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Telcos charge more to send a text next door than cost of sending data from Mars (falkvinge.net)
51 points by Cbasedlifeform on Nov 29, 2012 | hide | past | web | favorite | 45 comments

This shows up every once in a while in rants against telcos but "price per kB of text message" is a completely pointless metric because no one really cares about it.

On one side the company has to operate the network, pay the employees and still generate some profit, so they care about total ROI. On the other, the customer wants to communicate, which includes text messages, voice and data transmission, so they care about the price of that bundle which often just includes unlimited texts.

How many people really want the services they use to be priced like AWS and pay separately a few cents for each time they use any tiny component? And is it really a market failure when they're not billed like that or can you Google "market failure"?

Why is it then that the US cellular providers are the only ones that charge for incoming texts? This doesn't seem like a case where if they didn't charge for it, their entire business model would collapse.

At least for US cellular providers, it's very clearly a tactic to push people towards paying monthly for 'unlimited text messaging' by attempting to make the per-message pricing prohibitively expensive. The "illusion of options" so to speak. Providing you with multiple options, but making sure that only one of the options makes economic sense (ensuring that the majority of people choose it).

The most expensive resource for a cellular provider is RF spectrum. You use that up when you receive a call or text too, so it might actually make more sense to charge for both, but consumers are so used to only paying for outgoing calls that they don't care.

Text messages are piggy-backed onto status/control messages that would be sent regardless, and the slot length is fixed so a shorter / longer message does not change the bandwidth requirement at all.

This is the origin of the limited length of these messages.

You need to get an active channel with the network, which means to tell a cell that you want to talk to it, have it allocate resources for you, get the SMS and send an ACK.

It's true that if you already have a data channel active (e.g. you're talking to someone) then you piggy-back the SMS and ACK on it (with audible degradation in audio quality in 2g connections), but that isn't the case most of the time.

> Why is it then that the US cellular providers are the only ones that charge for incoming texts?

Why would anyone care how their bill is sliced? Why do you care about anything beyond the total cost of owning a (smart)phone per month or year?

Incoming texts, outgoing texts, network upkeep... it's a meaningless line on the bill. Sure, some configurations will be a little better for you, some will be a little better for someone else depending on your usage pattern but in the end telcos have to pay their own bills, and have something on top for their investors, so they'll charge you somehow for something.

It doesn't help when the telcos are dishonest about their pricing structures/rules. E.g. claiming that the early termination fees were 'to recover the subsidized cost of the phone' when the ETFs were a flat fee (no matter if you terminated the contract when it was 10% complete or 90% complete).

You can say that it's 'their prerogative' to charge a fee for breaking the contract, and that's fine[1]. It's when they try to twist the truth to make it not sound so harsh that it really irks me.

[1] The contracts also don't have to be so one-sided. If I need to be penalized for early termination of the contract, why isn't the telco also penalized if they terminate the contract early? AFAIK, there is something in the law about contracts needing to have equal consideration for both sides. If a contract is too one-sided, then it (or at least parts it) can be ruled invalid.

It matters because not all users use all the services.

The ones who use the services that bear the burden of 'paying the bills for the carriers' are the ones who are subsidizing other services for you.

>How many people really want the services they use to be priced like AWS and pay separately a few cents for each time they use any tiny component?

Please correct me if I'm reading this incorrectly, but you're suggesting that most people don't want to pay for exactly how much they use a service?

That's exactly what I'm saying. Most people, regardless of what they claim, want to buy the feeling of safety that comes with the assurance that they'll be able to use the service when they need to. Obviously, for as little as possible.

That's the secret of those "unlimited", and heavily oversubscribed, plans, hosting services, all you can eat buffets, medical insurance that includes a subscription to $8/mo birth-control pills... All those companies capitalize on "being there for you".

And yet nobody seems to complain that all of our other utilities are charged based on usage: electricity, gas, water, landline phones (remember those?).

I'm aware that it's a lot harder to judge data use than it is for water, so there's a reasonable objection to usage-based billing for data services. That being said, the only reason I've gone out of my way to keep my grandfathered unlimited cell phone data is because the blocks of pre-metered data a) are hugely overpriced, b) excessively penalized for overages, c) not tiered in a way that's relevant to real-world use, and d) seem to increase in cost over time rather than decrease, despite plummeting costs for the provider (while usage patterns increase)

The unlimited psychology is utter nonsense. None of these services[1] cut you off completely for going over your allotment, they just charge punitive rates. They're still "there for you", as long as you're ok getting reamed in the wallet.

[1] except prepaid phone minutes, but that's because there's no card on file to charge for overages.

I disagree.

The thing that "unlimited" plans help you cope with are the sticker shock.

Oversubcribed services, such as data plans, count on someone not using their data that they're paying for. So if you use 200 MB of your 2GB plan, you paid for someone else's data.

If the carriers start charging per MB what they deem profitable, the user who doesn't use as much bandwidth will save money while the one who uses more will have to pay more.

I understand carriers need a certain guarantee on sales figures to continue investing in infrastructure/upgrades etc but there are other services that have worked great without this model.

Then you also have your QoS argument. Why should I pay the same amount for data if I have to put up with slow page loads on my smartphone because ten other people around me are streaming Netflix?

So basically, this is just marketing bullshit. To abstract away the real cost of the service so the sticker shock doesn't put you off.

Also, the pay in advance model urges you to use a service more, where as pay as you use model promotes need based usage. This will perhaps, to some degree, promote less 'wastage' for any service as well. Ever had to 'burn off' your cell phone minutes because, 'I've paid for it anyway.'

I know I would save a ton of money if they just charged me for what I used even if they raised their rates per unit for any given service.

The argument for unlimited is to remove marginal tension which is a barrier to increased usage. If everybody thinks "but won't that be expensive!?" before installing an app or watching a video or clicking a link, adoption growth slows down.

This is obviously directly in the interest of telcos - the more people signing up to "unlimited" dataplans, the better for them. Especially if they're light users. But it's also good for the rest of us, as it creates pressure to build out capacity.

Incidentally, I'm on a metered plan. My provider analyses my usage each month and advises me on the best "bundle" to get. One month, the recommendation was "none at all" - paying for my data metered would be cheaper than the cheapest bundle (I spend most of my time and data at home or in offices with wifi). This is GiffGaff (UK), highly recommended.

> On one side the company has to operate the network, pay the employees and still generate some profit, so they care about total ROI.

While broadband access via DSL is among the cheapest in France, the historical three physical mobile network owners (SFR, Orange and Bouygues) were (and still are) offering obscure, ridiculously contrived and absurdly priced two year contracts going north of 50€ with 2 hours talk, 1GB data from the phone, unlimited SMS and a free useless option[0], to which you're supposed to add a full 25€ just for tethering. That's after having been struck by justice's mighty hammer for secretly coordinating prices.

Then about a year ago, Free Mobile entered the mobile market in France. For a 20€/mo contract you can bail out of anytime, you get unlimited voice, SMS, MMS and HSPA+ (there's virtually no LTE deployed here yet anyway) usable as tethering or with VoIP, downgraded to slower speed past the 3GB/mo barrier. Basically a "just makes sense" contract from a data and a consumer point of view. Earth shaking prices all the while they're investing in infrastructure to build their own network, while at the same time paying a MVNO deal to Orange as a fallback in not yet covered areas.

Public reaction from the old guard was ranging from outraged ("they'll destroy the whole market! people will lose their work! frogs will pour down the sky!") to shameless excuses ("no, we did not rip you off for years, we promise!") to bewildered ("how the hell can they be so cheap?") to FUD ("you'll see! it's just a marketing ploy to gather critical mass! prices will rise!") to speechless ("").

Curiously, almost 12 month later, all prices have been falling down. The closest to Free right now is Sosh, a MVNO operated by Orange, which started to offer similar contracts. Still subscribable only online (so John Doe really has no clue about it when he goes shopping around the mall, which is what the bulk of customers do) and their marketing used to be misleading in various areas, like they were offering only HSDPA. Just checked and things changed a bit as they now offer 2GB HSDPA for 20€ or 2GB HSPA+ for 25€. Not quite that but getting there.

So well, there's ROI, and there's maximizing profits.

[0]: useless options as in:

- double hours for free between 4PM and 6PM on raising moon days and 2AM to 7AM otherwise.

- TV on the phone, via an app that does not work via WiFi (you know, for authentication), offers limited channels at crap quality and constantly tries to upsell you more channels.

- GPS navigation on the phone, via a disaster of an app. Think Apple Maps is a failure? You ain't seen nothing.

- free youtube and social networks access! OMG lolzor! but through their custom app. With content ads.

- five music tracks per month, for free, WMA DRMized via some proprietary auth+download platform of course. Super useful when you bought an iPhone from them with the same contract.

- football (== soccer) SMS alerts on goals! Yay, like people interested in this are not watching the games live already.

... a completely pointless metric because no one really cares about it

Bullshit. I care that they charge for text messages at all. I want my phone service to be mere plumbing and leave the services on the phone to me and third parties. They should only charge for raw data usage, and that means that text messaging should be virtually free.

You forgot jet fuel. It's skyrocketing these days.

Pricing is based on what people are willing to pay (value to consumer) and not at all on what the service might cost to provide. Obviously, competition is a factor too.

For light users, sending a hundred SMSs a month probably does provide $5 worth of value. For heavy users there are various plans and bundles which will let you send lots rather more cheaply.

I think the way SMS is priced is more of an indicator of how people can ignore small transaction costs when there is zero payment friction. SMS is probably the most successful micropayment system around. Although of course, all the payments go to the telco ;)

I dont think so. Hardly anyone in the US pays for texts a la carte, and when they do, they went over their contract allotment and are pissed about it. I don't think hitting people with an unexpected $300 bill at the end of the month because they didn't realize they could have spent $5 more for unlimited plans is a great model for micropayments.

I always wondered how people managed to send, on average, 1 SMS every 4 minutes, for 12 hours a day, every day. I'm not sure I could do that even if someone paid me to.

The surprise $300 bills you are talking about, they're teenagers right?

Because a lot of these texts are "yes", "no", "lol", "hi", etc. They might send 10 such texts in a 30 second period.

Yeah I see what you and mattmaroon mean. Thanks. I used SMS a fair bit when it was 20c/NZ a message - but that never seemed to be a big deal for anyone.

Interestingly, although running out of prepaid credit was highly inconvenient, it never really lead to people trying to conserve TXTs. As of today I am slightly ashamed to admit that I actually have no idea what an SMS costs me...

Back in the day had a prepaid phone that cost 25c/US to send and receive. I don't miss it.

25¢ to receive a message is not something I'm willing to pay; it's something I literally have no way out of if I want a cell phone and don't want to cough up even more for unlimited SMS. AFAIK there's no way to just turn off SMS entirely, which I'd be more than happy to do as I've completely replaced it with various data-based services that I'm also paying for in my monthly bill (email, IM, iMessage, google voice, etc.)

Even if I am able to disable SMS completely (without screwing up the parts of my plan that I actually like, at least), it's problematic because of the handful of people that do text me, they'd have no way of knowing that I never got the message (unless the telco would automatically respond on my behalf saying that number can't receive texts; I doubt this is the case). Some SMS-based services don't work with Google Voice and MMS is completely unsupported by it, and there's absolutely no fallback let alone a graceful one.

These rants against text message pricing pop up from time to time and always neglect one fact: by volume, almost nobody pays 5 cents a text. Most text messages are sent by someone who just pays $10 per month or something like that for unlimited texts, then sends thousands of them.

source or at least some reasonable napkin calculation?

The average teenager alone sends over 3000 texts per month. At 5 cents per, that's $150 for SMS alone. Think the average teenager spends $150/mo on SMS? Or pays the $10 fee for unlimited?

the problem with this argument is that there is not an unlimited capacity for telcos to transmit these messages. if 1,000,000 people decided they needed to send a message to mars in the next 6 hours, you can bet your ass those messages would be $25.00 each, or more.

it's also not fair to simply compare the amount of data. when you send a message you're borrowing a channel / band. the transmission tech and spectrum has a certain capacity, that's why it gets auctioned and licensed for big bucks. i would also not be surprised if telcos spent 400 million maintaining, updating and building out the infrastructure. btw, someone correct me if i'm wrong here.

i'm not defending the fact that text messages are extortion in every sense of the word and the reality that they're more expensive than a real-time voice call is the part that's really hard to grasp.

> the problem with this argument is that there is not an unlimited capacity for telcos to transmit these messages.

No, the problem is that there is a fixed amount of bandwidth to each phone used for status messages anyway so even if you wanted to get unlimited capacity to a device you could not. It's not as if these text messages are sent in a stream of their own, they simply ride along on slots already allocated to your device.

From a telco perspective they're 100% free.

Average text messages per user are down, for the first time ever. See http://bits.blogs.nytimes.com/2012/11/12/text-messaging-decl... .

The article blames Facebook and Apple's iMessage, but the price of text messages has to be a factor as well. On AT&T, it's $20 a month for unlimited messages, or 20 cents per, in and out.

The 20 cents per incoming message is the bogus part. Especially when you get spammed, and have to pay to receive an unsolicited advertisement (and the fact that telcos don't do much to curb this because they just pull in the money off of it).

A friend of mine works in a company where the managers demand every nagios alert gets SMS'd, no matter how minor. They literally receive multiple hundreds of SMSs every week. Expanding into the US, the tech in the SF office had to upgrade his cell plan. Later in his first week, he had to upgrade it again. Then again. Ops keep telling management about just how bad this policy is, but management like have a paper-trail for blamestorming.

Tired of cost analyses that completely ignore price of wages and maintenance. Does NASA have to staff hundreds if not thousands of little shops in order to keep its product moving?

Then there's good old confirmation bias. "Hey, let's assume the mars rover was constantly transmitting at the maximum rate the entire time!" - never mind finding out the actual number, just assume that the maximum was the average. Yeah, that works.

Not to mention "Only next door!!!!!" when the same prices apply to "The other side of the continent". If you're really feeling ripped off about sending short messages to the people next door, just open your window and shout instead.

Oh, then we'll also say "transfer across the wire is only 25c!" when SMSes are definitively not meant for transfer only across the wire.

Then we'll italicise words like personal insult, which is egregiously amateurish.

I wonder if the author would go to a lawyer to handle the paperwork around a housing purchase, and the complain that he has to pay far more than the simple costs to lodge the papers. "What? $1k? But lodging the papers only costs $50, I looked it up!"

I don't see how this is a "failure of the free market". Text messaging prices are fixed because one can't freely move their plan and hardware from telco to telco when one gets cheaper or better.

You can call it what you want but one thing is for sure. These prices demonstrate that the competition on the US telecom market is limited. In Denmark you only pay for out going sms (typically around 5 cent) and you can get a plan with unlimited sms, 7 hours of calls and 2 GB of data for 20 $ a month. This is because we have fierce competition on our telecom market as a result of the old monopoly company being forced by government to lease their network to upstarts at fair rates.

Theres no cost to send a text[1], because they are sent thru overhead comms channels built into the network standard.

> Pricing of texts == jedi mindtrick


[1] to the carriers; no bandwidth is used.

My text messages in Australia are still $0.25, although thats probably because of the "cap value" plans we have.

Lets not get started on mobile "data" charges.

These plans make it impossible to compare between the companies -- I hate them! $30 gets you $200 credit with one but $300 with another, the first might have $0.25 texts, the second $0.20, the first might have a flagfall, the second might not. I wish the ACCC would make such things illegal.

Being in Australia I should mention that I don't pay for text on my $30 a month plan :)

On most of our plans, you will start paying per-SMS once you send a few hundred of them.

> I don't pay for text

> $30 a month plan

Seems like you are already paying for text :)

Maybe he/she meant to say "I don't pay per text," or maybe he/she got a "free unlimited texts" deal, where they are just paying for the other services.

If you had to pay to get something for free, then you didn't get it for free...

But it doesn't go straight next door. It goes to a cell tower and then is pinged back again, possibly through other cell towers if the person is on another network.

Don't get me wrong, SMS prices are insane. But this is a bad example.

The post measures $/kB, not $/(kB⋅m).

In which case the title is entirely irrelevant, no?

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