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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.
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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Submission: What Carriers Don't Want You to Know About Texting by Anonymous Coward
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Correlation (Score:5, Insightful)
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)
That's because their parents are the ones footing the bill... ouch.
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Re:Correlation (Score:5, Informative)
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)
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Re:INCORRECT Correlation (Score:5, Informative)
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)
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Re:INCORRECT Correlation (Score:5, Informative)
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...
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Re:INCORRECT Correlation (Score:5, Informative)
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).
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Re:INCORRECT Correlation (Score:5, Insightful)
"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.
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Re:INCORRECT Correlation (Score:5, Informative)
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.
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Re:INCORRECT Correlation (Score:5, Insightful)
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.
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Re:Correlation (Score:5, Insightful)
exactly. but people don't care or don't seem to realize how badly they are being fucked by the wireless companies.
i read an article recently that assessed the cost per MB given the size of a 160 character text message and found that it's actually cheaper per MB to send/receive data from the Hubble Telescope.
wtf?
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Re:Correlation (Score:5, Informative)
http://www.itproportal.com/articles/2008/05/13/text-messaging-costs-more-receiving-data-hubble/ [itproportal.com]
http://www.physorg.com/news129793047.html [physorg.com]
http://thelede.blogs.nytimes.com/2008/05/12/costs-of-text-messaging-vs-space-transmissions/ [nytimes.com]
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Re:Correlation (Score:5, Insightful)
Up until about August this year, all carriers charged $0.10 per text message, now they all charge $0.20.
This should scream price fixing.
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Re:Correlation (Score:4, Informative)
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Re:Correlation (Score:5, Funny)
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)
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Re:Correlation (Score:5, Insightful)
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.
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Re:Correlation (Score:5, Informative)
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Re:Correlation (Score:5, Interesting)
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.
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Re:Correlation (Score:5, Insightful)
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.
Parent
Re:Correlation (Score:5, Interesting)
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.
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Re:Correlation (Score:5, Funny)
Or during an grammar test.
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Re:Correlation (Score:5, Insightful)
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Re:Correlation (Score:5, Interesting)
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Re:Correlation (Score:4, Interesting)
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.
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Isn't exactly news (Score:5, Insightful)
This makes me dream... (Score:5, Funny)
Re:This makes me dream... (Score:5, Interesting)
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.
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Re:This makes me dream... (Score:4, Interesting)
I still think it's pretty funny that Americans have to pay to send and receive texts.
I'm not sure of many, if any, other countries where this happens.
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Re:This makes me dream... (Score:5, Funny)
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Re:This makes me dream... (Score:5, Interesting)
Just recently I had to battle with an AT&T rep to get 18 text messages on my phone and 18 on my wifes phone credited back. They came from an unknown source and they all had two letters in them that was pointless. After talking to the rep for 10 mins or so he finally consented and gave us credit for them. I forgot to mention that I don't have a texting plan so each message received, that I didn't want or ask for, was going to cost me .35 each!
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SMS messages where an afterthought (Score:5, Insightful)
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.
Goodness gracious me (Score:5, Funny)
Next you'll be telling me that when you buy Coca-Cola, you're mostly just getting sugar and water!
Re:Goodness gracious me (Score:5, Informative)
High-fructose corn syrup. You've often gotta pay more for Coke if you want it with sugar.
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Re:Goodness gracious me (Score:4, Interesting)
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Re:Goodness gracious me (Score:4, Funny)
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Re:Goodness gracious me (Score:5, Insightful)
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.
Parent
Re:Goodness gracious me (Score:5, Insightful)
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.
Parent
This just in... (Score:5, Funny)
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)
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)
And people wonder why I don't text...
Parent
Re:Um what? (Score:4, Interesting)
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.
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Re:Um what? (Score:5, Interesting)
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Re:Um what? (Score:4, Informative)
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.
Parent
I'm in Japan for six months... (Score:5, Interesting)
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!
Maybe they want to phase it out. (Score:5, Insightful)
SMS is just a special case of very low-bandwidth data traffic, which should be superseded by email or jabber anyway.
-jcr
data/voice usage balancing (Score:5, Interesting)
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).
Text pricing is ridiculous (Score:5, Insightful)
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.
Obligatory (in)Famous Quote: (Score:5, Interesting)
"Texting is the closest thing to pure profit ever invented" - Sir Chris Gent, founder of Vodafone.
Re:Failed economics class (Score:5, Insightful)
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.
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Re:Failed economics class (Score:5, Informative)
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.
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Re:It is less than 160 bytes! (Score:4, Interesting)
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