Why am I required to pay for both text and data. Is it a scam?

http://www.reddit.com/r/technology/comments/f1z9g/why_am_i_required_to_pay_for_both_text_and_data/

by rkwz • 16 years ago

31 49 16 years ago

iwwr2• 16 years ago

Just ask all your contacts to stop sending/receiving texts and stick to e-mails. Voice and SMS are legacy technologies, so they cost more than pure data. Although, the reliability of a voice connection is higher than the equivalent VoIP tunnel.

robin_reala2• 16 years ago

Among my friends email is far more legacy than SMS. I guess you’re USian though? In the UK pretty much every call plan includes more txts than you could feasibly use in a month, and it doesn’t cost anything to receive them.

iwwr2• 16 years ago

EU here, yes it costs nothing to receive, but it's still around 5 eurocents to send one. 5 cents for a couple of bytes is still a lot. As for MMS, let's not even go there, that is a true ripoff.

E-mail is not quite legacy. What would you suppose could replace it?

edderly• 16 years ago

Here's an interesting perspective of text versus email:

http://communities-dominate.blogs.com/brands/2010/03/faster-...

tl;dr SMS is $100 billion business, is hugely popular and still growing.

ra• 16 years ago

That's a great article, thanks for posting.

ugh3• 16 years ago

Texts probably subsidize data.

By the way, text messages are very cheap for carriers. They are sent on a control channel which is also used to establish and hold calls. This channel has to be kept free at all times anyway so the carriers can’t use it for anything else. Text messages are moreover very patient. If the control channel is not available they will just wait.

jarek2• 16 years ago

Yeah. I hate cellular pricing as much as the next guy, but it's really just whatever the operators feel/have data will bring in business × whatever they feel/have data the market will bear. Comparing per-byte transmission costs makes about as much sense as comparing per-calorie cost of a cheap fast-food place with that of an upscale restaurant.

As an aside, one of the big three Canadian operators just announced text messages not covered by a plan will soon cost 20 cents. They charge for both incoming and outgoing.

dedward3• 16 years ago

That's the real scam - charging for incoming.

Charge for outgoing. Leave it at that - otherwise it's a mess.

Why should i have to pay for a message I can't reject? That's silly.

The CRTC should be hit up on that one.

notahacker• 16 years ago

I'm perfectly happy for overpriced SMS messages sent by SMS addicts to subsidise my unlimited data contract

[I live in the UK so SMS messages are free to receive and the number I send per month is well within the limits of my plan]

jamii• 16 years ago

Wait, you have to pay to receive messages in the US. Thats batshit. I wonder if there are any mechanisms in place to prevent financial ddos?

exit2• 16 years ago

why does so much economic activity depend on fucking people over?

ZeroGravitas• 16 years ago

Because it's easier than adding value.

parfe• 16 years ago

Text messaging does add value. Remember having to call, leave a voicemail, then listen to a reply voicemail confirming plans?

"Meet at Joe's at six." "Ok"

Value is not the same thing as cost. The cost to carriers is low, but the value to consumers is high.

brudgers2• 16 years ago

At least they're not doing it traditionally by pillaging the village and raping the women.

atgm3• 16 years ago

It definitely is a scam.

Here in Japan, text IS data -- SMS messages are just e-mail and every phone has a user-defined e-mail address, except for some cheapo phones that just have randomly generated strings.

Data is charged by the packet, with different tiers of pricing; for example, my plan charges by the packet up to a maximum level, at which point I can use everything for that maximum charge, which is around 60-70 USD depending on the exchange rate.

It's definitely a better deal than other countries seem to be getting...

ugh3• 16 years ago

I don’t really understand how that makes it a scam.

stcredzero3• 16 years ago

What you pay per megabyte for an SMS is ludicrous.

trezor• 16 years ago

Yes and no. what that means is that you don't have SMS, you have email only and that is indeed packet-data.

SMS is basically a hack which lets us transmit non-control data over the GSM control-channel, normally used top setup calls, channels and specific time-frames required for calling to work.

This means that SMS has second priority and is treated as a when-available transport.

In conclusion SMS is different and charging differently for it follows naturally.

atgm3• 16 years ago

For all practical intents and purposes, SMS and e-mails are the same thing for the non-technical end-user when they're easily accessible from a phone; use of either is referred to "texting."

I never knew that about SMS, though... thanks for enlightening me. If it is that different, and not just raw data, then I guess it does make sense to charge differently.

jawee• 16 years ago

First off, although apparently a recent thread on HN showed others have more problems than me, I don´t pay for texting; I use a combination of IM and Google Voice with my smartphone to get the job done on one bill.

However, I was travelling in a Latin American country recently and was talking to one fellow who worked for the government who had been given a Blackberry Storm (it was the only smartphone I had seen there). I asked him about his data plan; he said he got 5MB a month that he basically just used for texting, e-mailing, and checking Facebook. Apparently this was some kind of combined plan, or he was mistaken one.

dedward3• 16 years ago

I live in a latin american country THere is a fee for local calling (based on time only) and a fee for sending SMS (based on # of messages), and in the regular (only?) phone plan (which is about $8/mo I think) there are enough minutes/messages included in the plan that I never see more then a dollar or two in extra fees.

There's the blackberry plan on top of that (going away soon when my new iPhone arrives, yay) - but htat doesn't change SMS or Calling preferences - just adds unlimited data and the usual blackberry services.

Teh reason SMS & Data are different, historically, is because they are different. SMS was a way to cram a message in a single GSM packet. Very low-cost for the network to send. This was prior to data plans being available. No sustained network protocol for the end user -that's why there's a small character limit - it had to fit in a single packet. Providers globally reap huge profits on SMS, because actually sending SMS cost them nothing additional.

Data, OTOH, ends up costing them actual real bandwidth and resources

dedward3• 16 years ago

It seems the market is willing to put up with it... so not a scam.

piers• 16 years ago

Whilst on the subject of it being a scam, who can forget this little nugget of information... http://science.slashdot.org/science/08/05/12/1419204.shtml

biafra• 16 years ago

SMS is cheaper considering the battery of your mobile phone. Receiving SMS on a regular GSM-phone does not add much to the power drain. Compare that with an open TCP-Connection to receive emails (or XMPP-messages). Or worse with polling for email.

And you can reach about anyone with a cell phone with SMS. Most people to not read all their email on the go.

eli4• 16 years ago

If you're aware of the price and agree to payit in advance than I don't see how it could possibly be a "scam."

I'm sure many people consider text messaging overpriced, but there's an easy solution: stop paying for it and disable it on your phone. It's simple economics: the price is set by what people are willing to pay.

brudgers2• 16 years ago

People are charged for incoming messages by some US carriers and are not provided with a clear option for blocking them. A person low on minutes can let a call roll to voicemail without incurring cost, there is no similar option for messages.

eli4• 16 years ago

I agree it may not be very clear, but as far as I know every carrier allows you to block all incoming and outgoing messages. Most people just don't actually want that.

stcredzero3• 16 years ago

T-Mobile will let you block your for-charge SMS. I use them on a Canadian iPhone and use Google Voice for SMS text.

JoeAltmaier• 16 years ago

Its marketing. Kind of like a scam, but everybody does it.

simias• 16 years ago

As long as people are willing to buy it, why would they stop? I could make the same argument about voice "Why pay for unlimited data plan and for voice call? Isn't voice data?".

The problem will stay there as long as a contender on the market won't try to make a move and give them for free, then the rest will follow to remain competitive. In france I think the standard is (finally) to free and unlimited SMS since a couple of years. I think it's the result of the convergence of internet and old-school telephone, the masses start to realize they can send emails on their telephones with pictures and everything for free when they have to pay for a shorter SMS.

grinich• 16 years ago

Text messages are billed at about $5,000 per megabyte. Here's the best comment I've found on the matter, which was posted on The Register's forums.

    #########

Dr Nigel Bannister is correct to say that SMS costs more than using Hubble Space Telescope!

I reckon his calculations are ballpark as they echo my own similar experience when as far back as 1999 I did a rough comparison between the costs[1] of local SMS messages and that of NASA receiving messages from its Voyager spacecraft billions of kilometers away.

My calculations show that on a byte-for-byte basis it cost kids several orders of magnitude more money to send [to text] a single character across a schoolroom than it does for NASA to receive the same message from its Voyager spacecraft as they approach the heliosheath--that boundary where edge of the solar system gives way to deep space some fourteen billion kilometers from earth.

The SMS service was originally devised as a quick and dirty maintenance channel for field use by technical staff to adjust and maintain mobile telephone networks--not for general use by subscribers. Well, that was until the telcos realised they were sitting on a goldmine and they could ACTUALLY sell the SMS service to subscribers. Moreover, this twee, almost-unacceptable, almost-unusable and awkward communications system with its strange and kluged way of keying in messages, was extremely easy to sell to a remarkably gullible and unquestioning public who lapped SMS up no matter what outrageous and extortionate price the telcos charged. For the telcos, SMS was the telecommunications equivalent of heroin, the public, world wide, became addicted overnight.

Had SMS been initially planned as a consumer service then it would have been much more extensive than it now is. The telcos just couldn't believe their luck: for almost negligible establishment costs they've made billions. And, on a dollar-for-effort basis, they've made even more money than Bill Gates and Microsoft.

Moreover, the world's telcos are all very aware of the SMS goldmine they're sitting on. Thus, they're forever engaged in seemingly competitive SMS price wars which, in reality, just oscillate or nibble around an artificial and outrageously high price. No telco is wiling to enter into true price completion in the SMS arena, and no telco wants the secret SMS oligopoly to be exposed. The stakes are enormous.

The tragedy of SMS is that governments, regulators and consumer advocates let these miserable telecommunications carpetbaggers get away with such huge exploitation, it was on such a grand scale. In the broader sense, SMS pricing--which ought to have been included in the base subscriber price with no charge for messages (as the bandwidth is so negligible)--can be seen as another consumer casualty in the worldwide headlong rush that was telecommunications deregulation. Matters, too, were made worse when governments also divested themselves of their telecommunications regulators and engineers, as governments no longer had easy access to professional and independent technical advice (they would have picked up the SMS scam then referred it on for the drafting of appropriate lemon laws and consumer protection legislation).

SMS and its pricing is truly an amazing phenomena. One day when we eventually realise the huge extent to which the consumer has been deceived and conned over SMS, it will go down in history as a quintessential example of what happens when the synergies of corporate greed, marketing propaganda and deception, consumer gullibility and the new and strange addiction of SMS messaging come together. It's what happens when all involved are blinded and mesmerised by technology's new and pretty baubles bangles and beads. With SMS, it is as if the Pied Piper had really come this time.

What is urgently needed now is to expose this SMS pricing sham once and for all. I call on whistleblowers, insiders and those of us who still posses a modicum of rationality and who understand the issues, to leak and expose true and quantifiable figures (not guesstimates) about SMS installation and running costs and the extent to which the public has been deceived and extorted over the years. This information can then be used to force regulators and legislators to act.

[1] At the time, my reason for the calculation was in response to my then unit manager who suggested we use SMS to replace regular telephone conversations. Responding I'd said that SMS is, at best, a clumsy, slow and an inefficient means of communication but he remained insistent but he then dropped the idea when the costs of SMS were compared to that of Voyager's communications.)

    #########

posted on "SMS costs more than using the Hubble Space Telescope", The Register http://forums.theregister.co.uk/forum/1/2008/05/14/txts_r_v_...

The $5k number is from a WSJ article. http://online.wsj.com/article/SB1000142405297020468320457435...

eli4• 16 years ago

It's a fun post, but "per byte" is a funny way to calculate the costs on a system that cost billions to deploy.

cma• 16 years ago

Yet the marginal cost is supposed to be all that matters in a competitive market. Of course, real competition doesn't work that way at all:

"Charlie Munger: And maybe the cereal makers by and large have learned to be less crazy about fighting for market share—because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it.

In some businesses, the participants behave like a demented Kellogg. In other businesses, they don't. Unfortunately, I do not have a perfect model for predicting how that's going to happen.

For example, if you look around at bottler markets, you'll find many markets where bottlers of Pepsi and Coke both make a lot of money and many others where they destroy most of the profitability of the two franchises. That must get down to the peculiarities of individual adjustment to market capitalism. I think you'd have to know the people involved to fully understand what was happening."

Munger uses a technical form of the word "demented" here: companies are "demented" if they don't collude on price.

mithaler• 16 years ago

One of the reasons why I like Google Voice on Android so much is it handles texting through data, which is free if the plan is unlimited. And that's not even counting the additional benefit of being able to get threaded texting through the web interface.

On another note, here's some cost analysis from 2008 that doesn't appear to have been linked yet unless I missed it: http://gthing.net/the-true-price-of-sms-messages

jdietrich• 16 years ago

There's a vitally important lesson in this for all startups - pricing is about value, not cost.

It might cost a billionth of a cent for a network to handle an SMS, but that's largely irrelevant. If you're running late to meet a friend, ten cents to send a message of apology is a stone cold bargain. If you're a hypersocial teenager, $10 a month is a small price to stay in constant contact with everyone you know. Rates charged for SMS aren't set relative to their cost, but relative to the price of a voice minute - for a short message it is invariably cheaper to text rather than talk, which seems more than fair to most customers.

There's a whole class of high-margin products - SMS, soda, razor blades - that people regard as overpriced when it's pointed out to them, but buy anyway. You could call that a scam, but I just see it as an artifact of the complexities and contradictions of how we think about price and value.

All too often I see startups charging what they think is fair rather than what their target customers are willing to pay. From the perspective of a geek who likes tinkering with technology, any price is too much for something you could hack together in a couple of hours. The average end-user neither knows nor cares whether a piece of software was a trivial bit of scripting or an epic production of Duke Nukem Forever proportions. Their sense of value is calibrated completely differently, based on what they are used to paying for products and services. In many industries, the worst possible mistake is to charge too little. The value of your work bears no correlation to the effort or technical sophistication that went into it. The multi-billion dollar value of SMS is proof positive of that.

morrow• 16 years ago

I agree with you, but I think the "overpriced" label still has real meaning for the high-margin products you mentioned. A company's ability to charge higher margins can be for several reasons, whether they be legitimate competitive advantages: first to market, superior products, better marketing, better image, vertical-integration, etc. Or less legitimate/illegitimate: monopolies, oligopolies, collusion, anti-competitive practices, underpaid labor, etc.

For SMS in particular, the only way they get away with charging so much is consumers don't have much choice in the matter, as all the major US carriers charge for SMS, and the cost is minimal to them for the reasons described in the link. Their justification for doing so then seems to fall on the less legitimate side of the scale. For Coke, since their value is based in some part on their recipe, you could argue their justification for their margins is, at least in part, due to the exclusivity and superiority of the product, rather simply relying on collusion or being a member of an oligopoly.

This isn't to say that companies shouldn't charge whatever the market will pay, but charging high margins for the wrong reasons hurts the brand's image, erodes customer loyalty, and most importantly means they probably aren't innovating -- leading to more problems down the road. Apple's strategy vs. Microsoft's, $17 CD sales vs. $1 digital downloads, and iphone users lamenting being stuck on ATT (and possibly now switching to verizon) are all examples of this having an effect.

That said, I doubt any startups are capable of or willing to rely on illegitimate methods to maintain high margins, I just wanted to argue that there can be negative consequences for existing companies who choose to do so without legitimate justification.

drdaeman• 16 years ago

While price feels tremendous, there are differences with raw GPRS/3G data service, though.

First, SMS is reliable transport. In case message cannot be delivered, message will be hold in SMSC and receivers' HLR would notify SMSC to reattempt the delivery, as fast as recipient is available again.

Second, SMS is globally routeable. You may visit another country on the other side of the planet, and the message will still be delivered to your phone.

And one weird thing comes to my mind. If SMS are really that overpriced, why noone in Telco world announced really cheap SMS plans? They would instantly win huge part of the market. Is that some sort of worldwide cabal?

chadgeidel• 16 years ago

Because of collusion. Why would AT&T and Verizon compete on price in this area when they are both making a mint on this "service"? Why would a "little guy" drop his prices on this high-margin product?

metageek• 16 years ago

>First, SMS is reliable transport.

Not particularly. I've had messages dropped a few times--especially when sending from AT&T to Verizon. I've also had messages delayed a day or more, which was as bad as dropping them.

It's more reliable than some of the old paging systems (some of which didn't do retransmissions), but it's much less reliable than voice, which is its main competitor today.

Why am I required to pay for both text *and* data. Is it a scam?

Related Stories

Why am I required to pay for both text and data. Is it a scam?