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Facebook Communications The Almighty Buck Wireless Networking

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."
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Facebook May Bust Up the SMS Profit Cartel

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  • 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?
  • I'm getting old (Score:5, Insightful)

    by guruevi ( 827432 ) <`moc.stiucricve' `ta' `ive'> 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 iONiUM ( 530420 ) on Monday March 07, 2011 @05:45PM (#35411624) 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?

  • 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 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
  • 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.

  • Re:except (Score:4, Insightful)

    by icebike ( 68054 ) on Monday March 07, 2011 @06:46PM (#35412494)

    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 []. 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 [] 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.

  • 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.

I go on working for the same reason a hen goes on laying eggs. -- H.L. Mencken