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Facebook Communications The Almighty Buck Wireless Networking

Facebook May Bust Up the SMS Profit Cartel 262

Posted by Soulskill
from the bytes-and-cents dept.
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."
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Facebook May Bust Up the SMS Profit Cartel

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  • by Mean Variance (913229) <mean.variance@gmail.com> on Monday March 07, 2011 @05:45PM (#35411606)

    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.

    • I've toyed with using virgin's 25$ a month but I don't trust the wording on the contract. Just how "unlimited" are things like web browsing and the like. Now that they have non contract Android phones for under 150$, it almost sounds too good to be true, which means to me that it probably is.
      • The "unlimited" data plan is limited to 5GB a month. After you go past 5GB your throttled way down, AFAIK.
      • by MoonBuggy (611105)

        The terms of service [virginmobileusa.com] for those plans don't seem to make sense from a technical perspective:

        Beyond Talk Plans: $25.00 per month for unlimited domestic text messages, picture messages, instant messages ("IM") and email messages, unlimited video, unlimited access to Downloads (VirginXL) and the mobile Internet (but not unlimited downloaded content), and 300 anytime minutes.

        I know it's legalese, but I've always been told that the point of such arcane terminology is to accurately and unambiguously cover all eventualities (usually in the context of none of those eventualities being the company's fault, but I digress). How can one reconcile " unlimited access to ... the mobile Internet" with "but not unlimited downloaded content" - is the mobile internet somehow defined differently to the

        • and that's why I'm concerned. I don't plan on being a data hog by any means, but if they limit me to 40 meg a month or some other foolishness then why bother. Their terms of service are as clear as mud.
    • 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

    • by AbRASiON (589899) *

      I couldN'T care less about your opinion.

  • Another retread (Score:4, Insightful)

    by Imagix (695350) on Monday March 07, 2011 @05:45PM (#35411614)
    I can already do this. It's called Google Talk (or pick almost any other IM system). Why is "Beluga" any more special than any other IM system?
    • Re: (Score:2, Informative)

      by Anonymous Coward

      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)

        by blueg3 (192743) on Monday March 07, 2011 @05:58PM (#35411836)

        So it's Google Voice, but without the other features.

      • by icebike (68054)

        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

    • That it has the backing of Facebook.
  • I'm getting old (Score:5, Insightful)

    by guruevi (827432) <evi.smokingcube@be> on Monday March 07, 2011 @05:45PM (#35411616) Homepage

    I remember when SMS was free and was hidden in the advanced menu of a 3-line text display of a phone.

    • by hedwards (940851)

      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)

        by DeadCatX2 (950953) on Monday March 07, 2011 @06:34PM (#35412306) Journal

        "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.

        • 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.

        • by thynk (653762)

          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

        • Re: (Score:3, Interesting)

          by jquirke (473496)

          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

      • by arivanov (12034)

        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

    • by Ungrounded Lightning (62228) on Monday March 07, 2011 @06:46PM (#35412500) Journal

      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.

      • by Splab (574204)

        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

        • by Ungrounded Lightning (62228) on Monday March 07, 2011 @11:02PM (#35414962) Journal

          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.

  • by iONiUM (530420) on Monday March 07, 2011 @05:45PM (#35411624) Homepage Journal

    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?

    • There's one problem with you plan - babies.

      Yes, go on Facebook and everyone from here to Timbuktu who has had a baby is taking photographs of their baby and putting it up on Facebook.

      Oh, and talking about their babies.

      Lots.

    • 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

    • by icebike (68054)

      Hard way to get lower rates if you ask me.

      Just use Google talk for free world wide and to hell with facebook.

  • by gstoddart (321705) on Monday March 07, 2011 @05:46PM (#35411630) Homepage

    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.

    • by jackbird (721605)
      10 or 15? Sprint charges a quarter to send and receive, even within your family plan, so if my wife texts me, and i reply, it costs a buck.
      • by gstoddart (321705)

        10 or 15? Sprint charges a quarter to send and receive, even within your family plan, so if my wife texts me, and i reply, it costs a buck.

        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.

      • by CastrTroy (595695)
        Do they seriously charge you to receive an SMS? that's completely stupid, as your phone automatically receives it whether or not you want it to. Do they also charge you for calls that make your phone ring, but that you don't pick up? What of somebody on an unlimited texting plan sent you 1000 messages in a month? 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?
        • Re: (Score:2, Informative)

          by Anonymous Coward

          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.

        • by praxis (19962)

          Now you are starting to understand why people aren't overly fond of the telecommunications companies Stateside.

        • by Nadaka (224565)

          Most of them charge not to receive the text message, but to view it instead.

        • by bertok (226922)

          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

          • by cdrguru (88047)

            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.)

        • Yeah, though US telcos have been rubbing our faces in shit for so long that SMS charges doesn't seems so bad, somehow. Back in college I got a bill from Verizon for $2000 for just voice (it was a land line, not a mobile, no long distance). I called them about it and it turned out it was a billing mistake and they promised to correct it and send a new bill. They did not, the next bill was for almost $6000. Six months later they finally got the balance straitened out, but insisted I pay over $400 in late fees
      • what kind of insane plan are you on?? I'm on the basic individual one for 50 bucks a month, and it's unlimited data (text is part of data)
  • by rubycodez (864176) on Monday March 07, 2011 @05:46PM (#35411634)
    the way facebook sells and shares private data is too scary, wouldn't want them to have personal contacts or phone browser information
  • ... 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.

    • Verizon lets you disable all text messaging other than messages to and from Verizon services. See if your carrier does the same.

  • by Anonymous Coward

    SMS isn't normal data. Ever notice how you can still send text messages even when you don't have a data connection?

    • by praxis (19962)

      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.

  • 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.

  • I have limited data, but unlimited texts... so if anything, a large amount of SMS data would cost me near nothing... Is there any highish-latency browser that can use a stream of SMS texts for data? Cos that would be awesome...
  • You mean it will do what google voice has been doing for years?

  • Voice Data (Score:3, Interesting)

    by Lord_Jeremy (1612839) on Monday March 07, 2011 @05:55PM (#35411788)
    Cell phone networks use digital voice protocols, of course. Essentially, your audio is being streamed as a (compressed) data file over a data network. The GSM-EFR audio codec has a bitrate of 12.2 kbps. Obviously more modern phones probably use a higher-bitrate codec. That means for one minute of audio 60 * 12.2 kb or approx. 750000 bits of data is sent. One AT&T text message costs $0.20. The maximum size of an SMS message is 1120 bits (140 characters). That means in the data space of one minute of voice you could send 700 messages. At 20 cents each that's $140. Now I'm pretty sure that there aren't any cell phone plans (excluding sat phones) that cost $140 per minute of speech.
    • by dave562 (969951)

      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)

    by Gonoff (88518) on Monday March 07, 2011 @06:08PM (#35411990)

    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.

    • by ewieling (90662)
      In the United States the called person pays for the call to the mobile phone.
    • Not in my experience is Europe cheaper than plans in the USA anymore. A few examples.Cell phone overall costs are FAR cheaper in the USA than in Europe. We can roam the entire continent with our standard plans, Europe buy a sim card per country. USA has no cost to call a cell phone (most plans have PLENTY of minutes), Europe it's expensive to call a cell phone from a land line (~$0.25-0.50/minute when called from USA to Europe cell phones). As for unlimited internet, a friend of mine in London grabbed an
  • Texting is something we all do reluctantly. It's the way to reach older phones without data plans. And as long as data plans are too expensive to give to the whole family, texting will remain.

    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.
  • The cost of text messages, down greatly.

    The time taken to delete spam texts, up exponentially.

  • 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?

    • by dave562 (969951)

      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.

  • I can already do that by sending a message using the Facebook client on my smartphone. BB Messenger works great for folks with Blackberries. There are also 5 other IM clients on my phone. Although I used ICQ extensively years ago, its only function now seems to be receiving solicitations from Russian hookers.
  • 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

  • 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

  • by amaupin (721551) on Monday March 07, 2011 @07:39PM (#35413218) Homepage

    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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