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What Carriers Don't Want You To Know About Texting

Posted by timothy on Sun Dec 28, 2008 08:21 AM
from the what-the-market-will-bear dept.
An anonymous reader writes "Randall Stross has just published a sobering article in The New York Times about how the four major US wireless carriers don't want anyone to know the actual cost structure of text message services to avoid public outrage over the doubling of a-la-carte per-message fees over the last three years. The truth is that text messages are 'stowaways' inside the control channel — bandwidth that is there whether it is used for texting or not — and 160 bytes per message is a tiny amount of data to store-and-forward over tower-to-tower landlines. In essence it costs carriers practically nothing to transmit even trillions of text messages. When text usage goes up, the carriers don't even have to install new infrastructure as long as it is proportional to voice usage. This makes me dream of the day when there is real competition in the wireless industry, not this gang-of-four oligopoly."
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  • Correlation (Score:5, Insightful)

    by conureman (748753) on Sunday December 28 2008, @08:26AM (#26248739)

    The feckless youth I see texting in public do not appear to be the sort who employ reason or critical faculties. That's the kind of customer base dreams are made of.

    • Re:Correlation (Score:5, Insightful)

      by Anonymous Coward on Sunday December 28 2008, @08:38AM (#26248811)

      That's because their parents are the ones footing the bill... ouch.

        • Re:Correlation (Score:5, Informative)

          by ptbarnett (159784) on Sunday December 28 2008, @11:10AM (#26249637)

          Is it true they even charge you for receiving calls in the states????

          Yes, they do. And there's good reason for it.

          In the US, most people can make "local" calls free of charge. The definition of "local" varies, but it is generally the town/city that you reside in and maybe the surrounding suburbs. To be semantically correct: it's not actually free... it's covered by a flat monthly rate. But, there is no per-minute rate.

          Calls outside that area are considered "toll" calls. They are assessed a per-minute rate, although phone companies are now offering calls to the entire US for an additional flat monthly fee.

          In some states, a toll call must be dialed differently. In mine, it must be preceded by a '1'. This is imposed by the public utility commission, to prevent a caller from claiming they didn't know it was a toll call that would assess additional charges.

          Faced with the public expectation that "local" calls are free -- or at least no additional charge, the cell phone services in the US chose to assess airtime charges to the user of the cell phone, rather than the person that called them. Had they not done so, consumer acceptance of cell phones as a replacement for wire-line phones would have been inhibited.

          (An aside: free mobile-to-mobile calling on the same network is also a standard feature in the US)

          • by fdrebin (846000) on Sunday December 28 2008, @10:44AM (#26249487)

            No, receiving calls/texts is free.

            While there may be some price plans that allow for free incoming calls or free incoming text messages, the majority of US price plans charge airtime for incoming calls and charge the same for incoming text messages as outgoing - currently 20 cents per message.

            You can also typically buy bundles of text messages, with say Verizon charging $5.00/month for 250 text messages (and other options as well)

            /F

              • by Firethorn (177587) on Sunday December 28 2008, @12:36PM (#26250299) Homepage Journal

                WTF? Does that mean the US telcos are double dipping?!

                Well, you have to understand the differences in evolution in telephone service. Traditionally in the USA, local phone calls are unmetered. That was never the case in Europe.

                When the first radio phones started coming out(they weren't cellular yet), ALL calls were metered because you were paying for relatively expensive limited radio transmissions. Because such people were relatively rich, and didn't want to discourage calls too much with getting the equivalent of a 900 number, they accepted the charges.

                Think of it as the tradition is that the owner of the cell phone pays for the radio transmission costs, outgoing or incoming. Thus the reason you get charged minutes for incoming as well as outgoing calls.

                That's not to say that the charges for text messages aren't crazy. It's one of those things that I wouldn't be surprised that there's more bit traffic to charge for text messages than to send them. More expense to bill for a text message than to send one, etc...

                • by shutdown -p now (807394) <int19h@nosPAm.gmail.com> on Sunday December 28 2008, @02:23PM (#26251139)

                  Well, you have to understand the differences in evolution in telephone service. Traditionally in the USA, local phone calls are unmetered. That was never the case in Europe.

                  This has always been the case in Russia, though, but we don't pay for incoming calls & messages, either. We used to, but a few years ago the government intervened and mandated all cell providers to not charge for incoming (forcing them to strike up agreements to redistribute the payment to cover expenses on both sides in cross-network calls).

              • by jrp2 (458093) on Sunday December 28 2008, @02:23PM (#26251151) Homepage

                "WTF? Does that mean the US telcos are double dipping?!"

                No, it is just a different model.

                In the US/Canada, calling a mobile vs. calling a landline is the same price (often unmetered or very cheap). In most cases it costs just a few cents a minute to call anywhere in the US, landline or mobile, usually including Alaska and Hawaii. Some packages even extend that to Canada, and western Europe (non-mobile in the latter case).

                That is not the case in Australia, the caller to a mobile is usually charged a hefty surcharge. Take a look at your international calling rates, you will see no special mobile rate for calls to the US. It is all the same rate, there are no special mobile area codes (a.k.a. city codes).

                In many cases, you can even transfer your home number to a mobile if you are eliminating your landline.

                One could argue which concept is better, fairer, or whatever. As with Australia (and almost everywhere) it really depends on the package you get.

                • by penguin_dance (536599) on Sunday December 28 2008, @04:15PM (#26251993)

                  To the UK, it's normally 4 cents a minute (free if you have an unlimited plan). But, if you are calling a mobile phone in the UK, it's 34 cents a minute.

                  In France, it's 4 cents a minute vs. 21 cents a minute.
                  In Germany, it's 4 cents a minute vs. 31 cents a minute.

                  Here it can depend on cell phones because there's a lot of services that charge a flat rate for X No. of minutes. Both parties can be charged when you call mobile to mobile. Charges can range from free (if the person is on the same network or in a network of friends) or the individual rates. IOW, you're charged depending on your plan, they're charged depending on theirs. In my case I prefer the pay-as-you-go plan. If you don't call all the time it works out pretty economically. On my cell plan, for example, I pay $1 a day on the days I use it and 10 cents a minute to anywhere or 0 if I call another member with the same service. I spend about $150 a YEAR. While fixed minute packages may run cheaper per minute, Being that most run $40/month for the cheaper packages, it's a lot cheaper for me to do the pay-as-you-go and I don't have to worry about running over minute limits.

                  If you have a land line, it doesn't cost you any more to call a person's cell phone if it's a local number. It does cost the cell phone owner as stated above. However land line companies also compete with cells by offering a flat rate per month cost for both local and long distance, usually around $50/month.

                  Our biggest cell problem in the US is coverage. It depends on where you are as to which service has the best coverage.

                  Regarding the texting, it should be obvious: The price is high, not because it taxes the systems more, it's because texting is popular. How is this surprising? When something is popular or needed, the price goes up. When it's not, the opposite is true. This popularity allows the telco's to rake in additional profits and offer package deals with a guaranteed income. Sorry, but a company is not require to responsibly price things according to their cost. If you want texting prices to go down, then texting needs to become less popular or more competition needs to come in that offers cheaper or included texting.

                  • by eh2o (471262) on Sunday December 28 2008, @11:25PM (#26254665)

                    No its not obvious... supply and demand economics, right? Well, the demand is high, but the supply is essentially infinite as TFA points out. N/infinity = zero for extremely large values of N. Therefore it should be practically free. What we are looking at is a price-fixing scam.

    • Re:Correlation (Score:4, Informative)

      by BobReturns (1424847) on Sunday December 28 2008, @08:43AM (#26248841)
      If they need to send a short message to someone it's not like there's a viable alternative - it's really the only game in town.
        • by Dachannien (617929) on Sunday December 28 2008, @09:24AM (#26249037)

          But when it costs around the same amount as a minute of telephone call, I can't help wondering if they would be better off just making a short call...

          But that would be, like, totally lame! (or ghey, or whatever it is those whippersnappers are saying these days)

          • Re:Correlation (Score:5, Insightful)

            by vadim_t (324782) on Sunday December 28 2008, @10:53AM (#26249539) Homepage

            Contrary to many people I still remember enough of my days at school to realize that young people aren't a lot different from adults, they just live in a different environment.

            While at work it may be acceptable to take a phone call at any time, such things usually aren't welcome by teachers. And while at a job there's a hierarchy that may result in you having maybe 5 people you can regularly talk to, at school you're in a deeply social place, and part of a class that may be around 30 people. The small amount of separation between classrooms and common recess and food areas means it's very easy to meet a very large amount of people. Receiving 30 SMS per day is easily doable, while taking 30 phone calls, most of which don't need to be replied to isn't near as convenient.

              • Re:Correlation (Score:5, Informative)

                by AnyoneEB (574727) on Sunday December 28 2008, @02:04PM (#26250991)
                Which is why students use text messages. It is nearly impossible to miss a student talking on their phone during class, but students have no problem holding their phone under their desk and texting during class without getting caught.
        • Re:Correlation (Score:5, Interesting)

          by mollymoo (202721) on Sunday December 28 2008, @09:43AM (#26249137) Journal

          Better off financially? Almost certainly, particularly as text conversations are frequently longer than one message each way. But I don't think that's the point. Calls require an instant response and a lot of attention an you can't really multicast voice as effectively. Setting up even a 3-way call takes longer than writing a short text ("Pub tonight?") and sending it to half a dozen friends. Texts, like emails, can be responded to at your leisure. I prefer to receive texts than voice calls for that reason. A-la-carte texts can be absurdly expensive, but packages (available with many hundreds of texts per month if you're a heavy user) will hardly break the bank.

          The bandwidth comment in TFS is curious - the bandwidth for voice is also there whether you use it or not as well. Mobile voice and landline networks work that way too - mostly fixed infrastructure costs for the operators, but a pay-per-use model for the consumer. It's nothing new. Increasingly commonly, broadband works like that as well.

        • Re:Correlation (Score:5, Insightful)

          by michael021689 (791941) on Sunday December 28 2008, @09:56AM (#26249215) Homepage
          There are reasons a lot of us prefer texting over a call in most situations.

          Calling represents a loss of time - you have to be somewhere away from others(if you are polite), wait as the phone rings, wait as you go over formalities, finally say what you needed to say, and then hang up. That is all a pain in the ass to us whippersnappers. Not to mention the annoyance of not getting an answer and having to wait to leave voicemail...(which is quite similar to a text, other than that it takes longer to convey a message and if something is missed it has to be replayed..)

          Texting is more polite. Although I know many over thirtys who disagree, many younger people often do not consider it impolite to receive and send text messages in public or with company (within reason, it can't distract you completely). Beyond that, sending a text does not heavily interrupt the day of you or your contact, unlike a phone call.

          Essentially, texting gets the same job done faster and with less hassle.
        • Re:Correlation (Score:5, Interesting)

          by WDot (1286728) on Sunday December 28 2008, @09:59AM (#26249233)
          I disagree. To get the equivalent of a text message in a short call, I would have to say "My plane landed safely in Phoenix, I love you, bye," and then hang up before they have a chance to respond. I use phone calls for conversations, even short ones. However, if I can fit the entire conversation into 160 characters, I use a text message instead.

          I, like almost everyone else on Slashdot, think that text message rates are exorbitant, but I have no room to talk since I signed up for a plan. Yes, I'm a "feckless youth" like conureman says, but I pay out of my own pocket for my plan. I justify it to myself by saying that I'm paying for convenience, and I am.
        • Re:Correlation (Score:5, Interesting)

          by YttriumOxide (837412) on Sunday December 28 2008, @10:41AM (#26249467) Journal
          I use text a lot for work. I live in Germany, but deal with people from all over Europe for work. Often, I may need to give or receive an address, and since I don't speak every European language, addresses are a complete pain if spoken to me on the phone or left in a voicemail. With text, I (or others) can just show the address to a taxi driver and there's no confusion. (example: The address of the Holiday Inn in Brno, Czech Republic is "Krízkovského 20" (carons over the r and z - can't show them on Slashdot) - if someone told me that by voice, I'd be lost - put it in a text, and it's dead easy)
    • Re:Correlation (Score:4, Interesting)

      by Nazlfrag (1035012) on Sunday December 28 2008, @09:09AM (#26248963) Journal

      You were once those feckless youth, and I'm sure believed what you had to say was of utmost importance. We have been conned into thinking that text messages actually cost the network operators anything, but while this is to do with the critical faculties of the general public it isn't about those teenagers utilising our new social conference ground. They are wiser than you assume.

  • Isn't exactly news (Score:5, Insightful)

    by A beautiful mind (821714) on Sunday December 28 2008, @08:26AM (#26248741)
    ...but it's good to see this fact receiving some mainstream attention. I guess it's inevitable that people now tend to ask that if it costs x dollars to transfer y megabyte from my phone, why do text messages cost a lot more when they are so tiny? In the digital age text message fees seem more and more ludicrous even to ordinary people.
  • by TuaAmin13 (1359435) on Sunday December 28 2008, @08:26AM (#26248743)
    Of when we'll be nickled and dimed for text messages instead of quartered.
    • by arashi no garou (699761) on Sunday December 28 2008, @09:16AM (#26248999)

      I'm still looking forward to the day when I'm only charged for what I send, not what I receive. I have two phones on my account, one for me and one for my fiancee, and before I added a texting package any time one of us texted the other my account was charged twice. Once for the sent message, again when it was received. I honestly believe the cell companies do this to force you into a texting package.

  • by msgmonkey (599753) on Sunday December 28 2008, @08:27AM (#26248749)

    As a service that the operators could milk their customers with. It was only when it started getting popular that they heard the cha-ching sounds and start charging outrageous fees.

  • by hobbit (5915) on Sunday December 28 2008, @08:28AM (#26248759)

    Next you'll be telling me that when you buy Coca-Cola, you're mostly just getting sugar and water!

    • by FroBugg (24957) on Sunday December 28 2008, @08:33AM (#26248785) Homepage

      High-fructose corn syrup. You've often gotta pay more for Coke if you want it with sugar.

      • by CrackedButter (646746) on Sunday December 28 2008, @08:43AM (#26248837) Homepage Journal
        Only outside the US as far as I know. Everywhere else uses sugar, not that that makes any difference since I don't drink fizzy pop.
      • by Anonymous Coward on Sunday December 28 2008, @09:34AM (#26249081)

        World prices for sugar is about 1/5 that of sugar costs inside the USA.

        HFCS is less expensive in the US than sugar.

        The artificial prices of sugar and the artificial price of corn leads the USA to use corn for sweeteners and corn to make ethanol.

        The solution is to stop propping up the US sugar companies. If C&H cannot compete on the world market, then let them fail. Why should the population of the US prop up an industry which has had many many decades to compete on the world market.

        • by headbulb (534102) on Sunday December 28 2008, @11:20AM (#26249705) Homepage

          HFCS is only less expensive because of the sugar tariffs place on the importing of sugar.

          The problem is political.

          Corn farmers are getting tax incentives to grow corn.

          Then creative people need to figure ways to use all this corn.

          It's hard to find something in the usa that isn't made with corn. It's not the healthiest thing. Farmers could be growing crops that are much healthier.

          It's not C&H's fault that there is a sugar tariff.

  • by geekmux (1040042) on Sunday December 28 2008, @08:31AM (#26248771)

    Addictive behavior (texting) + Monopolistic cellular rule over addictive technology = obscene rates.

    Even Larry Ellison is sitting back looking at his cellular bill going "Holy shit. And I thought I ripped people off."

  • Um what? (Score:4, Interesting)

    by imroy (755) <ian@testers.homelinux.net> on Sunday December 28 2008, @08:34AM (#26248789) Homepage Journal

    The truth is that text messages are 'stowaways' inside the control channel â" bandwidth that is there whether it is used for texting or not â" and 160 bytes per message is a tiny amount of data to store-and-forward over tower-to-tower landlines.

    From what I understand, the problem with SMS's sent on the GSM standard is that it is in the control channel - as the anonymous submitter stated. But there's only one control channel for each cell versus many data (voice, etc) channels, and it has a lot less bandwidth than even one data channel. It was only ever meant to handle connecting calls, phones moving from one cell to another, etc. Administrative stuff. SMS was never meant as a proper way to move lots of messages. But it's now a major form of communication and it's using a channel (the control channel) that is very limited.

    When "text usage goes up", I'm guessing the only thing the carriers can do is to install more cells in order to get more control channels. But surely there's a limit to how many cells can co-exist in a given area. But everyone's moving to various "3G" networks and AFAIK they have proper means to send messages, photos, videos, etc. The anonymous submitter is still an idiot though.

    • Re:Um what? (Score:5, Informative)

      by TheRaven64 (641858) on Sunday December 28 2008, @08:46AM (#26248849) Homepage Journal
      It's been possible to send SMS via GPRS for a long time, and now it is mostly sent via UMTS or GPRS, rather than the GSM side channel. This means that it costs as much as any other kind of data. Even if there is a 100% protocol overhead, at 5Â/message you're paying $164/MB.

      And people wonder why I don't text...

    • Re:Um what? (Score:4, Interesting)

      by betterunixthanunix (980855) on Sunday December 28 2008, @08:59AM (#26248925)
      Yes, the control channel is bandwidth limited, but a text message is only 160 bytes. The control channel has a transmission rate of 270kbps. Do the math; literally hundreds of text messages per second could be sent over the air via a single cell.

      It is almost always the case that voice channel usage and text message usage increase in proportion with each other. A cell can handle far more simultaneous text messages than voice calls, however, so new cells would need to be installed to take care of the voice channels first, and so as the NY Times article points out, it literally costs the cell provider nothing to provide text messaging.
        • Re:Um what? (Score:5, Interesting)

          by betterunixthanunix (980855) on Sunday December 28 2008, @09:32AM (#26249073)
          And voice traffic increases in such situations as well (perhaps not as much for your stadium, but that is really an edge case). Go to your local urban intercity rail station; you'll see a lot of people talking on their phones. You'll also see a lot of people typing text messages. If you had the equipment, you would also see that the station is covered by multiple towers from multiple carriers, and that the number of people simultaneously sending texts, as opposed to typing the text and preparing to send it, does not exceed a couple hundred per second. It is very unlikely that the limit on text bandwidth would be reached before the limit on voice bandwidth; possible, sure, but not very likely.
    • Re:Um what? (Score:4, Informative)

      by sjames (1099) on Sunday December 28 2008, @09:46AM (#26249151) Homepage

      The idea behind the text message is that the phone and the base must handshake periodically no matter what, and the packets used for that have a minimum fixed size. They can either be padded with 160 nulls or contain a text message. That means that the text message costs literally nothing in terms of bandwidth on the control channels.

  • by Anonymous Coward on Sunday December 28 2008, @08:42AM (#26248831)

    In Japan there's this magic concept. The $30 plan actually costs $30! Go figure! A brand new cell phone is also free with no contact. And you can watch TV for free on your cellphone. But, don't let the Americans know or they'll want decent service too! ...oops!

  • by jcr (53032) <jcr@@@mac...com> on Sunday December 28 2008, @09:24AM (#26249029) Journal

    SMS is just a special case of very low-bandwidth data traffic, which should be superseded by email or jabber anyway.

    -jcr

  • by firewood (41230) on Sunday December 28 2008, @10:22AM (#26249359)

    as long as it is proportional to voice usage

    That's the reason for the pricing model. SMS has to be priced high enough to make sure its use doesn't grow faster than voice.

    The telcos want to balance the profit they make from the use of both channels, voice and signaling, while being backward compatible and not having the expense of updating the protocol to use the data channel(s).

  • by lawpoop (604919) on Sunday December 28 2008, @11:01AM (#26249583) Homepage Journal
    I was an exchange student in Finland back in '96. This was when *nobody* had a cell phone in the US. Shortly before I left for Finland, my sister and I were in a shoe store. We heard a guy walking down the isle talking to himself, and we both looked nervously at each other, because we were about to encounter an obviously crazy guy. Turned out he was on a cellphone.

    Anywho, when I got to Finland, everybody in the high school had a cell phone. Well, almost everyone, and if they didn't have one when I got there, they got one that year. And the thing was, *they texted all the time, because it was cheaper, much cheaper, than a voice call*.

    Flash forward five years to the states, and then everyone is getting cell phones, but *without text service*. And now, text service is something that costs per text, or something ridiculous like that. In Finland, and I would guess most of Europe, you get some ridiculous amount of texting included in your plan, or you just have a straight-up bandwidth plan, which covers voice, text, media, etc.

    I wish Americans would travel a little more often, to see how the US is becoming a technologically backwards society. Technological improvements which are more efficient are seen as opportunities to gouge customers, instead of compete and offer lower prices. The same thing was going on with banking about five years ago. American banks were charging fees to have people access their accounts online, while Finnish banks were giving it away for free, because then they didn't need to pay tellers. Oh yeah, and you could pay your bills and do banking by text service. :)
  • by lobiusmoop (305328) on Sunday December 28 2008, @11:10AM (#26249643) Homepage

    "Texting is the closest thing to pure profit ever invented" - Sir Chris Gent, founder of Vodafone.

    • by Anonymous Coward on Sunday December 28 2008, @08:53AM (#26248893)

      No, apparently you failed economics.

      If there is sufficient competition in the market profits will be driven to zero and the price of the service will approach the *actual* cost of providing it (which is close to zero, apparently). The fact that text messages cost 1000s of times more than they should indicates that there is insufficient competition in the industry, excessive barriers to entry into the market, etc.

    • by guacamole (24270) on Sunday December 28 2008, @08:55AM (#26248909)

      Not really. In classical economic theory: the market price can be one of the following:

      1. Essentially the cost of making the product (firm's economic profits are 0). This arises in the model of perfect competition only.
      2. Each consumer pays the highest price this person can afford. This arises only in the model of monopoly with a perfect price discrimination.
      3. Everyone pays a single price, but the price is set by the single producer for the purpose of maximizing this producers profits. This is the model of monopoly with no price discrimination.
      4. Anything in between. Various models of oligopoly will render the equilibrium prices that are anything in between (1) and (3). There is no single model of oligopoly. So, each setting has to be analyzed separately (usually with the tools of game theory) based on the relevant assumptions.