According to the New York Times, one Senator decided to figure out what costs carriers incur when it comes to their customers sending and receiving text messages.
Herb Kohl (D-Wisconsin), the chairman of the Senate antitrust subcommittee, submitted a short questionnaire to the USA's cellular providers. The inquiry, send to Verizon Wireless, AT&T, Sprint, and T-Mobile, wanted a breakdown of message costs and pricing. While Verizon Wireless would not allow the Senators office to release its response to the inquiry, letters from the other carriers did not have promising answers.
The responses were quick to show the pricing structure for text messaging, but they did not convey any information about how much it actually costs a carrier to send a message. Since the responses from AT&T and T-Mobile were published by Sen. Kohl's office, the carriers have become involved in 20+ class action lawsuits regarding price-fixing on text messaging services.
Quick to defend themselves, T-Mobile "called Mr. Kohl’s attention to the fact that its average revenue per text message, which takes into account the revenue for all text messages, has declined by more than 50 percent since 2005.” However, according NYT's Randall Stross, the amount of texts sent since 2005 has increased ten-fold. An estimated 3.3 trillion text messages are to be sent in 2009. If figures from the Times and organizations like CITA are true, then the cellular industry will make more money off of texts alone than the U.S. spends in two years fighting the war in Iraq. That may be hard to imagine, but 3.3 trillion texts at 20 cents a pop... you do the math.
According to Stross, there is little to no cost to send and receive text messages. The wired connection between cell towers has ample bandwidth for the messages, so some would think it's the wireless aspect? Wrong. "Perhaps the costs for the wireless portion at either end are high--spectrum is finite," says Stross. "But text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network. That’s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted."
So where does the mentality of "the more, the better" fit into all this? Well, since many cell phone users have an unlimited texting plan attached to their monthly bill, they probably think they are getting a great deal. Wrong, again. "Customers with unlimited plans, like diners bringing a healthy appetite to an all-you-can-eat cafeteria, might think they’re getting the best out of the arrangement. But the carriers, unlike the cafeteria owners, can provide unlimited quantities of “food” at virtually no cost to themselves--so long as it is served in bite-sized portions."
While all the facts have yet to be seen, its seems as though the cellular carriers are making like bandits when it comes to texting. Hopefully one of class action lawsuits will bear some consumer-friendly fruit.
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I wish we could leave the big business witch-hunts to the Europeans. The price for a good or service is almost always as high as the market will bear. I am willing to pay $15 a month for my unlimited texting plan. If I wasn't willing to pay that much, I wouldn't use SMS. It's not the government's job to come in and force a "fair" price, because in economics, fair is almost always relative.
Chris312,
Fair is always "relative"? Yeah, 5 wireless carriers working together as a conglomerate controlling the price instead of letting the free-market system runs its course sure is FAIR ISN'T IT? They're forcing the consumer to pay a premium for a cheap service regardless of what carrier they use. But hey, if getting ripped off is your thing, be my guest.
Not surprising at all. Communications companies seem to thrive on fu**ing people over.
Why lower your prices when every customer gladly pays it?
As someone who doesn't text on a cellphone but who is constantly around those that do, I figured out a long time ago that they were being charged exorbitant fees for the service. And those that didn't have unlimited texting plans often complained about overage fees, too.
I always felt texting was overpriced - and always felt extorted when I had to use their picture sending services at a high price.
Of course, I went overboard and bought a smart phone and pay the $30 premium. Then again, I prefer having access to full email, instant messaging, and Opera Mobile web browsing over just SMS.
In defense of the companies, every business needs an high profit margin item to make up for the services they go into the red on. Computers have low margins, but cables are extremely high margin items. Burgers versus fries/sodas/coffee. Cheap phones that make a loss versus high profit plans and add-ons.
Im sure Anandtech covered this ages ago, as well as compared it to the cost of communicating with one of there satellites or something too...
I send and receive on the order of 5000 sms and mms messages a month, the $20 a month unlimited txt package for ATT puts my per txt usage at around $.004. I think thats acceptable.
Acceptable for you maybe, but my 50 texts a month costing me $7.50 +tax (15 cents per txt) would be a scam, thankfully I had the my fives thing where I could send free texts and call, for free, 5 people for an extra $15 per month, considering you can pay 15, or 20 cents for sending "Ok" to someone while using less than 10 bytes of bandwidth which flows with the signal the cell has with the tower already anyways.
Now I have a pay as you go cell for I use it to little to warrent paying $55 a month, they got plans for pay as you go's now, I can pay 30 cents a day to have 10 texts daily or 50 cents a day for 100 texts daily, thats 0.5 cents per text, so if they can afford that for a mere pay as you go client, then yes 15+ cents per text is a rip. The biggest BS is paying to receive texts though, thats 30+ cents per text lol
happens in asia, though not as severe.
text messages can ride on gprs or any data service, so text service should be dirt cheap.
Im sure Anandtech covered this ages ago, as well as compared it to the cost of communicating with one of there satellites or something too...
Yes, I am sure in 2005 T-Mobile figured out the revenue for all text messages will declined by more than 50 percent after 2005.
Read the article before BSing.
You just have to wonder why one of the smaller providers doesn't give that perk of having free unlimited texts. Makes me think the big boys get to them first. I don't disagree that companies need large profit margins in certain parts of their business, but I do disagree when competition is circumvented to do this. I would rather pay full price for a phone and get a good deal on service then them give me a phone and reap that same profit from the service year after year.
Att charges $20 for unlimited which is expensive especially after you add in thier $30 unlimited data fee. I thought T Mobile or Verizon offers/offered unlimited text for $5.99. Anyone know where I can follow the progress of these law suits? I want to use them to get a lower texting rate from ATT before they decide to raise other rates.
Yes, I am sure in 2005 T-Mobile figured out the revenue for all text messages will declined by more than 50 percent after 2005.Read the article before BSing.
WTF are you on about??
Why lower your prices when every customer gladly pays it?
Until the day the consumers wise up and ask their elected officials to make these companies more consumer friendly. AT&T is the worst at the fees for this no cost service to them.
I got rid of my cell with cingular about 7 years ago for this kind of crap. I must say I haven't missed it one bit. It's not good to be available to everyone, every second of everyday. People freak out when I tell them I don't have a cell phone, and think am to poor to afford one. Too cheap; maybe, but I can think of 100 other things I would rather spend 60 bucks on every month. As long as wireless companies have suckers that are willing to shell out for their overpriced services, their will be no incentive to lower prices. People shouldn't keep pouring fuel on the fire and then complain about the heat.