Text-Messaging Rates Come Under Scrutiny

http://online.wsj.com/article/SB122100918492217655.html

by raghus • 18 years ago

70 52 18 years ago

online.wsj.com

Protophore2• 18 years ago

I have to agree that current rates are absurd considering the file size and actual cost incurred by the carriers. It would be nice if the government can slap a collusion case on them and make them send a refund to all of their customers and lower the texting rate.

It's interesting that typically as new technologies become more popular and are adopted by more and more people the costs tend to decrease. In this case however the prices have gone up. Seems counter intuitive.

Goronmon• 18 years ago

I think it's just a case of offering a service that costs so little to use. Even the inflated price is an insignificant cost for most people on a per message basis.

MicahWedemeyer• 18 years ago

What is particularly alarming about this industrywide rate increase is that it does not appear to be justified by rising costs in delivering text messages

Yep, I don't really believe that it costs the telcos $1000/MB to handle SMS.

http://mobilejones.com/2007/07/27/you-might-be-paying-1000-p...

kirse• 18 years ago

From what I recall too, the marginal cost of SMS is 0, because text messages are sent on your cell phone's control channel (also why you can't send/receive a call while a text is transferred):

http://mobile.slashdot.org/comments.pl?sid=433536&cid=22...

That said, I can't wait to see the BS they come up for this one.

mdasen• 18 years ago

To be fair, there is overhead to opening a connection. If sending a text was a matter of transmitting 160 bytes, it wouldn't take a second or two to send. Networks now transmit at 600kbps easy and yet my messages don't send in 1/3750th of a second. And that network usage counts. Calculating it based on the number of bytes just seems unfair.

That said, they're still overpriced. They should cost less than a minute of phone conversation. Really, they should cost probably around the equivalent of 1 second of phone conversation. So, you should be able to send 60 messages for, say, 10cents. That would come to $10-11/MB by your logic which is high if you don't count the cost of building/tearing down the connection.

jcromartie2• 18 years ago

What I find to be particularly evil is that most carriers charge you for receiving messages, but you cannot opt-out. That means I have to pay for every stupid stock spam and wrong number, and there is nothing I can do about it. They give some bullshit answers about being able to block certain short numbers by configuring it manually through their website and calling them for a refund... but seriously, who is going to take the time to do that?

ROFISH• 18 years ago

Umm... I have AT&T and I could cancel all text messages from their setup website or by calling customer support. The messages just went into a blackhole and I never saw or paid for anything my friends would send me.

Of course I share unlimited text with a "family" plan that me and 5 friends are on. But the opt-out for texts still exists last I checked.

jonknee• 18 years ago

You can always opt out. Call up your carrier and say you never want to receive a text message and you never will receive a text message.

cstejerean• 18 years ago

I'm guessing not receiving text messages at all is also not an option for some people. Being able to whitelist numbers from which you can receive messages would be much better.

procrastitron• 18 years ago

Up until recently T-Mobile refused to let people opt-out of receiving text messages, regardless of what steps you were willing to go through. The only reason they changed their policy was because of a class-action lawsuit that was filed against them.

snewe• 18 years ago

Interesting:

"Mr. Kohl's letter noted that each company appears to have changed text-messaging rates at nearly the same time, with identical prices. 'This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace,' he said."

ardit332• 18 years ago

Two words: Tacit Collusion

And to all those libertarians here, no just market forces wont fix it, as in this case they are clearly broken. As long as the carriers have a lock on the data on your phone, and what applications you use on your phone.

This is a classic examples where some gov. regulation is required, by: 1. Forcing prices down. 2. Or forcing carriers to allow users to use their prefered SMS provider

EU has been using option 1., where it recently forced carriers to put caps on insanely "roaming data" pricing. (or better rip-off).

The internet equivalent of this would be that your ISP forces you to use only one kind of push email that they provide. Kinda outrageous, no?

fallentimes4• 18 years ago

I think the internet equivalent of the wireless industry as a whole (instead of just this situation, which you noted) would be the following:

1. Misleading pricing that never matches the advertised rates

2. Unexplained and unrefunded outages

3. Misleading services that have built in caps that aren't explicitly stated in company literature or advertising

4. For consumers, only able to choose between 1-4 providers, based on your location

5. Normal hold times of 30 to 60 minutes

Oh wait, that's how the internet is if you're stuck with Comcast, RCN, et al in the States. It's almost uncanny how much the internet providers, wireless providers and the RIAA/Big Labels have in common including their share prices.

time_management2• 18 years ago

Automatic bill payment is a great thing, especially for people who are busy and would miss payments if it didn't exist. However, it unfortunately allows companies to get away with a lot of crap, given that the majority of customers are no longer reading monthly bills and don't notice the fluctuations.

mseebach2• 18 years ago

The market forces work just fine. It's just that there isn't a free market. If every mom and pop could set up a cellular service with a reasonable investment, there'd be a bunch of community providers, and prices would go down - just as we've been seeing with internet connections.

But the spectrum is intensely regulated by authorities, frequencies are not just expensive, they are usually not available at all(:1) - because the authorities want to protect the investment of the early providers. Effectively, they made a deal that created a government sponsored monopoly, which, even if you can privately buy a share in it, is the opposite of free markets.

1: This is true for most of Europe, can't say for the US.

biohacker422• 18 years ago

Three words: High entry cost.

As a libertarian, I blame regulation for that.

ardit332• 18 years ago

That's trivializing a not so simple problem. In a pure market, with no regulation whatsover, anybody could just stick an high power antena on it's roof, and bam, they have their own network.

But, also spectrum is finite, especially on what we can use with the current technologies. If everybody puts it's own high powered antenas, it would just make everbody's service unsuable. And taking out your competitor, ment to just place a bigger antena.

Also, high costs and barriers of entry don't just come b/c regulation. There is huge capital costs to build a infrastructure (towers, technology, etc.) Look at Wimax, (which has less regulations than cellular telephone) where two companies had to merge in order to make it feasable.

What I would like, is option 2. The goverment makes sure there is fair competition for services, and where a carrier shouldn't lock your devices, and not allow you have your own apps and services in your phone.

If you look a classical use of goverment regulation: Road traffic, traffic lights, rules etc. In the early days of the car, none existed, and it used to be every man for each own. Result was lots of accidents, traffic jams (deadlocks everywhere), making cities almost too chaotic. People driving without knowing how to really drive (accident rates where very high). Regulation brought some control to the chaos, where it made roads usable, traffic flowing, and make sure only people that know how to drive, drove.

But, regulation can also go too far, but making things expensive, excessive tickets that serve only to make revenue to cities and states. etc.

And yes, I have real life experience with this. I come from an ex-communist country, where twice in my life time goverment basically ceased to exist (once in 90-92, and once in 97). It was everybody on it's own, and it wasn't pretty.

I remember my favorite TV channel went off air, b/c one their competitors decided to erect a bigger antena, and use the same band.

Overegulation is bad, but under regulation is surely aweful. And I lived through it. Most of you probably just dream about it, and think it is cool, but it is not.

Xichekolas• 18 years ago

As a quasi-libertarian, I blame the billions of dollars needed for base station hardware, fiber optic networks, and a nationwide salesforce for the... uh... high entry cost.

90% of people^ won't use a cell carrier that doesn't have nationwide coverage, so it's not like you can build these things on a shoestring. Witness the long slow rise of Cricket Wireless (http://www.mycricket.com), even though it offers flat rates without contracts.

^ Yes, I made up this number, but I'm sure it's not far off.

lallysingh• 18 years ago

Because transmission and switching equipment would be cheap?

kingkongrevenge4• 18 years ago

What market forces? Telecoms in the US comes in just behind medicine as the most heavily regulated and protected business.

kingkongrevenge4• 18 years ago

Also, I just learned that 46% of a cell phone bill is taxes.

jmatt2• 18 years ago

Ok I am admittedly one of the many libertarians that use NewsYC. I think ardit33 is being a little bit unfair. Not all libertarians necessarily want 8 year old crack dealers and the right to individually own nuclear weapons. There is something in between.

There was a similar problem back in the early-mid 1990s with internet and broadband. The market of the time often charged per minute or per data transfered. Especially when stepping up to ISDN or a T1. Everyone said this was crazy and a total rip off. And that without government intervention the phone companies would just continue to rip everyone off forever. Then cable came along and provided some serious competition and now everything is changed. (Though if uptime is THAT important customers can still pay per bandwidth on a T1...)

Internet worked itself out with the same high entry costs and regulation. Wireless will also work itself out.

Government intervention may speed up the process, in this case, but that is (as others have pointed out) only because there is such regulation and high entry costs.

I'm all for the senate putting some pressure on the industry. They should bring the issue to the public. But I don't know if this necessarily requires additional regulation.

As for the phone companies screwing the customers - they will get what's coming. Just wait for there to be another option. Everyone will flood to this alternative and the phone companies will immediately adjust their business model and pricing to compete. And I imagine most people will be so bitter they'll abandon the telcos over issues such as this.

anewaccountname• 18 years ago

Talk all about the regulation and leave out the massive subsidies that were given to broadband providers to build out their networks...

mseebach2• 18 years ago

> Just wait for there to be another option. Everyone will flood to this alternative

VoIP over Wimax and Wifi, with GSM as backup .. IM replacing SMS. The future is almost here, and I think a platform like Android will help it along.

fallentimes4• 18 years ago

I wish there was a carrier that advertised their real rates for every aspect of their plan instead of their bullshit rates.

Real rates include those ridiculous fees they add on at the very end each month - and no those fancy sounding names aren't all government taxes and ridiculousness - just clever suit trickery. Excluding sales tax, grocery stores aren't allowed to lie about their prices, why are cell phone carriers?

I'd pay a premium and tell my friends.

kqr2• 18 years ago

http://www.consumer.att.com/ccrf/

My favorite bogus "fee" is AT&T's "Cost recovery fee". In their explanation, they explicity state that :

This fee is not a tax or charge required by the government.

"Cost recovery" used to be known as the "cost of doing business" and was included in the monthly price.

This is just a deceptive way to add a few extra dollars without raising the nominal price.

joshwa• 18 years ago

Doesn't that count as 'bait-and-switch?'

dkokelley• 18 years ago

"This fee helps AT&T recover costs associated with providing state-to-state and international long distance service, including expenses for national regulatory fees and programs, as well as connection and account servicing charges..."

It's a regulatory fee that AT&T gets hit with, so they pass it on to customers. Other than the fact that I'd prefer they absorb the cost, I don't see how it's unethical in any way.

fallentimes4• 18 years ago

Mooooooooonooopoly. Actually colluding oligopoly, but that's not as fun to say.

antirez• 18 years ago

what's the cost in your country? In Italy it's more or less 10 cents of euro for SMS sent. To receive an SMS is of course free.

blang• 18 years ago

0.20 USD send and receive, with no data plan.

shiranaihito• 18 years ago

It's around $0.11 for sending a text message in Finland.

There's no charge for receiving one, because that would be just silly.

Finally I found something that's cheaper here than in America! Sure compensates for the cars you get at 1/3 of the price over here..

Out of curiosity, are we talking about text messages because of the iPhone 3G? :)

time_management2• 18 years ago

The obvious motive here is that text messages compete with (also absurdly overpriced) phone calls.

__• 18 years ago

I wonder how much text messaging costs in China, where $0.20 USD is a larger fraction of the average person's income. I suspect it's much cheaper, and yet the companies presumably aren't losing money on it.

Protophore2• 18 years ago

"In China, text messages cost an average of 1.3 cents to send"

Pulled from: http://www.marketoracle.co.uk/Article419.html

I thought this line was a bit staggering "...the average cost of a text message is $0.10. Last year, mobile telephone operators pulled in $50 billion in revenues just from text messaging."

$50 billion, that's a nice racket!

ggrot• 18 years ago

While I agree text message rates are absurd, we have an economy in shambles, a rapidly worsening energy issue, a very expensive war, and a large hadron collider defense system to build. Senator, please tell me you aren't wasting much of your time on text messaging rates.

khafra• 18 years ago

So, you're saying Congress should fix the SMS cost at the current rate, but tax carriers 95% of their text message revenue so they only make a reasonable profit? Not a bad idea; that might go a long way toward balancing the budget.

gills• 18 years ago

Allowing government to dictate an enterprise's pricing structure or profit margin is a dangerous road to walk. Government should really only bust fraud and handle arbitration, to keep markets competitive.

Anyway, there's no source of money in the world that Congress won't overspend...

steveplace• 18 years ago

Dr Nigel Bannister’s calculations were used for the Channel 4 Dispatches programme "The Mobile Phone Rip-Off".

He worked out the cost of obtaining a megabyte of data from Hubble and compared that with the 5p cost of sending a text.

He said: "The bottom line is texting is at least 4 times more expensive than transmitting data from Hubble, and is likely to be substantially more than that.

The maximum size for a text message is 160 characters, which takes 140 bytes because there are only 7 bits per character in the text messaging system, and we assume the average price for a text message is 5p. There are 1,048,576 bytes in a megabyte, so that's 1 million/140 = 7490 text messages to transmit one megabyte. At 5p each, that's £374.49 per MB - or about 4.4 times more expensive than the ‘most pessimistic’ estimate for Hubble Space Telescope transmission costs."

jeffy• 18 years ago

Text messages are the new long distance...

Text-Messaging Rates Come Under Scrutiny

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