of attention, and typically says a lot of "hi" and "hello" and other things to grab your attention. Since he has absolutely no understanding about what goes on in traffic, his attention-grabbing often comes at unfortunate times, and I have to admit that this has caused some potentially dangerous situations. Naturally, I'm more careful when driving him now. I'll bet most parents have similar experiences.

My cell-phone usage while driving is mostly related to professional activities with people who know I'm driving, so I have no problem with telling them that I'm coming up to an intersection or something, and they have no problem waiting. On the other hand, I can easily see that other types of conversation can be a lot more dangerous. I try to avoid those while driving, but unfortunately, it's not always easy to pull over, especially in dense traffic where you need it the most.

Re:Adam Smith sez...

[drsmithy (35869)]

Except with a hands free, you have both hands available, so you can accurately control the car and safely respond to safety issues. If you're holding a phone, driving becomes more erratic as you're trying to steer and change gear with one hand.

The problem with using a phone while driving is not one of physical control, but one of attention. Which is why people with only one arm, or other physical disabilities, are allowed to drive.

Re:Adam Smith sez...

[Stefanwulf (1032430)]

The person in the passenger seat is in the same environment as you, and is far less likely to just keep chattering in your ear if something important starts happening. Instead, they'll probably be yelling "Look out!" or "Red light!"

Re:Adam Smith sez...

[Kagura (843695)]

It is a lie. It may be a post or base policy from the post or base commander, but that doesn't make it a violation of anything other than UCMJ, which is not ever referred to using the words "federal law". Fort Bragg has a similar policy, in that as long as the cell phone is not physically in your hands, you are free to talk and drive. You cannot hold a speaker phone in your hand or use the phone to your head, because you will get pulled over and fined by the MPs and you will also have to attend a Saturday "safe driving" course. The device must be hands-free of any type.

Re:But WHY???

[k_187 (61692)]

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?

Re:But WHY???

[Doug Neal (195160)]

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.

Re:Adam Smith sez...Hookers should be free.

[Jeremiah Cornelius (137)]

I'm still waiting for the reason why sex costs so much?

Well, yer ugly, and you smell bad. Those are yer good points. Good lookin' blokes, what know how to talk with a bird, like what she's sayin', it's important like. We're the ones what get's it - and has 'em buyin' stuff fer us, too!

Bit a cologne... A blazer... Listenin' a bit more than talkin'. Goes a long way, mate. Sometimes into the next day!

Yer pal, Alfie.

Article text in lieu of mirror.

[palegray.net (1195047)]

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

Re:Article text in lieu of mirror.

[mathew7 (863867)]

If you do the comparison, do it right:
With your ISP you have a direct medium (usually cable) capable of high-speeds (in this case, even 1mbps is high speed). And data overhead is less than 50% (IP header compared to 140 characters of data) on a pre-established link.
With your cell, you have a shared medium (air) with a limited number of frequency bands. The overhead is not only the extra data transfered, but also (like a phone conversation) it has a separate line negociated to transfer.
If you would have smaller prices on SMS (let's say 10 times smaller), more and more users would use it. This would increase the providers load, and even if they could handle it, some cells could be limited by their bandwidth which is regulated by the FCC. This would increase the transmission times and even affect regular communications, which means more angry calls to tech support.

So providers probably justify it as a "crowd control" (something like use it only if you really have to).

Im Romania at least one of the ISPs had a 1st 3 seconds not charged. Needless to say, the consumers started making 1-word calls (call, say 1 word and hang up, then do the same for each other word). I've heard about 1000-page detailed phone bills which were less than 10$. After the 1st year, they cancelled it on ALL contracts, not just the new ones. I don't have to say how it was during phone "rush hour" when you wanted to make a regular call.

How can they justify the cost?

[rritterson (588983)]

They can justify the cost because we continue to reward them with lots of our dollars.

It's easy...

[Sique (173459)]

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.

Re:It's easy...

[Sique (173459)]

What about actually reading the posting you are replying to?

I never said that GSM cost is zero. I said that the cost of SMS within GSM is zero, because SMS is just a part of GSM (its stderr channel). So if you deploy a huge GSM network to work as a provider of mobile voice services, you get the SMS service for free. When GSM first was deployed it was never thought to have SMS as a separate service. Thus the first huge SMS networks were paid for by voice users who weren't even using SMS. Then the providers which already had a complete SMS infrastructure in place saw that the usage of SMS started to grow and they could just print money by increasing the SMS prices.

When GSM was introduced in the U.S., the SMS facility was already been known to the providers as a big cash cow, and the calculations were already taking that in account.

But still the cost to send an short message is much lower than the cost to send a phone conversation with about the same price. Here in Austria the charge for 1 min of mobile phone conversation is often 1 ct (up to 5 ct/min for prepaid plans). So for the cost of a single short message (19 ct) I can have a conversation for about 19 minutes. Which one will be more expensive to transmit for the provider?

Re:It's easy...

[Rulke (629278)]

actually, thats bull, as the firmware that routes GSM in the networks is also used for SMS, actually, SMS uses the same channel your mobile uses to announce itself to the base stations and exchanges status information with. other services like reversed billing were developed later, and you pay for an SMSC because it adds convenience to you, not because you are technically not able to do it yourself... they make the contracts with all the providers, reserve those nice short numbers in all networks and give you a convenient web service or other interface to talk to... and for that you pay. I too used SMS when it first emerged in Europe for zilch... billing it would have cost them more than just letting you use it in those days, at least so they thought before they saw what ridiculous prices they could charge and get away with. When they finally started billing it was 23 cent for the first 100 messages, and 2.3 cent for every message more ... imagine, after it got up to 39 cent for every message... for them it's like printing money. Surely with the added services they developed ON TOP of SMS, like the afore mentioned reversed billing, premium SMS and so on they have slightly increased their costs for the service itself, but basic SMS started as an accidental byproduct of GSM Oh, i worked two years in a business that developed and distributed mobile applications, so this is not theoretical stuff.

How can you justify still using SMS?

[Misanthrope (49269)]

Just use
T-Mobile: [e-mail]
Virgin Mobile: [e-mail]
Cingular: [e-mail]
Sprint: [e-mail]
Verizon: [e-mail]
Nextel: [e-mail]

Just buy the cheapest data-plan and it's still better if you're a heavy user.

Re:How can you justify still using SMS?

[Darkforge (28199)]

All of the US cellular providers charge not just per message sent, but per message received. Using an SMS e-mail gateway may save you sending fees, but it won't save you on the receiving cost.

meh

[reynaert (264437)]

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).

Re:meh

[mikkelm (1000451)]

Consumers don't care about 3G? I'm extremely satisfied with my HSDPA USB modem, and everyone I know to have 3G phones are happy with their service.

That's what happens without net neutrality

[Animats (122034)]

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.

Even more rediculous..

[DigitAl56K (805623)]

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").

Bling and Spinning Tires

[EdIII (1114411)]

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.

I know!

[eiapoce (1049910)]

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!

Raise the price of SMS!

[rve (4436)]

"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.

some convenient fallacies here

[wannasleep (668379)]

While I am no fan of AT&T, and certainly agree that the cost of an SMS is outrageous by any standard, but the article contains several fallacies.

• The most common fallacy is mistaking the marginal cost of sending one SMS with the total cost. The marginal cost is basically zero, which is the point of the article. However, AT&T pays for a bunch of items that at a first approximation don't vary with the number of SMS sent through the network. There are many ways to account for these costs and there are entire university classes which deal with this type of calculations. However, when your network costs few billion dollars, a billion here, a billion there, soon we are talking about real money. The same applies to marketing costs, customer support, etc.

• The author conveniently forgets that there is also a termination fee that a provider pays when messages originating from one network (e.g. AT&T) are delivered to phones on a different network (e.g. T-Mobile). So, some messages cost more, raising the overall average. Same apply for roaming charges, if any.

• The author also miscalculates the number of bytes necessary to send an SMS conveniently forgetting the envelope, i.e. phone number of the sender, subject, time, etc. I am sure that his ISP doesn't subtract overhead from the 500GB of data he pays for.

• 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.

The Real Answer: They Don't Want You To

[FroBugg (24957)]

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.

Just for comparision

[jandrese (485)]

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.

Re:Offer and demand

[dvice_null (981029)]

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.

A LOT of air on the prices

[Dr. Hok (702268)]

There is probably some air on the prices, but not as much as the author of the article makes you think.

I work in a SW company and once talked to a representative of a GSM provider over the lunch in a pause of a workshop. He told me (and he didn't tell me it's a trade secret) that the entire SMS messaging in their network was handled by one single Sun workstation.

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.

Re:A LOT of air on the prices

[arivanov (12034)]

This is just the SMC. In order to handle SMS it relies on capability in the network and the price is driven by the network capability, not by the system which uses it.

Unless the phone can do SMS over GPRS, each SMS message eats signalling capacity and travels along an SS7 link. After that it once again eats signalling capacity and competes with the rest of the signalling traffic for a place in the sun on the beacon channel. This is probably the most expensive way to encapsulate data known to man. You use mostly serial links, reliable transfer everywhere, transaction safe forwarding on every step and so on. It is not surprising that it is hideously expensive. When the protocol was designed nobody had the slightest idea how popular it will be and now it is a commodity so everyone is afraid to break it while trying to optimise it.

So the hideous price of GSM SMS is here to stay until we switch to 3G.

Re:A LOT of air on the prices

[digitalchinky (650880)]

I spent a bunch of years working in the field, it was a rare site to see SS7 saturating a link. These days it is simple and cheap to add more SS7 capacity. You can already jam a metric crap load of phone calls down the bearer and still have lots of nice white space to spare for data. SS7 isn't much of a bottleneck at all. Certainly it's not the most elegant way to do SMS, but there really isn't that much competition with all the other dialing cruft that goes over the wire.

I guess others might disagree.

If you have the number of customers that would saturate your existing links, then you are also making more than enough money to add in more capacity.

SS7 works well over pretty much any type of link. It's extremely common to see it on satellite, I think that would be about as unreliable as it can get, though you could get creative and try and do it over HF with a couple of home made transceivers and some bent up coat hangers for antenna.

Maybe in the US it is taken as seriously as you say, but elsewhere the telco's really don't care how it happens, just so long as it almost always accurate and still turns them a stupidly high profit. Here in Asia it's quite common to see 8 or more SS7 links on a single E1, that's the popularity of SMS in this part of the world.

It's technically more efficient to do SMS some other way, but right now it would seem bandwidth isn't so scarce that it makes economic sense just yet.

Re:A LOT of air on the prices

[cnettel (836611)]

Yep, assuming that you have a cell grid covering the better part of a geographic area. A phone that's just turned on with a user who expects coverage wherever he goes costs almost as much as one with a limited, but regular, usage of SMS and voice. Still, the first one can get off far cheaper than the second, simply because users seem more willing to accept paying for actual actions, than just waiting. The interesting aspect in this light is that the text message might very well transfer as much information as a phone call of equivalent cost. The fact that the data content is far smaller is simply due to the ingenious idea of letting the user do the compression.

Re:A LOT of air on the prices

[adpowers (153922)]

The fact that the data content is far smaller is simply due to the ingenious idea of letting the user do the compression.

Heh, I like this concept. Perhaps the wireless companies-to the dissatisfaction of English teachers everywhere-are also subversively encouraging the use of SMS lingo. For example, "r u going to the mall 2night" is compressed to 82% of the original size of "are you going to the mall tonight". Those bastards will do anything to make a buck!

Re:A LOT of air on the prices

[weicco (645927)]

It is even easier where I live. I just type "pub 15" and receiver immediately understands that it means a hectic beer drinking festival at the pub starting 15 minutes from now, put on your clothes and get your ass to the pub. So the compression rate is enormous! It also helps that there is only one pub in the town...

Air interface bottleneck plus infrastructure costs

[Swordfish (86310)]

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.

Re:Offer and demand

[nmg196 (184961)]

> 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.

Re:Offer and demand

[OlivierB (709839)]

"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?

Re:As the four other posters...

[esper (11644)]

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.