The True Cost of SMS Messages 583
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?"
Re:Adam Smith sez... (Score:3, Interesting)
Re:Adam Smith sez... (Score:5, Interesting)
Bling and Spinning Tires (Score:3, Interesting)
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 call shenangians (Score:2, Interesting)
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.
Article text in lieu of mirror. (Score:5, Interesting)
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:Adam Smith sez... (Score:1, Interesting)
Re:Adam Smith sez... (Score:2, Interesting)
Re:A LOT of air on the prices (Score:4, Interesting)
Re:It's easy... (Score:3, Interesting)
*This is my non-techie understanding. Somebody with GSM background can elaborate with the correct jargon.
Re:Offer and demand (Score:3, Interesting)
Re:some convenient fallacies here (Score:3, Interesting)
The point of the article is not what the provider's cost is, but what the consumer's price is. ISPs have operating costs too, but I wasn't looking to do an in-depth study and account for every penny.
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.
It is true, I didn't mention (nor was I even aware) of carrier to carrier termination fees. But again, I'm not dealing with the costs on the carriers side. I'm dealing with strictly the cost of data compared to an ISP or TCP/USPS. The carrier's internal cost is irrelevant. Furthermore, asking how the carriers can justify such exorbitant prices was a legitimate, honest question (not rhetorical). You've provided a piece of the answer. But then again, we could ask how carriers can justify charging each other so much. I also do not have access to these figures.
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.
That is true. I didn't think of that. It probably wouldn't impact the final number much, but I fully encourage others to do the calculations for themselves. I'm sure someone much smarter than me could get closer to an accurate number. I'm not a math guy.
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.
Fair. I considered that as well. But to be fair, I was being very conservative in the estimation of how much data you could fit in a letter. I restricted it to a 256 character set, 12 point font, 250 words per page, no pictures, etc. You could easily fit 10x as much data printed out inside an envelope, or thousands of times more if it was on some sort of digital media. I also didn't forget to count the envelope this time. I could have gone either way with the numbers - calculating a stack of DVDs with the media mail rate, or a single sheet of paper in an overnight envelope. I figured the numbers I used would be a good average middle point.
Overall I wasn't trying to be terribly accurate with the numbers. Again, I'm no math guy but the ballpark figures still give you an idea.
Re:Article text in lieu of mirror. (Score:3, Interesting)
Re:Adam Smith sez... (Score:2, Interesting)
Re:It's easy... (Score:1, Interesting)
As far as the network goes, SMS is sent over the air via the control (D) channel (ie out of band) but it still needs separate store & forward gateways (the SMS-SC) to hold the message until it can be delivered. The asynchronous and unreliable delivery are what make SMS different from voice. The functions could be included in the MSCs or SGSNs I guess but for scalability it is more effective to use separate SMS-SC's
Re:Adam Smith sez... (Score:5, Interesting)
Re:It's easy... (Score:3, Interesting)
Correct - SMS messages are sent over the SS7 network, rather than the circuit switched network used to carry voice.
That said, I have no idea what network packet switched IP data is sent over (GPRS, etc.) - are the operators running the IP packets over yet another network infrastructure, or shoving them over the existing SS7 network (with possibly upgraded links). In the long run, the telcos are switching from SS7 to IMS (IP based - crazilly, usually IPv4. Talk about spending billions to upgrade to an already superseded protocol), but we aren't there yet.
high volumes of SMS data is a much greater burden than the packet data sent during a voice call.
well, not quite. SS7 links can be upgraded to provide more capacity, just as the circuit switched network can be (in fact, it isn't uncommon for SS7 traffic to be carried on the same physical TDM link as the voice circuits, so it wouldn't be hard to reallocate some of the voice timeslots to be SS7 links). In any case, networks have a very simple way of dealing with shock loads of SMS traffic (for example, new year's day) - they silently throw the messages away.
Somebody with GSM background can elaborate with the correct jargon.
Not specifically GSM, but I did work on SS7 and SIGTRAN for a while (and yes, they really are horrible protocols).
Re:I wish it was the same in the UK (Score:3, Interesting)
Transaction Costs (Score:2, Interesting)
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.
Just for comparision (Score:4, Interesting)
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.
Comment removed (Score:4, Interesting)
Re:Adam Smith sez... (Score:1, Interesting)