
Why am I required to pay for both text *and* data. Is it a scam? - rkwz
http://www.reddit.com/r/technology/comments/f1z9g/why_am_i_required_to_pay_for_both_text_and_data/
======
grinich
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.

    
    
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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.)

    
    
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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_...](http://forums.theregister.co.uk/forum/1/2008/05/14/txts_r_v_pricey/#c_223288)

The $5k number is from a WSJ article.
[http://online.wsj.com/article/SB1000142405297020468320457435...](http://online.wsj.com/article/SB10001424052970204683204574358552882901262.html?mod=rss_opinion_main#printMode)

~~~
eli
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
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.

------
ugh
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.

~~~
jarek
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.

~~~
dedward
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.

~~~
jarek
Technically speaking, I believe there is an appeals process you can follow if
you believe you are received unwanted messages. That makes it only slightly
less of a crock, and I think applies mostly to actual spam rather than
unwanted messages from real people.

As for the CRTC, well, good luck to all of us.

------
jdietrich
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
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.

------
simias
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.

------
atgm
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...

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

~~~
stcredzero
What you pay per megabyte for an SMS is ludicrous.

~~~
ugh
Sure, but how does that make it a scam?

Prices for text messages are well known and there are plenty alternatives
available. I’m quite happy that those who frequently write text messages
subsidize me. (Competition between carriers is relatively brutal – at least in
Germany – so I’m pretty sure that I’m not overcharged.)

Were SMS to use email I would see a pretty clear net neutrality problem (still
no scam) but if you are using GSM, text messages are technologically very much
unlike email.

~~~
isleyaardvark
> Prices for text messages are well known and there are plenty alternatives
> available.

Maybe in Germany, but not in America. We're calling it a scam because we think
it is an example of price-fixing, which is anti-competitive, anti-free market
behavior. (<http://www.justice.gov/atr/public/guidelines/211578.htm>)

------
iwwr
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_reala
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.

~~~
iwwr
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?

~~~
robin_reala
I’ve just had a look around the providers in the UK - the most basic talk
plans include at least 100 txts a month, but go one step up and you generally
get unlimited. As for MMS, everyone I know just uploads photos to Facebook
instead.

Email just doesn’t fit a usecase for my friends for the most part (and I’m
talking as a 30-something, not a teenager). For short messages there’s a txt,
for short broadcast and medium messages there’s Facebook and for long messages
generally you ring. There’s obviously still a use for email in the workplace,
but it’s confined to there.

------
jawee
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.

~~~
dedward
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

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

~~~
ZeroGravitas
Because it's easier than adding value.

~~~
parfe
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.

~~~
exit
and telephone companies can't take credit for providing that value. it's an
inevitable and virtually costless feature of the infrastructure.

if you monopolized the worlds supply of air, you can't claim to provide value
after charging people to breath.

------
biafra
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.

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eli
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.

~~~
brudgers
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.

~~~
eli
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.

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drdaeman
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?

~~~
metageek
> _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.

------
mithaler
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>

------
piers
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>

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

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

