Facebook May Bust Up the SMS Profit Cartel 262
AndyAndyAndyAndy writes "Fortune had an interesting article recently about wireless providers and their exorbitant profit margins for SMS handling, especially when looking at modern data plans. 'Under the cell phone industry's peculiar pricing system, downloading data to your smartphone is amazingly cheap — unless the data in question happens to be a text message. In that case the price of a download jumps roughly 50,000-fold, from just a few pennies per megabyte of data to a whopping $1000 or so per megabyte.' A young little application called Beluga caught the attention of Facebook, which purchased the company a Thursday. The app aims to bring messaging under the umbrella of data plans, and features group messaging, picture and video messaging, and integration with other apps. The author argues that, if successful, Beluga (or whatever Facebook ends up calling it) could potentially be the Skype/Vonage or Netflix-type competitor to the old-school cellular carriers and their steep pricing plans."
Google Voice and TextFree (Score:5, Informative)
I've found the available workarounds are sufficient to the point that I could give a crap about texting fees. I use GoogleVoice and TextFree and they work great. My wife uses Virgin Mobile for $25/mo (that's it no extra taxes or garbage) and can text to her delight.
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I'm very unhappy about this development (Score:2)
This is going to mean higher cell phone bills for me. I don't send text messages. Therefore all the chumps that run up high cell phone bills with text messages are effectively subsidizing me by letting the phone company offer me basic cell phone service at a lower rate. I don't believe the cell phone companies simply will earn less gratuitous profit if you remove the ring-tone and text messaging markets from profitability. Instead if you lower their margins in one area you will simply drive them up
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I couldN'T care less about your opinion.
Another retread (Score:4, Insightful)
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With Beluga, the recipient doesn't have to have *anything* more than SMS capability. They will be charged SMS fees until they get it, but they're still capable of participating in group chat sessions without other individuals in the Beluga Pod.
I don't believe Google Talk or any other IM system can do that. I could be wrong...
Re:Another retread (Score:5, Informative)
So it's Google Voice, but without the other features.
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Standard SMS users can reply to Google voice messages, but I have never used any group chat function of GV.
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Yes, Google Voice gives you its own phone number to use and anyone can use that number to send you standard SMS messages.
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Group chat has been added to Google Talk (android client) for some time now.
(As well as the gmail interface to Gtalk, and the Windows version of GTalk).
And because its just Jabber (XMPP) Google Talk is inter-operable with almost any other Jabber based messaging service.
But you kind of miss the point of the whole story here, and that is to avoid SMS due to ridiculous pricing. So having something that ONLY requires the recipient to have SMS is EXACTLY what this thread is all about avoiding.
Paying a carrier f
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I'm getting old (Score:5, Insightful)
I remember when SMS was free and was hidden in the advanced menu of a 3-line text display of a phone.
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Indeed, it's a great scam they have going. A bunch of idiots paying exorbitant prices for something which costs the carrier basically nothing to provide.
Re:I'm getting old (Score:5, Interesting)
"basically" nothing?
Every time your phone pings a cell phone tower, it transmits a packet of data to and from the tower. This packet of data has some spare space at the end. This bit of room is where the put the text message data.
Your phone is using the text message's bandwidth whether or not you're sending or receiving a text message.
Quite the racket they've got going, making you pay to make use of bandwidth that you're already consuming regardless of the use of text messages.
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Well they need some relatively expensive hardware or software [wikipedia.org], but once amortized across their whole customer base over the multiple years it's functional, it is essentially free. Because it was a non-zero cost to provide it initially, it isn't actually free... but it might as well be.
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So they found a way to make money on what would normally be overhead, I don't see a problem with that. For me, it's worth the $10 I spend on each of my lines for the family to have the option to txt the kids, or them to txt me. Even tho I account for maybe 1% of the messages each month, I don't have a problem paying for the service. I got caught paying per message fees once with my teen aged daughter, worked out a deal with the carrier to back date the unlimited plan. They were quite reasonable about it
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This is simply a myth. The sending of text messages consumes network resources that cost money. How much they cost is a different question - and I am not disagreeing with you that the markup may be exhorbitant, but I do have to correct your claim.
In GSM, sending a text message still predominantly operates over an SDCCH [wikipedia.org] (standalone dedicated control channel), which requires a full paging (for network originated) or random access cycle, encryption setup messages, authentication messages. The whole process can
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Actually, you are charged for the entire call, that's why most calls have a "X for the first minute, Y for each additional minute, with a minimum of 60s, and billed in 6s increments".
The charge for call setup and teardown is included in the first minute charge.
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SMS in its classic form is justified to be expensive. It does not travel as mere data. It on the network as Intelligent Network messages which are transactional and reliably transmitted on a per-hop basis taking in each case signalling processing resource. Once it gets through the core network to the radio it once again travels on the signalling channels where the capacity is extremely limited and is at premium. It is once again reliably transmitted and the acknowledge once again goes back with hop-per-hip
SMS uses the thin "control" pipe. (Score:5, Interesting)
I remember when SMS was free and was hidden in the advanced menu of a 3-line text display of a phone.
SMS messages go over the (VERY!) low bandwidth control channel used for communication between the cellphone and the tower, and from there over the call set-up channels among the towers, their controllers, and the rest of the telephone network. Using them to let cellphone handsets emulate a text pager (and a text pager message sender) was something of an afterthought, put into the GSM spec and then ported to others. Because they're on the control channel, they work even if the phone has no data service or is not data service capable.
Once they caught on and started having major traffic despite the small packet size, the telcos put a price tag on them, both to try to avoid channel saturation and as a handy revenue stream. (Yes even a large number of the little text messages wouldn't clog the channels. But a customer-deployed IP-over-SMS would have been trivial. Charging a few cents for every 140-byte packet killed that idea.)
Now that mobile data services has created a fat data pipe under the separate "payload" bandwidth, moving the services currently running on SMS makes great sense for the users. But now that SMS messages have become a major income stream, despite their extreme price, the carriers have no incentive to kill this surprise cash cow. So the innovation has to come from apps developers.
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While absolutely right, also totally way off the mark depending on the market.
The US market is very peculiar, so you might be spot on there, but over here in the EU where there is competition, SMS are in most cases free, even though they do as you point out actually cost quite a bit to service, the competition here is just so fierce you can't charge anything meaningful for them.
I used to work for a carrier and trust me, there is nothing we would like more than to have our users stop using SMS and MMS and mo
Re:SMS uses the thin "control" pipe. (Score:5, Insightful)
The US market is very peculiar, so you might be spot on there, but over here in the EU where there is competition, SMS are in most cases free, even though they do as you point out actually cost quite a bit to service, the competition here is just so fierce you can't charge anything meaningful for them.
I agree completely (with the caveat that, if a significant number of people started using IP-over-SMS to avoid data charges it wouldn't stay free AND unfettered for long.)
The US cellular market has been noncompetitive from the beginning, due to a failing of the FCC: They defined "competition" to exist when there were TWO cellular carriers in a given market, and initially allocated the spectrum in a way that made it essentially impossible for a third player to get in. They stayed that way for decades, while a small number of carriers became entrenched.
Market forces don't significantly drive down prices until there are THREE competitors (or the barriers to entry are so low that a new player is always a possibility that must be headed off.) At two players the market forces drive their prices toward each other but don't penalize that price point being high. The incentive is still to go for all the market will bear, creating a defacto cartel with no communication but price signals. Add a third player and the incentive shifts toward defecting and sucking market share from both of your competition. (Or at least that's how I understand it.)
These days we've got opportunity for more players (with more bands, plus service alternatives). And we are seeing some price and service pressure. But we've got a long way to go before somebody with a better idea can get funding from investors burned by the .com collapse and roll out a continent-wide service that would win the resulting price war and the ability of the entrenched players to turn up more/better services when it's in their interest to do so.
Anything to stop the carriers.. (Score:5, Insightful)
Well, I can't believe I'm going to say this considering I am definitely not a fan of Facebook, but if this is what it would take to make them drop the completely outrageous SMS price tag, then I'd support it.. And, that's knowing full-well that Facebook is just doing this to increase platform adoption, since if you want to 'text', you'd have to be on FB..
That said, I doubt I'd use it, just because I don't have a Facebook account. But I'm hoping it would lower the SMS fees for myself. Competition is good, right?
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And, that's knowing full-well that Facebook is just doing this to increase platform adoption, since if you want to 'text', you'd have to be on FB..
This is sort of my concern. Carriers are charging ridiculous prices, which should be a lesson of what happens when you give a company too much control. So is the solution to hand the control over to Facebook?
Why not come up with a standard/open messaging protocols? I really don't understand why we need to go with Facebook or Twitter to deal with status messages and short-form messaging. It's like being in the dark ages of the Internet, when you had AOL and Prodigy and CompuServe, but their respective u
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Hard way to get lower rates if you ask me.
Just use Google talk for free world wide and to hell with facebook.
I hope this actually puts some pressure .... (Score:4, Insightful)
I think most of us have known for years that the amount we get charged for cell phone SMS and data plans is really out of whack.
How is something with a limit of 140 chars or so worth the 10 or 15 cents they charge you for it?
They've been advertising broadband and cell for the last decade as "look at all the shiny things you can do", but the price never goes down, and they keep lowering the cap on what you can use.
They've bet the farm selling telecom services, but they can't actually afford for you to use them the way they advertise them. Or, at least, we can't afford to use them the way they're advertised.
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Really? That is expensive, but I don't keep close tabs on the price to be honest.
I don't text, but my wife does a little ... we've looked at it, and for our phone carrier we just worked out that unless she's going to routinely text more than x messages, the cheapest texting plan isn't worth it since she'd pay less every month on average since she doesn't text that much.
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Yes, you would get billed for those 1000 received messages. You'd have to call customer support, explain what happened, ask them to block all incoming texts to your device, and then- maybe- you might be able to negotiate a refund.
But they're not crooks, it's all perfectly legal... as long as you do it on a large enough scale.
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Now you are starting to understand why people aren't overly fond of the telecommunications companies Stateside.
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Most of them charge not to receive the text message, but to view it instead.
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Would you automatically get billed $250 just because somebody decided to send you a bunch of messages, even though you didn't want to receive them?
In a word? Yes.
In every country I've been in, telco and ISP companies are the only entities allowed to charge unlimited amounts of money for a service that you aren't even aware you are using. Here in Australia, there's been lots of horror stories of kids watching youtube videos, and then the next monthly bill on the "$25/mo" plan is $40,000! I've had this kind of thing happen to a friend, she had a bill arrive for 1 month that was bigger than her life savings.
There was a point here in Australia where Telst
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Are you suggesting that every business have its fees and services reviewed by a government regulator? Said regulator would then need to have the power to accept or reject specific services and/or fees, right?
Every business? Or just the ones that the public uses? (The difference being, well, zero.)
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I've never understood why everyone gets so offended at SMS rates.
Try committing to a premium unlimited data plan then having one of your dipshit friends send you a bunch of SMS's as if he's using an instant messenger. I'd like to see you say "you cannot begrudge a company..." after that.
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I've never understood why everyone gets so offended at SMS rates. Why don't you complain about the markup on bottled water, too. What something is worth is whatever people will pay. You cannot begrudge a company a profit. It's why they exist.
When I ran a cafe, we purchased bottled water for $0.28 and sold it for $1.50. So roughly a markup of 5x-6x more than we paid for it.
Let me know when the carriers start charging 5x-6x what an SMS costs them, and I'll happily stop posting about SMS rates.
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Unlikely, considering that SMS traffic is just filling empty packets so it literally costs the providers nothing on top of their existing infrastructure.
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I could care less what they charge to send a text message, for then I can decide whether or not the information I want to convey is worth the cost and the medium is the best one.
What I do care about is having to pay for text messages I receive. That leaves me open to large bills due out-side of my control or living with the feature at all. I haven't checked recently, but when I asked them if there was some method for me to whitelist numbers from which I wish to receive texts and block (without charge) the r
Collusion (Score:2)
I've never understood why everyone gets so offended at SMS rates.
Because the cost to the telecom company is almost zero and the only way it should be staying so high is if the telecom companies are either expressly or tacitly colluding. There is no other explanation for the cost of text messaging being as high as it is when all other forms of data are constantly dropping in price. Competition should be driving the price down but that isn't happening.
You cannot begrudge a company a profit.
Sure I can, especially if that profit comes at some detrimental expense to society or myself. I definitely begrudge the
facebook very untrustworthy (Score:5, Insightful)
This is why... (Score:2)
... I've been boycotting SMS for, well, years. I only send or receive them when absolutely necessary (activating some service or other, or for Google's two-step authentication)...
SMS is bullshit, plain and simple. Then again, I doubt anyone at Slashdot wasn't already aware of that.
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Verizon lets you disable all text messaging other than messages to and from Verizon services. See if your carrier does the same.
Not normal Data (Score:2)
SMS isn't normal data. Ever notice how you can still send text messages even when you don't have a data connection?
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Yes, the underlying method for sending the bytes of the SMS message is different than IP. But, SMS is normal data. It's still a string of bytes. I think the argument is that the load on the network generated by SMS messages with their protocol versus the load on the network generated by IP packets with their protocal is not 50,000:1 in ratio.
Good-ish? (Score:2)
Anything to stop that horrendously unconscionable markup is a good thing. ...or so I'd say if it's under the Facebook umbrella. I didn't notice any technical talk but this is FB so I can only assume everything flows through their servers and is saved.
But wait a second... (Score:2)
Not new (Score:2)
You mean it will do what google voice has been doing for years?
Voice Data (Score:3, Interesting)
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You can send a text message when the voice channel is down. You cannot make a voice call when the text (control) channel is down.
It is like crying about the cost per gigabyte of a fiber channel, RAID1/0 SAN LUN compared to the cheap Western Digital drive you bought at Best Buy. SMS is ridiculously expensive because the underlying infrastructure is expensive. Unlike the SAN analogy, the SMS infrastructure does not need to be as robust as it. Yet rather than build out another infrastructure, they send SMS
USA Only? (Score:4, Insightful)
In Europe, we have been getting better rates than you for years. I believe my teenage son sent over 3,000 text messages last month. Beats me how he manages to get good grades and play sports. I think his plan includes 500 talk minutes and "unlimited" internet - he has never gone over anyway. Costs £30/month because he wanted an extra clever phone. I think the cheap plans get down to between £10 and £15.
I have never heard of anyone paying to receive them. It's like post. The sender pays. The only real ripoff we have is roaming abroad costs and the phone companies are supposedly being compelled to lower them. I don't think you want that to happen in your country. That is government restricting business practices. We like it though.
This was not to laugh at you, but to show you what can be done as a start. We need to get it even lower here. Lobby your representatives or something.
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It's the kids (Score:2)
My wife and kids have smart phones without data plans, just plain prepaid service. Synchronising contacts and rearing mail can all be done near a wifi hotspot. Saves us tons of money.
There will be a time when data plans are cheap. But the time isn't now.
Awesome (Score:2)
The cost of text messages, down greatly.
The time taken to delete spam texts, up exponentially.
Old School Solution (Score:2)
What would happen to SMS pricing if people, en masse, simply stopped using it unless and until the price became actually reasonable and proportional?
Yes, I know... that solution requires educated consumers we don't have, but I can dream, can't I?
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The cost is reasonable. I doubt you can find more than one (if you can even find one) cellular telco that does not offer an affordable, unlimited texting plan. I think I pay $5 per month for unlimited text. I bet Verizon pays more than that to power the cell towers that I send my texts through.
Mobile Facebook (Score:2)
Hello? Twitter? (Score:2)
I'm going to repost an older post of mine, regarding twitter - frankly - fuck facebook (and yes, I have an account but those slimy assholes treat privacy and their users with utter disdain)
Twitter is one of the greatest new forms of communications in the last 20 years.
My first 2 tweets stayed for 6+ months iirc and were just "twitter is lame" and "update: twitter is still a wank" or something like that.
I didn't 'get' twitter.
Now that I do, I do not understand why on earth SMS still exists, this website / ap
Already dead here in Korea (Score:2)
There is a cross platform messenger called Kakao Talk, that works like many others, except it's Korean made, which means an instant success here, with the proliferation of smart phones, sms will probably be gone within the year, as the only people who will hold onto their older style phones will be old people who don't text anyway.
I use Pingchat, which is also a cross platform app, to keep in touch with people out of country. Between the 2 of them, that's over 90% of the people I talk to.
Sure another app is
a shiny new Thursday (Score:5, Funny)
A young little application called Beluga caught the attention of Facebook, which purchased the company a Thursday.
Nice. Wish someone would buy me a Thursday.
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My cellphone bill says otherwise. Saved $30 a month by switching to google talk for international texting.
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Yep. Using Talk let me drop my txt plan. Not to say others aren't, but considering how much Verizon likes to nickel and dime customers, I'd be surprised if others were doing that and they weren't.
Re:except (Score:4, Insightful)
Plus One.
Google talk has totally replaced SMS for me on my Android phone.
Even my Iphone friends use one of the many Google Talk clients, like IMO [apple.com]. Nobody in their right mind would use SMS internationally, and unless you paid for the unlimited SMS plan you would be nuts to pay for SMS on a per-message basis.
Google talk is Google's implementation of Jabber, (XMPP) and interoperability with standard Jabber Servers/Clients has improved of late to the point where you can send and receive to just about any standard jabber gateway, and any jabber client.
The Android version of GTalk comes on every Android phone, and is essential for the Android market to work. But it leaves a tad to be desired, as Google has only implemented about half of jabber capabilities on the smartphone platform.
But there are a dozen or so XMPP/Jabber clients in the android market [android.com] to choose from, some of which handle file transfer and voice calling as well.
SMS is a dead man walking. The carriers priced it out of existence.
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Android doesn't work without a Google account.
IPhone doesn't work without a Apple Account.
Windows 7 phone requires a Windows Live ID (I think, not absolutely positive about this).
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And here I thought Verizon was supposed to have better pricing.
I've been using Google Voice for SMS and transcribed voicemail on my ATT phone for almost as long as it's been available. Works even better now that I've moved to an Android phone. No sense paying $20 a month for SMS when your already paying $30 for unlimited data ...
There are tons of IM applications around for all platforms now that work on the data plans, there's no need for another one. Then again, one can't understimate the power of the f
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No (Score:3)
You are confusing "internet companies provide IM clients which bill as SMS if you use them" with "companies monitor traffic to . . ."
if you get your new non-smartphone with its included AIM application and send messages with that, it will likely bill those as a SMS message. That is entirely a different thing.
At least that is my experience.
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For android you can start here for a list: https://market.android.com/search?q=jabber&c=apps [android.com]
For iPhone you will find many of the same companies providing apps. Some don't support file transfer (pictures) and some do.
Google Voice (phone answering system) does support SMS. But you only need Google Talk (free) for unlimited world wide text.
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Carriers already detect Internet traffic that isn't really an SMS and bills it as an SMS, such as various instant messengers.
cite?
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Wrong.
Carriers install instant messengers on their phones that use SMS as a transport and not IP. (This practice is getting less frequent as time goes by, but a LOT of mobile IM clients do this!). They do NOT detect "SMS-like" IP data and bill it as SMS.
Another reason why stock ROMs from carriers suck.
You're probably in fairly good shape with Android or iOS, as I don't think any IM apps exist for Android that use SMS as the transport instead of IP. However, feature phones, fakesmartphones (you know, thos
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Which carriers?
I use both google talk and google voice for sms-like messaging. Neither one have I ever been billed for sms usage when using.
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By the way, does anyone know if they are planning a new version of Kopete? it seems like all real development has ended on it which is a pity because I loved it until the lack of facebook support for months after Pidgin had it killed it for me.
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it seems like all real development has ended on it which is a pity because I loved it until the lack of facebook support for months after Pidgin had it killed it for me.
"Facebook support" means XMPP support. You can access facebook via XMPP/Jabber. It would surprise me if Kopete did not work with that.
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None of my Skype messages get billed as SMS.
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And I've never been billed for emails or MSN messages myself. I know some carriers try to do this shit with traffic to Facebook & Twitter, but those are usually the lowest of the low plans where you don't actually get any real data, but data to FB & Twitter.
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But again, Google Voice can only send SMS to somebody who has an SMS plan or to another Google Voice account.
Google Voice stopped allowing international SMS messages a while back.
Using Google TALK, instead of Google Voice lets you SMS for free worldwide with anyone who has an iPhone or Android or even just a regular gmail account. (You can also speak world wide on google talk, but only pc-to-pc.)
Re:What will they think of next? (Score:5, Funny)
I hear they're working on extracting fibrous cellulose from trees that, when dried, you can create images on using nothing more than a graphite stick.
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Really, this has the same problem that every other alternative have. It requires everyone to install the same app to be on the same network. The only draw I can see to SMS is that every phone has it, so if you have a phone capable of doing anything with any kind of data, you know you are compatible with everyone else. It is a question of critical mass.
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Since when have you ever needed to install an application to use email?
What smart phones don't have email as a standard feature?
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I'd agree with you if A the transfer were free and B data was more expensive than SMS. As it is they're price gouging for something that doesn't cost them anything to provide, and in extreme cases have been willing to extend thousands of dollars worth of credit to allow people to be further gouged.
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My data plan costs me 0.000000015 per byte. My SMS plan costs me 0.0014 per byte. That's a ratio of 95,238:1. Are you saying that it's reasonable for the price disparity to be such, solely because I do not need a data plan and to have strong enough signal to use it? Perhaps. But then you add that the carrier will pre-install an "IM" application that uses SMS to send and receive messages rather than using a data network.
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The price for *voice* data is about 10000 times less than for SMS data. It is being sent by the same radio to the same cell towers and has the same availability! In many cases the ratio is *infinite*. Me and my SO have a friends and family plan and can call each other for *free*, yet texting each other (which I suspect uses less data than the first 1/10 second of the phone call) costs 30 cents (15 cents for each phone)! Also somebody else texting me costs me 15 cents, yet if they called me it would not cost
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The only reasonable price for this bandwidth is $0. It gets used whether or not you text. Why should it cost you extra to put meaningful information into the payload, as opposed to random garbage?
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Texting creates a message that can be read at any time, with your phone at a distance, without interrupting your ability to listen to what is going on, with a length limit that forces people (generally speaking) to be rather quick in their communication. Therefore it has a distinct benefit over say, someone leaving you a voice message. It is also, for some things, more precise than a voice message - for instance "Call me at my office, 555-7983" - is quick to read, understand, and the important information (
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Or you can use Skype, so neither government or anyone else can access your messages.
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NO, its exactly why Google TALK exists.
GV has other reasons for being. Google could flip a switch and turn every android phone into a Voip phone overnight. Then all you would need is a data plan and no minutes. The carriers would scream, but even they will come around after LTE is widely deployed.