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The True Cost of SMS Messages 583

Posted by kdawson
from the call-it-$24K-a-song dept.
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?"
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The True Cost of SMS Messages

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  • Adam Smith sez... (Score:5, Informative)

    by palegray.net (1195047) <philip.paradis@NoSpAm.palegray.net> on Tuesday January 29, 2008 @04:08AM (#22218918) Homepage Journal

    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: (Score:3, Interesting)

      by 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... (Score:5, Interesting)

        by jfim (1167051) on Tuesday January 29, 2008 @04:16AM (#22218972)
        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.
        • 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...
          • Pay anything for instant gratification. :-)

          • Re: (Score:3, Funny)

            by Firehed (942385)
            It's all over the place.

            Not that I should talk, having used VNC from my phone to start a remote backup while driving (shh!). I was at a red light at the time...
          • by Gadgetfreak (97865) on Tuesday January 29, 2008 @10:17AM (#22220968)
            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: (Score:3, Insightful)

              Many Mercedes and BMWs there?

              I believe (from the UK experience) that both indicators and mirrors are optional extras on German cars, as they never, ever indicate even when pulling out 3" from my front bumper :)

          • Re: (Score:3, Funny)

            by PirateBlis (1208936)
            My friend texts while driving all the time. I'm just waiting til the day I get a half finished message. Then I'm just gonna respond "Serves you right, dumbass"
        • Many countries (in Europe at least) have banned talking while driving, even with headset. More are considering it.
          • by MyGirlFriendsBroken (599031) <dexterberkeley@ m e . c om> on Tuesday January 29, 2008 @06:47AM (#22219766) Homepage Journal

            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: (Score:3, Funny)

      by BlackPignouf (1017012)

      Why do cars cost so much?
      Because we're even more addicted to car driving than we are to SMS sending?
  • by rritterson (588983) on Tuesday January 29, 2008 @04:08AM (#22218920)
    They can justify the cost because we continue to reward them with lots of our dollars.
    • They can justify the cost because we continue to reward them with lots of our dollars.
      And because to lower the price would be to have low-price SMS compete with high-priced voice calls.
  • It's easy... (Score:5, Insightful)

    by Sique (173459) on Tuesday January 29, 2008 @04:13AM (#22218948) Homepage
    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.
    • by Carthag (643047)
      What's scary are those 5000 "free" SMSes per month deals. I write about 2000 per year (1000 from May 1 to Dec 1) and I don't even worry about sending SMSes, I just send them whenever I feel like it. Costs me about 70 bucks per year in SMS alone, whereas the 5000 "free" offer would run up 700.

      Now, there are minutes included as well, but that still doesn't begin to compare.
    • by Colin Smith (2679)

      The cost is nearly zero
      Right. Because huge world wide telecommunication networks just sprang into existence fully formed from nothing.

       
      • Re:It's easy... (Score:5, Informative)

        by Sique (173459) on Tuesday January 29, 2008 @05:06AM (#22219262) Homepage
        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?
    • Why the hell was the parent moderated "troll"? Are there phone-company lackeys disguised as libertarians here?
    • Re: (Score:3, Interesting)

      by JonathanR (852748)
      You should also add that prior to GPRS being implemented, that the ability to send data from handset to handset was by using the network control protocols*, rather than within voice packets. Of course the GSM system wasn't designed to send masses of data by this method, so as far as the network infrastructure is concerned, high volumes of SMS data is a much greater burden than the packet data sent during a voice call.

      *This is my non-techie understanding. Somebody with GSM background can elaborate with the
      • Re: (Score:3, Interesting)

        by FireFury03 (653718)
        the ability to send data from handset to handset was by using the network control protocols*, rather than within voice packets.

        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, t
  • by Misanthrope (49269) on Tuesday January 29, 2008 @04:15AM (#22218964)
    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.
    • by Darkforge (28199) on Tuesday January 29, 2008 @04:21AM (#22219000) Homepage
      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: (Score:3, Insightful)

        by Bert64 (520050)
        So you're saying that by spamming those email to sms gateways, the victims will actually have to pay to receive those spams? That's a system just asking to be abused.
    • This little workaround is exactly why Apple is preventing 3rd-party apps on the iPhone. They're undoubtedly under a strict contract with AT&T not to allow anything on the iPhone that circumvents AT&T's profit centers. That would be VOIP and an SMS app that did all the sending via email. Hey, I've had my iPhone for 2 weeks and I love the crap out of it. I'm just a slight bit frustrated by this compromise. Wish it were a full-on computing platform.

      Seth
    • Re: (Score:2, Informative)

      by Osty (16825)

      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 m

  • meh (Score:4, Insightful)

    by reynaert (264437) on Tuesday January 29, 2008 @04:19AM (#22218982)
    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).
  • How can carriers continue to justify the high cost of their apparent super-premium data transmission?



    It's a market economy with lots of morons as customers. As long as they find enough morons to pay their super-inflated prices, they don't have to justify anything. And if they don't find them, they just have to justify why they're not making profit in front of their shareholders.


    I've quit sending text messages years ago.

    • Re: (Score:2, Insightful)

      by palegray.net (1195047)
      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
      • Re: (Score:2, Insightful)

        by Ihlosi (895663)
        The fact that people use text messaging services doesn't exactly make them morons.

        The fact that people apparently send hundreds or thousands of text messages per month, at completely ridiculous prices, with an information content close to that of white noise, hints at them being morons. Or just bad at adding up numbers.

        When I pay a buddy to help me fix my car, that doesn't make me a moron.

        However, when you pay your buddy more to fix your car than a completely new car would cost at the dealership down the

  • by Animats (122034) on Tuesday January 29, 2008 @04:22AM (#22219006) Homepage

    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.

  • by DigitAl56K (805623) on Tuesday January 29, 2008 @04:29AM (#22219038)
    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").
    • 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 notio

  • by Mike1024 (184871)

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

    How can Microsoft justify the high-cost of vista premium when all you get is a DVD that cost less than $0.25 to produce?

    How can phone companies charge more for international telephone calls than they do for international data transmission, like Skype, which transmits the same audio?

    How can Apple justify factory macbook upgrades which cost more than doing the same upgrades yourself?

    How can air lines and trai

    • How can Microsoft justify the high-cost of vista premium when all you get is a DVD that cost less than $0.25 to produce?
      - Because it actually cost Microsoft money to make the contents of that DVD

      How can phone companies charge more for international telephone calls than they do for international data transmission, like Skype, which transmits the same audio?
      - Because it cost them money to use the international trunks/satellite links

      How can Apple justify factory macbook upgrades which cost more than doing the
    • by Bert64 (520050)

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

      How can Microsoft justify the high-cost of vista premium when all you get is a DVD that cost less than $0.25 to produce?

      They can't, which is why a large number of users run pirated copies, and an increasing number are looking towards free alternatives like linux.

      How can phone companies charge more for international telephone calls than they do for international data transmission, like Skype, which transmits the same audio?

      They can't, people who know about the cheaper alternatives tend to use them, i haven't made an international call direct from my phone for years.

      How can Apple justify factory macbook upgrades which cost more than doing the same upgrades yourself?

      They don't, very few people buy bare upgrades direct from apple, some buy them from an apple store because they perform the physical installation, and some people buy new machines with upgrades already installed for the

  • by EdIII (1114411) on Tuesday January 29, 2008 @04:42AM (#22219122)
    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 call shenangians (Score:2, Interesting)

    by Peter Cooper (660482)
    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,
    • by SQL Error (16383)
      No, but 50 billion SMS messages is, let's say, 2TB of data (40 characters each, which is pretty generous). I pay 10c per GB for bandwidth at my hosting provider, so that would cost me $200 to send over the internet. Tweak the numbers a little and you can get closer to the $98 figure.
    • Re: (Score:3, Informative)

      by nilbog (732352)
      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.
  • 1. The public are ignorant of the true costs.
    2. The Telcos (like many other corporations) are thieving bastards.

    Funny thing is, most of the public still wouldn't do anything about this even if they knew. They accept the bills that they get and the roaming costs and the data costs - irrespective of how much they are actually worth.

    I wish someone would explain to me why roaming data (browsing internet while overseas) costs an extortionate amount more than when browsing it locally (especially when you are bein
  • "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"

    has to be a shoe in for the most retarded comparison of the year?

    yes teleco's are gouging us on everything not just sms, hence why i only have a prepaid mobile i hardly use and my home phone is VOIP. my annual telephone bill/internet/mobile expenses are under $1200.

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

    It really is that simple: Because they can.

    People are still using SMS, even though in many cases, actually calling by phone would be cheaper and more convenient. I'm not talking about the "I'll arrive at 11:20" message, I'm talking about the actual SMS "chats" that lots of young people engage in. 10, 20 SMS go back and forth easily. Maybe I'm getting old, but I simply don't understand why they don't simply call each other. It'd be faster and cheaper.

  • I know! (Score:5, Informative)

    by eiapoce (1049910) on Tuesday January 29, 2008 @05:05AM (#22219254)
    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!
  • by wannasleep (668379) on Tuesday January 29, 2008 @05:09AM (#22219276)
    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.
    • Re: (Score:3, Interesting)

      by nilbog (732352)
      "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
  • apples and oranges (Score:3, Insightful)

    by joebob2000 (840395) on Tuesday January 29, 2008 @05:26AM (#22219372)

    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.

  • SMS Scene in India (Score:3, Informative)

    by rmadhuram (525803) on Tuesday January 29, 2008 @06:28AM (#22219666)
    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.
  • by FroBugg (24957) on Tuesday January 29, 2008 @09:10AM (#22220412) Homepage
    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 (Score:4, Interesting)

    by jandrese (485) <kensama@vt.edu> on Tuesday January 29, 2008 @10:50AM (#22221302) Homepage Journal
    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.

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