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Cellphones Communications

What Carriers Don't Want You To Know About Texting 570

Posted by timothy
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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What Carriers Don't Want You To Know About Texting

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  • by FroBugg (24957) on Sunday December 28, 2008 @09:33AM (#26248785) Homepage

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

  • Re:Correlation (Score:4, Informative)

    by BobReturns (1424847) on Sunday December 28, 2008 @09:43AM (#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.
  • Re:Um what? (Score:5, Informative)

    by TheRaven64 (641858) on Sunday December 28, 2008 @09:46AM (#26248849) 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...

  • by guacamole (24270) on Sunday December 28, 2008 @09:55AM (#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.

  • by ect5150 (700619) on Sunday December 28, 2008 @10:27AM (#26249051) Journal
    All prices are based on both Supply and Demand. Not one or the other. Both of you, please remember this for your economic analysis.
  • by Anonymous Coward on Sunday December 28, 2008 @10:41AM (#26249113)

    Around Passover time in the US they actually make Coca Cola with sugar in it, at least in the NY area and places with large Jewish populations.

  • Do the math (Score:3, Informative)

    by baffled (1034554) on Sunday December 28, 2008 @10:41AM (#26249115)
    I don't know actual numbers, so let's be conservative.

    Let's say the average customer sends 1 text per day, and all these texts occur during a prime 8-hour window.
    (1 text/day) / (8 hr/day) / (60 min/hr) / (60 sec/min) = 3.47e-5 texts/sec/customer average

    Now let's assume each message uses 300 bytes with overhead, and let's assume each tower handles 100,000 customers (conservatively):
    (3.47e-5 text/sec/customer) * (300 bytes/text) * (100,000 customers) = 1041 bytes/sec

    So with these insanely conservative numbers, cell towers only require 8 kbps bandwidth for text messages.
  • Re:Um what? (Score:4, Informative)

    by sjames (1099) on Sunday December 28, 2008 @10:46AM (#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 Tsian (70839) on Sunday December 28, 2008 @10:50AM (#26249175) Homepage

    Except that that isn't really true anymore anymore. Phones cost around $500, but the major carriers break that out into monthly payments, and give subsidies for agreeing to a long term contract -- generally 2 years (the system variest from Carrier to carrier, but that is basically the situation with AU, Docomo, and Softbank).

    The $30 voice plan does cost $30, but then you add in the data plan and you add $10~$42 / month depending on use. And e-mail useage counts towards data use (there are systems analagous to text messaging, but phone e-mail basically plays the role that texts do in America/Canada/Europe).

    There is of course still tax and the Universal Access Fee. But, there aren't any "system access fees".

    Certainly the plans are generally better and more clearly advertised in Japan, but the situation has changed coinciderably in the last few years.

  • by djseomun (1119637) on Sunday December 28, 2008 @11:03AM (#26249263) Homepage Journal
    Regarding point 2, if I remember correctly, it's not the highest price one can afford. It's the highest price one is willing to pay.
  • by mousehouse (610712) on Sunday December 28, 2008 @11:15AM (#26249325) Homepage Journal
    The cost involved in transporting text messages is not just the capacity in the network. These messages all end up on a SMSC, a carrier-grade system able to handle multiple-hundreds or -thousands of simultanious SMS messages and route them to other subscribers and operators. These systems are provided by a handful of suppliers that know what to charge for a decent cluster of these baby's... and somehow they need support as well! NB. Not in any way affiliated with telco's.
  • by fdrebin (846000) on Sunday December 28, 2008 @11:44AM (#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 Anonymous Coward on Sunday December 28, 2008 @11:47AM (#26249499)

    when she went to the states she thought the HFCS version was vile.

    She's right. Way back in the dark ages when they used real sugar it was so much better. But the price of sugar in the US is kept artificially high by the use of steep import duties.

  • Re:Correlation (Score:3, Informative)

    by Grimbleton (1034446) on Sunday December 28, 2008 @11:48AM (#26249501)

    Not with Verizon.

  • Re:Correlation (Score:3, Informative)

    by socsoc (1116769) on Sunday December 28, 2008 @12:01PM (#26249585)
    No it isn't. The vast majority of US subscribers pay for incoming SMS and calls. Hell, even unsolicited text messages sent from the carrier's website aren't free.
  • Re:Correlation (Score:5, Informative)

    by ptbarnett (159784) on Sunday December 28, 2008 @12:10PM (#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 coryking (104614) * on Sunday December 28, 2008 @12:23PM (#26249725) Homepage Journal

    Have you looked at your phone bill? At lease on AT&T those "IM" messages seem to be converted into some kind of SMS message and sent through what appears to be a gateway. I originally thought like you probably do, they are actually TCP/IP packets leaving your phone. Then I looked at my SMS usage and found lots of messages to a couple of numbers and then it dawned on my the IM stuff goes through a SMS gateway.

  • Re:Correlation (Score:2, Informative)

    by Ye_Gads (985366) on Sunday December 28, 2008 @12:30PM (#26249783)

    Using something like slydial.com to drop a voice mail into a mail box without the other phone even ringing. Nice.

  • by Firethorn (177587) on Sunday December 28, 2008 @01:36PM (#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 Anonymous Coward on Sunday December 28, 2008 @02:23PM (#26250693)

    I know you have AT&T, but FYI T-Mobile lets you block/unblock all incoming texts at your leisure, right on their website.

  • Re:Um what? (Score:1, Informative)

    by Anonymous Coward on Sunday December 28, 2008 @02:50PM (#26250869)

    Personally I like that SMS is expensive. I don't get SMS spam and it means that mostly I know that an SMS contact is something important

    Except that most carriers provide an email to sms service as well, so it wouldn't/doesn't cost the spammer any more than the spam to your email address.

  • Re:Correlation (Score:2, Informative)

    by SvnLyrBrto (62138) on Sunday December 28, 2008 @02:50PM (#26250871)

    > SMS is for times when a reply is not needed, and when timing isn't critical.
    > I don't really care if that message takes 5 seconds or 5 minutes to arrive,
    > and if the recipient takes an additional 10 minutes until reading it.

    We already have a vastly superior solution for that problem. It's called email. Not only does it do everything that SMS does, let's have a quick looksie at its other advantages:

    1) No 160 character limit per message
    2) All my filters and rules work with email
    3) Multiple accounts per phone
    4) Since I use IMAP, the same email that's on my phone is on all of my computers.
    5) Real attachments. Not that idiotic MMS kludge... REAL email attachments.

    That's enough for me; though I'm sure I could think of more. Whereas the only advantage I can think of that SMS has over mail is that since it comes in over the GSM control channel, it's not reliant on a connection to the data network. But that's not really even an issue. Though I have my complaints about AT&T's G3 coverage, I can't think of any place where I don't get EDGE, except for underground areas where I get no signal at all.

    cya,
    john

  • Re:Correlation (Score:5, Informative)

    by AnyoneEB (574727) on Sunday December 28, 2008 @03:04PM (#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.
  • by Grishnakh (216268) on Sunday December 28, 2008 @03:08PM (#26251023)

    Don't be ridiculous. It certainly is C&H's fault a sugar tariff exists: the tariff is there to protect them from foreign competition. And how did they convince Congresscritters to enact this tariff and keep it in place? Bribes, err, I mean campaign contributions, of course.

  • by shutdown -p now (807394) on Sunday December 28, 2008 @03:23PM (#26251139) Journal

    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).

  • Re:Um what? (Score:2, Informative)

    by thebohemianthinker (1402797) on Sunday December 28, 2008 @04:55PM (#26251827)
    One more thing is that SMSes can be buffered by the core network and sent when the control channels are free enough. So, the effective volume of SMSes that could be handled at any given time can be much larger than voice calls, which have real-time channel requirements. You can notice the delay in message reception due to buffering on occasions such as New Year eve, if you've texting from a populous area.
  • by penguin_dance (536599) on Sunday December 28, 2008 @05:15PM (#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 mabu (178417) on Sunday December 28, 2008 @05:26PM (#26252071)

    . There is the use of the arcane abbreviations used in texting. This is similar to the stupid use of the "10 codes" which was insane.

    Those 10-codes were a carryover from standard police codes and anything but arcane. Early adopters of these radios were people who had training in enforcement or radio disciplines where this nomenclature was standard. SMS jargon is merely a bastardization of the English language that was not borne of efficiency, but most likely misspelling and novelty linguistic rebellion, and later adopted for efficiency. Modern phones could improve up on this by translating goofy l33t speak into actual english words, and some do.

    The CB radio fad was expensive to get all of your equipment but once you had it, was cheap to operate. Texting is cheap upfront but very expensive to send messages. This having been said, both are expensive.

    CB radios were never that expensive. They were necessary items for people who traveled a lot. They were in-effect a safety device and also early "radar detectors" (or should I say "smokey detectors" hehe). When the song "Convoy" became a hit, middle America decided they wanted to clog the airwaves with useless chatter, and THAT was a fad that screwed up the citizens band and forced them to open up a bunch of extra channels. Luckily the novelty use of CB radios did fade out and now once again, travelling/professionals use the system mostly, as it was always intended.

    Many people just have to be on the bandwagon. Like CB radio, I think texting too is just a passing fascination.

    People don't have to buy a special texting machine. SMS is built into almost all modern phones. Obviously if the telcos can't make a profit center out of it, they have no incentive to offer phones with this feature, but it's basically synonymous with mobile phones now. Your analogy might hold water if there was a CB radio sold with every new car, which there never was.

    For these reasons, I believe texting will not last long.

    The only thing that will kill texting is further evolution of the mobile web, and other cellular-based communications protocols, but there's no doubt "texting" in one form or another, is here to stay. If the telcos want to nickel and dime people to death then a tcp/ip phone-based skype or AIM-type messenging system will take over, but texting is here to stay. No doubt at all. It's way too efficient and desirable a feature. And it's most certainly not a fad. That's like saying "online chatting" is a fad when the first multi-user BBS offered such a feature. No. It was a revolutionary new way of communicating. It's better than voicemail and answering machines in that it can not only be passive, but also active. You can often send text messages when you can't get a normal voice call through -- this happened a lot during Hurricane Katrina... we were able to have text messages queued in our phones and when we hit service zones, the messages would be automatically sent - it was very useful.

  • by ian_from_brisbane (596121) on Sunday December 28, 2008 @07:43PM (#26253087)
    Economies of scale: South Korea has 493 people per square km.... Canada has 3.2 people per square km.
  • by Algan (20532) on Sunday December 28, 2008 @08:28PM (#26253397)

    When it comes to voice calls, then no, I wouldn't consider they are double dipping. However, when it comes to text messages they really stick it to us with a ten-feet old-school telephone pole and no lube. Not only you pay $0.20 to send one, your recipient pays $0.20 again, to receive it. And they make it hard or impossible to block incoming messages. So if you have a bunch of dumb-ass or malicious friends with unlimited texting plans, they can really run up your bill.

    It is all geared to push people to pay $15-$20 for unlimited messaging

  • Re:Correlation (Score:3, Informative)

    by magarity (164372) on Sunday December 28, 2008 @08:58PM (#26253539)

    So it's reasonable to you to pay 20EU a month for something that effectively costs nothing?
     
    It's a common mistake that since an additional unit ( in this case call/text) is practically zero cost then the service costs nothing. This is not the case; the FIRST call/text costs a staggering sum in infrastructure investment and THEN subsequent calls/texts are practically free. The 20EU subscription is his share of the up front costs. This model makes a lot more sense than the outrageous per-text and per-minute charges in the US model.

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