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]

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?

How can you justify still using SMS?

[Misanthrope]

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]

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.

Re:Offer and demand

[dvice_null]

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.

Re:How can you justify still using SMS?

[Osty]

Just use <phone number>@<provider gateway>

While that's useful to know, you have to know what provider your contacts are using rather than just knowing their phone number. If your friends change providers (this happens more than you'd expect, especially since number portability became possible a few years back), you have to keep track of that. Even then, when the message sent through the gateway always comes from the same phone number. Depending on how your phone shows incoming messages, it may not be clear who the message is from. It's impossible to directly call the person sending you a message through the gateway (you'll have to dig through your contacts to find the person with the associated name/email address in the SMS body), which at least for me is an important feature to have.

At least for me, SMS is used exactly as it sounds -- short messages, not long conversations, usually along the lines of "Let's meet up <somewhere>" with a short acknowledgement sent in reply (if at all). An average SMS session for me consists of 2-6 messages, depending on whether or not several replies are needed. Anything more than that and I'd rather send an email or physically call the person. I realize that I'm probably not a typical SMS user, but even so I'd much rather have cheap SMS available than always going through an email-to-SMS gateway.

A LOT of air on the prices

[Dr. Hok]

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.

Air interface bottleneck plus infrastructure costs

[Swordfish]

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!

[eiapoce]

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!

Re:It's easy...

[Sique]

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:Offer and demand

[OlivierB]

"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:I call shenangians

[nilbog]

You'll need to read the article, because that's not what it's saying at all. Even the summary makes it clear that it is comparing costs of bandwidth from an ISP vs. SMS over a cell provider. The cellular provider's actual costs are not taken into consideration, but as a previous poster pointed out, they are negligible.

SMS Scene in India

[rmadhuram]

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.

Re:It's easy...

[Rulke]

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.

Re:Adam Smith sez...

[Weh]

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...

[brian.gunderson]

[citation needed]

Re:But WHY???

[Doug Neal]

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:I wish it was the same in the UK

[lubricated]

That's 90's hip hop. 1992 specifically. 80's was more like run dmc and the like.

Re:Adam Smith sez...

[amorsen]

Personally, I think this is more of a time issue. When dealing with heavier traffic, you have to respond, and required response time may not leave time for signaling or other kinds of politeness.

If you don't have time to signal, you certainly should not do the maneuver. The obvious exception is if the maneuver is necessary to avoid collision, but if you find yourself doing emergency maneuvers on a regular basis, you should reconsider your driving style.