What Carriers Don't Want You To Know About Texting 570
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."
Correlation (Score:5, Insightful)
The feckless youth I see texting in public do not appear to be the sort who employ reason or critical faculties. That's the kind of customer base dreams are made of.
Isn't exactly news (Score:5, Insightful)
SMS messages where an afterthought (Score:5, Insightful)
As a service that the operators could milk their customers with. It was only when it started getting popular that they heard the cha-ching sounds and start charging outrageous fees.
duh (Score:2, Insightful)
Re:Correlation (Score:5, Insightful)
That's because their parents are the ones footing the bill... ouch.
Failed economics class (Score:2, Insightful)
Classic economics says that things are priced what people are willing to pay for them, and are not based on how much the cost to make.
As long as people are willing to pay 10 cents per text, that's how much carriers will charge, regardless of how many there are.
Not just for costs, but to keep demand down (Score:2, Insightful)
When text usage goes up, the carriers don't have to install new infrastructure as long as it is proportional to voice usage.
Quiz time! What will happen if the price of text messages goes down? Will it INCREASE or DECREASE the use of text messaging compared to voice usage? People never seem to get that the product price is not only the costs+profits, but also the additional costs if the demand grows larger or smaller. I imagine the operators have found the ideal text/voice ratio and are pricing the product so that the maximum capacity of the current network is in use. I don't know about USA, but at least in Europe the youths prefer using text messages over talking, so keeping the ratio in the sweet spot might be somewhat hard. In Finland cost for both voice-per-minute and text are 6,9 eurocents (that's what? 8 american cents?), pretty much from every operator you can name. How much do they cost in your part of the world?
Same old arguments (Score:1, Insightful)
Yes it uses a control channel that existed already. That doesn't mean this said channel hasn't had to be beefed up, the signal quality improved everywhere as what was acceptable for the odd, low priority message isn't good for large amounts of bandwidth being thrown around. Just like phone lines weren't designed for data but when they started being used for it, phone companies had to go around improving exchanges, replacing old wiring etc.
160bytes isn't much but that's still data that has undergo handshaking, be routed around a limited bandwidth network, processed to find the destination then sent to the destination phone. It's incredibly inefficient to do this for a small amount of data. It's also incredibly costly to manage lots of minuscule transactions. To price it on pure bandwidth costs is stupid. It costs phone companies a hell of a lot more to send 1000 texts than it does for a 3G user to download a 160kb image.
It's true for pretty much every business everywhere that if you do things in incredibly tiny properties, you're going to be charged through the roof. If I did a home delivery service from a supermarket and bought just 1 banana, that banana would cost me £5.10. If I ordered 100, each banana would cost me £0.15. It doesn't matter than my house is on the delivery truck's route and they'd use no additional petrol and only minimal time to deliver the single banana, I would still have an incredibly expensive banana.
Re:Failed economics class (Score:5, Insightful)
No, apparently you failed economics.
If there is sufficient competition in the market profits will be driven to zero and the price of the service will approach the *actual* cost of providing it (which is close to zero, apparently). The fact that text messages cost 1000s of times more than they should indicates that there is insufficient competition in the industry, excessive barriers to entry into the market, etc.
Re:Isn't exactly news (Score:2, Insightful)
And that's why the news on slashdot should be that a major paper is shining some light onto the issue for the uneducated masses to see, instead of the current story.
I can safely bet that it's going to elicit some dozen 'Duh! We already knew that'-comments.
Re:Um what? (Score:3, Insightful)
It's been possible to send SMS via GPRS for a long time
Possible in theory, but it mostly doesn't work in real life. Many mobiles have broken support for this. Many networks have broken support for this. If your customer changes from one mobile with support to another without it's a complete pain to make sure everything works right. Finally, even in this case, the SMS mostly travels over the SS7 network which is not well designed for user data.
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. I agree with you, however, that SMS is a totally stupid thing and everybody should be using email or instant messaging instead.
Re:Correlation (Score:2, Insightful)
Comment removed (Score:5, Insightful)
Re:Goodness gracious me (Score:5, Insightful)
World prices for sugar is about 1/5 that of sugar costs inside the USA.
HFCS is less expensive in the US than sugar.
The artificial prices of sugar and the artificial price of corn leads the USA to use corn for sweeteners and corn to make ethanol.
The solution is to stop propping up the US sugar companies. If C&H cannot compete on the world market, then let them fail. Why should the population of the US prop up an industry which has had many many decades to compete on the world market.
Re:Same old arguments (Score:2, Insightful)
1. they can but not all networks and phones have full support for these kinds of texts. Do you really want to have to wonder if someone can get a text from you or not? Also, GPRS would have to keep pinging towers to check for messages. This would cost a fortune over a year at GPRS rates or you'd have to sign up for a monthly charge like with push email services.
2. It's still data that has to be handshaked at both ends. Establishing a data connection is the most costly part.
3. Amazingly enough, networks aren't free. There are costs for equipment, there are costs for staff, there are costs for licensing a radio frequency. The more data they have to process, the more expensive the equipment they have to have, the better quality transmissions they need to send and receive. The busier a network, the more money needs spending to maintain and upgrade.
4. Wow that totally refutes everything I said! Who needs a reasoned argument when you can say "that's stupid" and not say why. It's a metaphor to show how buying things in tiny quantities is expensive.
Re:Correlation (Score:5, Insightful)
Calling represents a loss of time - you have to be somewhere away from others(if you are polite), wait as the phone rings, wait as you go over formalities, finally say what you needed to say, and then hang up. That is all a pain in the ass to us whippersnappers. Not to mention the annoyance of not getting an answer and having to wait to leave voicemail...(which is quite similar to a text, other than that it takes longer to convey a message and if something is missed it has to be replayed..)
Texting is more polite. Although I know many over thirtys who disagree, many younger people often do not consider it impolite to receive and send text messages in public or with company (within reason, it can't distract you completely). Beyond that, sending a text does not heavily interrupt the day of you or your contact, unlike a phone call.
Essentially, texting gets the same job done faster and with less hassle.
Re:Correlation (Score:3, Insightful)
Essentially, texting gets the same job done faster and with less hassle.
Yes, but if people used cheap texting over making phone calls, how would the phone companies gouge us when we go over our limits?
Re:Correlation (Score:4, Insightful)
It's hard to hear that one phone call in bars
It's easier to save that one text than to find a pen and paper to write something down on. (Or finding that one paper again when you need it).
I can read faster than I can wait for someone else to talk.
I can silently send a text when I'm "here" instead of picking up and being obnoxious.
I can send that text in between the tiny intermittent signal that I get instead of the 1 full bar I need to make a phone call.
Re:Correlation (Score:4, Insightful)
Not really, no.
Why would I want to interrupt somebody just to inform them of something like "My plane landed, will be there in 30 minutes"? These days, with a modern phone with predictive typing and presets such a message can be fired off in about 10 seconds. It's much easier than finding a quiet place, waiting for the phone to be picked up or voice mail, saying it and hanging up.
It's also much more convenient for the recipient: They might be in the middle of gaming, driving, talking or a meeting. An SMS can be unobtrusively checked when some free time becomes available. SMS is also known not to be urgent by the recipient, while a phone call can't be assumed to be possible to ignore for hours.
Depending on who you're communicating with, and SMS also has the advantage of not initiating the conversation. This is great when you have to tell something to one of those people who takes any opportunity to update everybody on what happened during every minute of their lives, and manage to turn a 1 minute call into an 1 hour one.
Voice mail is also very inconvenient when you want to keep an archive. I can send a SMS like "Could you get me blank DVDs next time you go to the shop?" and the recipient will be able to find it quickly a week later. Try digging it out from a fairly busy voicemail account, if it remained there at all after being listened to.
It doesn't have to be expensive either. I get 1000 free messages with each 10 Euro recharge with a time limit of a month.
Re:Correlation (Score:5, Insightful)
Contrary to many people I still remember enough of my days at school to realize that young people aren't a lot different from adults, they just live in a different environment.
While at work it may be acceptable to take a phone call at any time, such things usually aren't welcome by teachers. And while at a job there's a hierarchy that may result in you having maybe 5 people you can regularly talk to, at school you're in a deeply social place, and part of a class that may be around 30 people. The small amount of separation between classrooms and common recess and food areas means it's very easy to meet a very large amount of people. Receiving 30 SMS per day is easily doable, while taking 30 phone calls, most of which don't need to be replied to isn't near as convenient.
Text pricing is ridiculous (Score:5, Insightful)
Anywho, when I got to Finland, everybody in the high school had a cell phone. Well, almost everyone, and if they didn't have one when I got there, they got one that year. And the thing was, *they texted all the time, because it was cheaper, much cheaper, than a voice call*.
Flash forward five years to the states, and then everyone is getting cell phones, but *without text service*. And now, text service is something that costs per text, or something ridiculous like that. In Finland, and I would guess most of Europe, you get some ridiculous amount of texting included in your plan, or you just have a straight-up bandwidth plan, which covers voice, text, media, etc.
I wish Americans would travel a little more often, to see how the US is becoming a technologically backwards society. Technological improvements which are more efficient are seen as opportunities to gouge customers, instead of compete and offer lower prices. The same thing was going on with banking about five years ago. American banks were charging fees to have people access their accounts online, while Finnish banks were giving it away for free, because then they didn't need to pay tellers. Oh yeah, and you could pay your bills and do banking by text service.
Re:Correlation (Score:2, Insightful)
There are reasons a lot of us prefer texting over a call in most situations.
Most is an overstatement. In some situations, yes. Noisy environment, reply can wait, must interact with more than one person at a time, avoiding roaming fees etc. Speaking from experience, however, more often than not, a one-minute phone call settles what would have been endless finger-grinding on those ever-useless phone keypads, four messages both ways and still no conclusion reached. So no, in my experience, usually not faster and definitely never with less hassle.
There are problems with the politeness factor as well. While it could be more polite to receive a message rather than a call while in a busy place, replying to it in kind does distract. I see texting at the university all the time, MSN messenger is also rampant, and most of the texters and chatters more often than not have only half a clue about who the professor was this time, let alone what s/he spoke.
Re:This makes me dream... (Score:2, Insightful)
Thats bloody insane. I cant understand for having to pay for what you receive AND send. If the postal system there worked that way people would be up in arms. Plus it means that crap like messages from random numbers makes you lose money.
Both the Canadian and the US phone-services work like that, or have plans that work like that. With a phonecall at least you can decide to not pick up the phone, but with an sms-textmessage you already accepted, and are charged thus. Postal services worked that way, at least until around the invention of the stamp.
Re:Goodness gracious me (Score:5, Insightful)
HFCS is only less expensive because of the sugar tariffs place on the importing of sugar.
The problem is political.
Corn farmers are getting tax incentives to grow corn.
Then creative people need to figure ways to use all this corn.
It's hard to find something in the usa that isn't made with corn. It's not the healthiest thing. Farmers could be growing crops that are much healthier.
It's not C&H's fault that there is a sugar tariff.
Re:Correlation (Score:5, Insightful)
exactly. but people don't care or don't seem to realize how badly they are being fucked by the wireless companies.
i read an article recently that assessed the cost per MB given the size of a 160 character text message and found that it's actually cheaper per MB to send/receive data from the Hubble Telescope.
wtf?
Re:Correlation (Score:2, Insightful)
I see a common thread here. I think for our generation more then previous ones we appreciate the value of our time and waiting to see if someone is there (at least 3 rings if there isn't some over played ring back tone). I think the idea of voicemail has failed us completely, WTF needs to waste 10-15 seconds listening to some mechanical unappealing voice explain to them how to leave a voice mail? or telling them that they can page this person by pressing '1'... really a pager built into a phone I hope that engineer was dragged out back and beaten with a hose. And all of this is after your brilliant friend leaves his latest acoustic mutilation of stair way to heaven as a message. I have often thought about making my ring back tone into that noise that an incoming fax makes in the telephone just to discourage people from calling me.
Last week I was with a girl and things were going great until I got a phone call, I ignored it so instead of leaving a message they hung up and called again, you know in case I was away from the phone, thereby disrupting my evening even further. THEN they left a voice mail and I get yet a third interruption from my phone telling me that I have a new message, for which in order to listen to I must call my own phone wait for the damn machine lady to finish the same rant she has had for 20+ years and here that it was my acoustic friend calling to see if I was busy...GOD BLESS AMERICA!(insert sarcasm)
huh? (Score:4, Insightful)
How many participants in an industry do you need to have before you'll say that the goal of competition has been met? Four seems like it would be enough. If there was some advantage to be had by using a price structure that accurately reflects the true cost of text messages then I suspect one of the carriers would have already tried it.
Re:Correlation (Score:5, Insightful)
Re:Correlation (Score:3, Insightful)
And why do schoolchildren need to electronically communicate with anyone during school hours? I managed to get through school just fine by employing a form of communication called "talking", and never had a cellphone (they weren't exactly cheap around 1990). In fact, as another poster pointed out, many schools don't allow kids to use cellphones as a matter of policy.
As far as I'm concerned, it's fine that the carriers are profiting so much off text messaging. No one really needs it, and apparently the crowd that demands it so much is too stupid to do anything about the situation. If parents are the ones footing the bill for this, that's their own problem for not saying "no" to their kids.
Re:This makes me dream... (Score:3, Insightful)
Of course the companies could just start building the packages into the basic service, but then they would get no money. The main reason I see them trying to push people into getting the various texting packages isn't to make more money per se. Rather to reduce their call center service costs for all the calls when Jr.s texting has pushed the bill a couple hundred over the normal monthly cost.
A few years ago I worked as a CS rep for Sprint, texting was just starting to really take off then and I took dozens of calls from very irate parents. Irate at Sprint of course, when it was their child who they were failing to monitor or supervise, but that's beside the point.
The issue is that those calls were seldom short (or pleasant), and thus cost the company a lot of money to keep those customers as happy paying customers. The fix always included pushing the $10 or $15 texting packages $10 for a hundred texts or $15 for unlimited texts, to avoid the problem from reoccurring.
So I can see the companies increasing the per text fee to push more of their texting customers into getting the packages, and thus reducing the likelihood of having to pay for CSR's to handle those future long expensive calls.
Oh and FYI, before that job I had service with another carrier and have never been even slightly tempted to use Sprint.
Re:INCORRECT Correlation (Score:5, Insightful)
"WTF? Does that mean the US telcos are double dipping?!"
No, it is just a different model.
In the US/Canada, calling a mobile vs. calling a landline is the same price (often unmetered or very cheap). In most cases it costs just a few cents a minute to call anywhere in the US, landline or mobile, usually including Alaska and Hawaii. Some packages even extend that to Canada, and western Europe (non-mobile in the latter case).
That is not the case in Australia, the caller to a mobile is usually charged a hefty surcharge. Take a look at your international calling rates, you will see no special mobile rate for calls to the US. It is all the same rate, there are no special mobile area codes (a.k.a. city codes).
In many cases, you can even transfer your home number to a mobile if you are eliminating your landline.
One could argue which concept is better, fairer, or whatever. As with Australia (and almost everywhere) it really depends on the package you get.
Re:Correlation (Score:3, Insightful)
That was posted here. :) I'm too lazy to find the link, but I know it was only a few months ago.
Hey, with any business, the price tag is never what the cost is. The market dictates what the price will be. If people are willing to pay $100 for a bag of cheezie poofs, they will charge that much. If the price drops below the cost, unless there's a way to recover it through other means, the product will be dropped.
Re:Correlation (Score:3, Insightful)
You don't see this sort of thing in markets with real competition. Try to charge $100 on that bag of cheezie poofs, and the other guys will take your profits by charging $98 dollars a bag, you'll be forced to match them, and so on, until the prices are at the limits of profitability, and can't be lowered any further.
Re:Correlation (Score:5, Insightful)
Up until about August this year, all carriers charged $0.10 per text message, now they all charge $0.20.
This should scream price fixing.
Re:Correlation (Score:3, Insightful)
No. The article makes the mistake in thinking the the Radio part of the GSM bandwidth is the same as the Network bandwidth. It's not.
To continue the FedEx example, an SMS is like a post-it was was stuck onto your package. Trouble is the post-it might be going to a entirely different recipient to the parcel. So it's only piggy-backing until it reaches the sorting office.
Some networks work by store and forward of SMS much like email, others attempt direct delivery first. The point being that, if the recipient's phone is turned off, unlike a voice line you can't just give a busy signal (or charge extra for voice mail).
Where the article falls down is it's ignoring that the network understructure needs to handle and route SMS not just carry then from the handset to the mast.
Re:INCORRECT Correlation (Score:5, Insightful)
No its not obvious... supply and demand economics, right? Well, the demand is high, but the supply is essentially infinite as TFA points out. N/infinity = zero for extremely large values of N. Therefore it should be practically free. What we are looking at is a price-fixing scam.
Re:INCORRECT Correlation (Score:2, Insightful)
Wow. Quit sleeping through your econ classes.
Charging 3 different customers different prices for the same product is called discrimination. Great if you can get away with it (sometimes called a senior citizen or student discount), but not how most businesses operate.
The grandparent was correct, and you pretty much agree with the post in your second paragraph there. Text message market should be in perfect competition. Text messages from Sprint are exactly the same as those from Verizon, they are perfect substitutes. In a correctly functioning market, market forces will push commodities with perfect substitutes down to the marginal cost. Marginal cost is the price it takes to create the last widget, or in this case text message. As per the article, text messages cost almost nothing, therefore, the price of text messages should be almost nothing. The fact that this is not the case indicates that the market is not functioning correctly.
Re:Correlation (Score:3, Insightful)
As long as they are not disrupting others, I do not see the issue.
The issue is that I'm taxed out the wazoo to pay for the education you're throwing away. I'll remember your attitude the next time I'm asked to vote for a tax hike for schools.
And my teachers never bothered me about it. Why? Because I was not disrupting others. Because I got my work done regardless.
Did you know that it's legal - and often even encouraged - to sign up for more difficult and challenging classes so that you're not wasting everyone's time?