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Senator Questions Rise In US Texting Prices 592

Posted by kdawson
from the competition-what-competition dept.
vimm writes "Senator Herb Kohl (D-Wis.) has started an inquiry on the rising prices of text messaging (up 100% since 2005) that has occurred almost in sync with the consolidation of 6 major carriers down to 4. In a letter sent to Verizon Wireless, AT&T, Sprint Nextel, and T-Mobile, Kohl said the increase 'does not appear to be justified by rising costs in delivering text messages.'"
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Senator Questions Rise In US Texting Prices

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  • by BlackGriffen (521856) on Wednesday September 10, 2008 @05:54PM (#24953263)

    The amount of data in a txt, maybe a kb or so with overhead, should be virtually free to transmit compared to voice traffic. This is especially true since the voices are digitized and handled as data.

    In other words, they've been a price gouge from the start, and we're surprised when the companies try to push the envelope to get as much out of the gouge as people will put up with?

    I've got a bridge to sell you...

  • The answer: (Score:4, Informative)

    by faedle (114018) on Wednesday September 10, 2008 @05:56PM (#24953315) Homepage Journal

    "Because we can."

    My employer pays huge text messaging bills, mostly because they view the 10 cents a text message costs to be a non-starter. Even with the average user sending 100-200 messages, that only tacks on $20 to the average cell phone bill.

    And believe me, at my company, each phone is easily a $150/month bill.

    When you're billing out engineers at $200/hour, another $20 on the monthly bill is nothing. I'd guess that the average high-volume cell user is typically not watching the nickels and dimes on the statement.

  • by Like2Byte (542992) <.Like2Byte. .at. .yahoo.com.> on Wednesday September 10, 2008 @06:00PM (#24953403) Homepage

    I used to work for one of the large telecommunications companies. 161 bytes plus a little bit of HTTP header overhead is nothing. Practically everything performed on today's cellphones is completed via HTTP commands - most are clear-text. Usually, the only thing NOT encrypted is the NAI of user of the phone.

    It just doesn't ring true to me that text messages are eating up their bandwidth even if the scale of their customer base is increased with the next purchase of the next cell-co.

    It's greed - plain and simple.

    That's my 2 cents.

  • Re:Wag the dog (Score:5, Informative)

    by fiannaFailMan (702447) on Wednesday September 10, 2008 @06:11PM (#24953603) Journal
    Quite right. And petrol going from $1.10/gallon to $4/gallon is no big deal either, it's only $2.90 worth of difference. There are more pressing issues than gas prices, like healthcare, crime etc.
  • by RustinHWright (1304191) on Wednesday September 10, 2008 @06:18PM (#24953729) Homepage Journal
    Unfortunately, I'm sure we're all aware this is just a senator trying to make it look like he's rattling a few cages

    Actually, afaic, Herb Kohl is one of the few good guys left in Congress. And fwiw, since he's got his own millions of bucks from the Kohl's department store chain, he doesn't need money from anybody. Got his own stash, thank you very much. So while I wouldn't deny that he's a publicity whore (duh! he's a politician!) I would say that it's a safe bet that, oddly enough, he's pushing this in part simply because he's disgusted with the telecom companies.

    Now if only HE would run for president.

    A man's gotta dream; ya know?
  • by AJNeufeld (835529) on Wednesday September 10, 2008 @06:22PM (#24953793)

    In CDMA, the broadcast from one base-station is divided into many channels ... 1 pilot, 1 sync, 1-8 paging, and up to 61 traffic channels (per frequency channel). Ignoring the pilot and sync, which allow the cell phones to find and synchronize the the system, we have paging channels where the phones watch for messages from the base station letting them know what channel to go to for an incoming call, and traffic channels for those calls.

    Into this system, text messaging was bolted on as an afterthought. These are short messages, so they get sent out on the paging channel, since it isn't worth the time and effort to set up a traffic channel, only to tear it down again 80ms later, after the message has been transmitted.

    Then came unlimited text messaging plans, and teenagers. "Hi sue! How R U?" [send] "Gr8! Saw Bob at park." [send] "Really? What was he wearing?" [send] "The shirt you bought him!" [send] "Awesome!" [send]. All of a sudden, relatively speaking, the text messaging system volume overloaded the paging channel's regular traffic. Network areas which only ran a single paging channel, suddenly needed to assign more channels to paging. Ok, not a problem, the standard allowed for up to 8. But in areas where a lot of phones were in use already had multiple paging channels. These find themselves in running out of paging channel bandwidth, while large swaths of traffic channels are not in use.

    The problem isn't that text isn't cheap to send. It is the standard and the system were developed for voice traffic, and a tiny fraction was reserved for short data messages. The use case of teenagers with unlimited text messaging wasn't considered. To change the standard, and the systems which employ the standard - such as to add more paging channels - will require new phones and/or software upgrades to all existing phones out there, or they'll suddenly not work. It isn't just a matter of upgrading software in the network base-stations.

  • by Shakrai (717556) on Wednesday September 10, 2008 @06:36PM (#24953959) Journal

    will require new phones and/or software upgrades to all existing phones out there

    Why not just roll it out in stages like any other protocol update? Build a specification that uses the EV-DO part of the network for SMS and have all new phones receive/send SMS that way by default.

    The old system could be left in place indefinitely (AMPS was a dinosaur and still supported up until Feb 2008) and would receive less and less traffic as all those teenagers upgraded their phones. Hell, I doubt it would take that much time. The phone that Mom and Dad bought them three months ago is so YESTERDAY.

  • Re:Wag the dog (Score:2, Informative)

    by wmbetts (1306001) on Wednesday September 10, 2008 @06:39PM (#24954003)

    If bottled water kept people safer we'd be allowed to carry it on commercial flights.

    You can as long as you buy it after the TSA check.

    In all honesty the TSA is a joke. When I got on the first plane to take me to my destination they made me get rid of all my travel sized shampoo, because it wasn't in a plastic bag. I ended up having to buy razors at my destination. I didn't even try to bring them with me for obvious reasons. Then when I got back home and started unpacking I noticed I still had the pack of razors, bottle sized shampoo, and full sized tooth brush still in my bag and not in an approved plastic bag.

  • by flerchin (179012) on Wednesday September 10, 2008 @06:49PM (#24954129)

    They don't promise, or provide, a 0% error rate for text messaging.

  • by jandrese (485) <kensama@vt.edu> on Wednesday September 10, 2008 @06:56PM (#24954229) Homepage Journal
    I don't know where you get the idea that SMS has anywhere near 0% error rate. As best as I can tell, they get sent on the lowest priority possible, are sometimes delayed for minutes or hours, and occasionally never make it at all.
  • by AJNeufeld (835529) on Wednesday September 10, 2008 @07:02PM (#24954291)

    In this case, the SYNC channel message tells the phone how many paging channels there are, and only has 3 bits for this information. And the sync channel message doesn't have any versioning information, so they can't add another bit without breaking all existing phones.

    Even with EV-DO (data optimized), text messaging still has a fundamental problem: it is short. If a traffic channel is brought up to send the message, the base station has to tell the access terminal (cell phone, but we're talking EV-DO here) to go to listen on the particular channel, the AT has to send back a report on how fast it can receive data (based on SNR), before the base station can send the message. This all takes time - unnecessary overhead. But to send the text message on the paging channel means (in the case of EV-DO) sending it at the slowest possible data rate, since it doesn't know the SNR of the AT and thus the speed it can receive the transmission at. It has to default to the lowest possible speed.

    EV-DO is great at sending large swaths of data at high rates. For short message services, it suffers the same overhead inefficiencies CDMA does.

  • Re:Cost != price (Score:5, Informative)

    by Ascoo (447329) on Wednesday September 10, 2008 @07:15PM (#24954455)

    Email usually requires a data plan of some sort, which usually isn't free. Using ala cart SMS is usually cheaper than signing up for a data plan if you plan to send less than 25-30 messages a month. Plus SMS messages are received without user intervention or setup. Now some of us have push-email that allows us to receive email (or be notified of email) as soon as it hits our inbox, but I doubt the average joe shmoe has it. On the other hand, I'm sure he probably has an SMS equipped phone if it's been bought in the last 4-5 years.

  • by Shakrai (717556) on Wednesday September 10, 2008 @07:19PM (#24954501) Journal

    In this case, the SYNC channel message tells the phone how many paging channels there are, and only has 3 bits for this information. And the sync channel message doesn't have any versioning information, so they can't add another bit without breaking all existing phones.

    Why would you have to touch the existing protocol? When a phone running the new software comes onto the network it communicates back to home base this status and home base knows to route SMS via the new path instead of the old paging method. The old paging method sticks around for phones running the older software and for normal voice services.

    EV-DO is great at sending large swaths of data at high rates. For short message services, it suffers the same overhead inefficiencies CDMA does.

    Alright. So how about some other method? Take one of those traffic channels and dedicate it to SMS. Each phone gets a time slot to listen for incoming SMS. That wouldn't address the mobiles sending texts (how does that work exactly? Do they have to get on a traffic channel to upload one?) but it would seem to be a start. I would presume that this could be rolled out without breaking old phones -- the new ones would just communicate their capability when connecting to the network and not receive incoming SMS on the paging channel.

    Point being that there has to be some way they could fix this is if it was really a serious problem for them. If it was why offer unlimited SMS plans? I don't buy it as an explanation for a $0.20 SMS fee.

    The theory that I've heard that makes the most sense is that one of the key indicators in the mobile industry is ARPU (average revenue per user). If you sell your customers text plans you bring up your ARPU. By making individual messages more and more expensive they convince more people to buy text plans. Or fork over $2-$3 for a handful of Google searches or "pick up some milk" type usage. Either way they win.

  • Re:off-peak? (Score:2, Informative)

    by XHIIHIIHX (918333) * on Wednesday September 10, 2008 @07:29PM (#24954585)

    I'm a techie. I'm on the net 14 hours a day. I like computers. I don't like telephones. I have a tracphone. A couple times people have sent me text messages. My phone costs $10 a month. It's ugly as hell and works great. Who the F needs to blab away on the phone for more then 60 minutes a month anyway? 800 minutes + free phone = $99 / year.

  • Re:Cost != price (Score:4, Informative)

    by AaronW (33736) on Wednesday September 10, 2008 @07:29PM (#24954591) Homepage
    Text doesn't even consume any voice bandwidth since it is sent over the control channel. It doesn't cost the telcos much if anything to support other than setting up various gateways. It's great since the control channel is always active for a phone anyway (whereas the voice has to be set up for incoming or outgoing calls).
  • Slowly Getting There (Score:4, Informative)

    by ZxCv (6138) on Wednesday September 10, 2008 @07:32PM (#24954631) Homepage

    While the big boys are charging $100 or more for their unlimited calling plans, there are a couple smaller providers that offer unlimited calling and texting and everything else for less than $50 (even down to $30 if you just want unlimited talk). And more importantly, there are no contracts involved. Hell, here (in Vegas) they're even offering the first month or two free (depending on which provider).

    It took a while, but the general populace is finally getting fed up with the nickel-and-diming that the big wireless companies are so fond of, and the small providers out there selling unlimited services at a reasonable price are growing by leaps and bounds because of it.

  • by dougisfunny (1200171) on Wednesday September 10, 2008 @07:35PM (#24954645)

    Well, if the companies are colluding to price fix the cost of the text messages, they would be in trouble.

    Like a few years back when the RAM companies did the same thing to inflate the cost of RAM.

  • by discord5 (798235) on Wednesday September 10, 2008 @07:37PM (#24954669)

    I can't speak for the US, but here we have premium numbers for texting (usually they'll pay a little extra to get a 4 digit number). What it boils down to is that each SMS they receive (which is usually at 5-10 times the price of a normal SMS), they get approximatly 40% of the revenue and the carrier gets approximatly 60%. I say approximatly here because there are various plans, rates which are far too complex and boring to explain here.

    The "Text us DURR to receive a new horoscope/ringtone/anal probe every hour" services, have the ability to send out SMS'es that cost money to the person receiving them. Once the person signed up for the service, they're free to start sending SMS'es whenever they see fit. There have been various customers who've received phonebills reaching into the 5000€ range.

    The problem is that the whole thing was completely unregulated, and that there was no legal requirement for these companies to have a maximum of charges per day per customer. When that got regulated (in a very half-assed way) it wasn't the end of all the trouble they'd started. SMS Dating services suddenly got very popular, which required the client to SMS the "person" he was talking to, and which was basicly an OK for the company to start sending him a couple of SMS'es.

    To cut this long story short and get to the interesting part, these kinds of companies were really goldmines when the whole SMS thing started picking up pace. The equipment is relatively cheap (you can buy a GSM modem for nickles and dimes), the programming for a system like that is DEAD easy (if you know Hayes commands and perl/python/whatever you can have a service like that up and running in a matter of hours).

    The contract with the telephone company is very easy to obtain. All you need to do is provide some information about your company, and negotiate about how much traffic you'll be causing and receiving. As the amount of traffic goes up, the profits get higher and you get better rates.

    These days it's much cheaper to have a large third party provide the service for you. They'll give you something like a rudimentary webservice where you can submit SMS'es to, they take a piece of the cake, the operator takes a piece of the cake, but you can still make money with the entire thing. Third parties are a lot easier to negotiate good deals with because they generate a lot of SMS traffic and get rates from the operator you'll never be able to get.

    Finally, to answer your question: cell phone companies aren't sponsoring other companies to drive up usage. The whole thing was and probably still is a real goldmine. There's enormous amounts of people who will subscribe to these services, and they usually don't learn after they've received their first ridiculous phonebill.

    I worked together with a company that provided such services at some point for a project that was a lot more innocent than what these guys usually did. They were raking in money back then, and since they still exist my guess is that they're still raking in money right now.

    If I recall correctly there used to be a scam with premium telephone numbers on landlines waaaaaaay back when. The idea is basicly that you call a regular looking number, but in fact the number you're dialing has a special tariff. The company would then keep you on hold, occupied or stall you as long as possible from hanging up. Eventually the situation got so bad that the operators were forced to block all premium numbers which weren't explicitly marked with a special prefix, unless the customer requested access to that phone number by calling his operator and enabling that number. The unprefixed premium number business then sank into a slump and was effectively killed. This was of course borderline scamming, but the telcos didn't care because they again were making enormous amounts of money. Prefixed premium numbers are still making a small fortune these days with televised games and quizzes, call-in numbers for radio stations, etc etc. A fool and his money...

    I've never met bigger sharks than telco people. From what I gather the situation has somewhat improved, but not much.

  • by xaxa (988988) on Wednesday September 10, 2008 @07:41PM (#24954713)

    There's lots of uses for text messages.

    - on public transport, if you don't want to annoy anyone else
    - to send a message to someone who's probably driving, they can pick it up later
    - to send a non-urgent message (e.g. at night, it will be noticed in the morning)
    - when signal is intermittant (e.g. moving vehicle) a text has a better chance of getting through
    - when you need to be discreet
    - notifications (e.g. "only £20 left in your bank account", or "phone bill overdue")
    - information (e.g. you book some train/plane tickets and the times are texted to you)
    - when you can't hear (nightclub, concert, noisy subway, party)
    - when you can't talk (school, lecture, office)

    If the messages I sent started costing the other person money I might think twice about them though.

  • Re:Cynical (Score:4, Informative)

    by geminidomino (614729) * on Wednesday September 10, 2008 @07:43PM (#24954727) Journal

    Because that "private company" is using "public property" (airwaves) under "government license" to do said business and as such are no less a government-created oligopoly than landline telcos and cable companies.

  • by wolenczak (517857) <`paco' `at' `cotera.org'> on Wednesday September 10, 2008 @07:55PM (#24954869) Homepage

    SMS messages are sent over a control channel, not the voice channel, which is pricier, more controlled and critical to the health of the network.

    RF communications for a mobile telephone network are quite different from the TCP/IP networks you are familiar with. The UDP/TCP abstractions shown to applications running on top of the mobile, to make life easier to developers, are just the tip of the iceberg.

    First read about the layers in a CDMA/EVDO/GSM/UMTS network and the components that handle them, and then you will understand the achievement and nightmare that is to provide reliable TCP/IP to the upper layer of the mobile software so you can rant about your iPhone and that its too slow to watch youtube.

  • by negative3 (836451) on Wednesday September 10, 2008 @08:03PM (#24954977)

    For GSM, it takes less time to send a regular text message than set up a call and wait for the other side to ring. In order to do both, the phone first requests a channel from the base station. It is then assigned a signalling channel on which the phone and the base station negotiate what's going to happen next. For a text, its simply transmitted as a set of messages on the signalling channel and then then phone leaves the channel. For a call, the mobile exchanges messages with the base station as to what services it can support and who it wants to call and is then assigned a traffic channel to wait for the other phone to answer or not. This takes way more time and resources than a text message - it gets even faster when the mobile can use a data connection like GPRS/EDGE or UMTS packet data.

    I don't see any reason for text messages to cost $0.25 (from Verizon at least). Their answer as to why they charge so much is probably "because we can." Unless there is such a high volume of texting that it is actually putting a strain on the data networks - the same networks that are being used to stream TV shows and music to phones. That's probably a stretch as it's cheaper in most European networks.

  • by AJNeufeld (835529) on Wednesday September 10, 2008 @08:21PM (#24955179)

    For sending SMS messages, on the reverse link (mobile to network), there are accesses channels which correspond to the 1-8 paging channels. A mobile will start broadcasting its request periodically, a little stronger each time, until the network acknowledges the access attempt.

    Currently, a traffic channel is encoded with a long-code specific to the individual cell phone assigned to the traffic channel. No problem, we can encode it with a general-purpose long code, known to all cell phones - this is just software. Each phone already has a slot it is assigned to wake up for to listen for paging channel messages (incoming calls). Do we wake the phone up at a different time slot, for these extra text messages? That means more awake time, and a shorter battery life. Or maybe listen on the extra pseudo-traffic channels when it wakes up for paging messages? That means extra decoder hardware. Maybe a new paging message that says "advanced phones, go listen on the pseudo-traffic channel 'cause I'm sending out an SMS to one or more of you."

    These can be done, but it requires cooperation of the network providers, the handset manufactures, and the chip makers. Changes to the protocols go through committees to get approved and into the standards, and takes time. Some of these costs go into the cost of the phones, which the networks usually subsidize for their customers, so they need to make money to pay for it.

    In the mean time, until the "fix" arrives (new phones, protocols, technology, ...) to prevent the existing system from cracking, the network providers can really only do one thing: Raise the user cost of the text messages, so to reduce the volume of text messages.

    As an existing, bandwidth limited, inefficient channel for SMS, it follows the usual economic supply and demand forces. Prices will rise.

    Well, the network operators are greedy, too. But sending SMS messages at ever increasing rates by customers isn't free for the networks. There is a serious SMS crisis looming on the horizon.

  • by edp (171151) on Wednesday September 10, 2008 @08:38PM (#24955349) Homepage

    "People are willing to pay $0.10 to send a text message. What it COSTS to provide the message is irrelevant."

    The cost is not irrelevant. If consumers are willing to buy for $.1 and the providers are willing to sell for $.01, economics says the price should be between $.01 and $.1. But why should it be $.1 and not $.01? Why is it clamped at what the consumers are willing to pay and not what the providers are willing to sell for?

    It is because the providers set the stage. They have control of the market. They operate together, not necessarily directly through collusion, but possibly indirectly through using the same marketing research companies, industry organizations, et cetera.

    In a healthy market, the price floats somewhere between the minimum price the providers are willing to sell for and the maximum price the sellers are willing to buy for. There is a give-and-take. Prices may hit one end of the clamp or another from time to time due to natural fluctuations, but when it is grossly disproportionate to actual costs, then there is something wrong. The market is unhealthy and is being unfairly manipulated.

    That is why cost is relevant.

  • Re:Wag the dog (Score:3, Informative)

    by rootofevil (188401) on Wednesday September 10, 2008 @08:52PM (#24955487) Homepage Journal

    ice javelins. portable drowning equipment, ie. steam cannons.

    cmon, get creative. plenty of opportunities to use water as a weapon.

  • Re:Wag the dog (Score:5, Informative)

    by zippthorne (748122) on Wednesday September 10, 2008 @09:19PM (#24955761) Journal

    The controls are pretty redundant, and their routing is not obvious from anywhere inside the passenger module. The odds of randomly hitting anything critical with a centimeter-wide slug from a handgun before other passengers with guns would take you out is astronomical. Especially if they just had a bowl of complementary derringers at the boarding ramp.

    Which is why I'm sad to say we will probably always be dealing with Islamic terrorists

    And how is "not able to fight back" going to help us with that?

  • by NotQuiteReal (608241) on Wednesday September 10, 2008 @09:20PM (#24955771) Journal
    The right to bear arms was an add-on.

    Basically, the US Constitution was supposed to say what the government was allowed to do. Specifically it is not stating what the citizens are allowed to do. It limits government, or was supposed to.

    It was brilliant - form a country with a government what was basically not allowed to do anything but defend its citizens from not being free...

    If it wasn't in the constitution, the federal government wasn't supposed to be doing it.

  • by hazem (472289) on Wednesday September 10, 2008 @09:28PM (#24955831) Journal

    It's because the government is granting them use of scarce public resources (bandwidth, rights of way for towers and wires). Because AT&T gets use of a piece of spectrum, nobody else can and thus can't compete.

    Plus there is the oversight functions of government designed to prevent competitors from collaborating to raise prices.

  • Re:Cynical (Score:3, Informative)

    by apoc.famine (621563) <`apoc.famine' `at' `gmail.com'> on Wednesday September 10, 2008 @09:34PM (#24955875) Homepage Journal
    HAHAHAHAHAHAHAH!!!!!

    They didn't....contribute...enough.....

    The man is Heir to a department store chain [wikipedia.org] and owns his own NBA team [wikipedia.org].

    Exactly WHAT is the cellular lobby supposed to bribe him with? Another major sports franchise [wikipedia.org]? Perhaps Macy's [wikipedia.org]?
  • by AJNeufeld (835529) on Wednesday September 10, 2008 @09:58PM (#24956113)

    Oh, they're definitely the ones causing the crisis, with unlimited text packages. Presumably, they'll do the switch part of bait-n-switch at some point (unlimited becomes say 50 msgs/day). Voice traffic will always have priority over text messaging, since they can delay that as much as needed, as long as the average text arrival rate is less than the average service rate, and their queues are deep enough to handle bursts.

    I'll concede that the SMS system isn't at the breaking point yet, so the networks are at this point probably just gouging the customers. But the incremental cost of text messaging isn't zero for the networks, because the system just wasn't designed for it at the scale it is being used, and it'll need patching/fixing soon.

    Perversely, long text messages (like e-mails, and what not) are just fine, especially for EV-DO. It is the fast, frequent, short crap that'll cause the problems.

  • by ConceptJunkie (24823) on Wednesday September 10, 2008 @10:20PM (#24956305) Homepage Journal

    Somalia has no government and one of the cheapest per minute wireless rates in the world.

    With an average per capita income of about 1% of the U.S., I bet the average person there still can't afford to call someone.

    Nevertheless, like with the rest of the Federal government we should consider ourselves lucky if things are actually not significantly worse with the FCC than without them.

  • Re:O RLY? (Score:4, Informative)

    by cjb658 (1235986) on Wednesday September 10, 2008 @11:31PM (#24956985) Journal

    P.S, we'll make an additional $24 million in fees by charging said voters for incoming text messages that they don't want.

  • Re:O RLY? (Score:3, Informative)

    by daemonenwind (178848) on Thursday September 11, 2008 @04:49PM (#24968507)

    FYI: Senator Kohl, D-WI, does not accept campaign funding from such sources. His campaign tagline has, for years now, been "nobody's senator but yours".

    Senator Kohl is independently wealthy, and largely funds his own campaign every 6 years. No one of consequence ever challenges him.

    Or put it this way: ever hear of Kohl's Department Stores? Yeah, that's him.

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