Shocker! Carriers are Profiting Handsomely from Texting
By Ed Oswald | Monday, December 29, 2008 at 10:00 am
Here’s one that isn’t surprising to me in the least: a New York Times investigation into text messaging indicates that it costs carriers virtually nothing to provide the service. This means those extra fees you pay just for the privilege of texting are essentially pure profit for these folks.
Even further, text messaging fees are the subject of a new Congressional inquiry that is looking into why text messaging fees have doubled over the past few years.
As late as 2005 it only cost 10 cents for a user to send a text message. Then over the next three years all carriers increased the cost to 20 cents, without much of an explanation at all.
Sen. Herbert Kohl (D-Wis.) is the chairman of the Senate Antitrust Subcommittee. Kohl has asked the big four carriers to justify the costs of text messaging to consumers.
Their responses? How their pricing plans work, but not a justification of their charges to actually provide the service. Obviously their stonewalling isn’t working: no less than 20 lawsuits are currently in progress around the country over text messaging fees.
Really, it costs these carriers nothing to transmit these messages, because they are so small. Furthermore, these come at no costs to degradation of service: texts travel on what is called a “control channel.” This is the same part of the network that instructs a tower how to handle a call, and is seperate from the rest of the network altogether.
So why the exhorbitant fees? That’s a good question. There was a point in time not so long ago when carriers (T-Mobile notably) offered texting as part of their plans.. and a good deal of them too. Now, they see that we’re all addicted to it, and plan to use that to their advantage and squeeze out every last penny that they can.
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December 29th, 2008 at 10:27 am
What’s most frustrating isn’t the impact to the individual, but the aggregate impact of overcharging. Fewer people adopt. People that do adopt adopt less. It hurts development of the SMS channel, and development of businesses that use the SMS channel. Ultimately, it unnecessarily limits development of technology and society. Overcharging for texts is like overcharging for gas. A field often misunderstood, but one that almost everybody uses or capable of using. Frustrating and wrong to overcharge…
December 29th, 2008 at 12:10 pm
Assuming there is no price-fixing going on, why shouldn’t the carriers be able to charge whatever the traffic will bear? The price of a product usually reflects the value of the product at least as much as it does the cost to produce the product.
December 29th, 2008 at 5:47 pm
I commented on this story yesterday here:
http://amateureconblog.blogspot.com/2008/12/cretin-or-crook-sen-herb-kohl-of.html
January 6th, 2009 at 3:52 pm
William says:
“Assuming there is no price-fixing going on, why shouldn’t the carriers be able to charge whatever the traffic will bear?”
Because IT’S NOT A FREE MARKET. If I don’t like what my cellular carrier charges for text messaging, what can I do about it? I can’t change carriers because I’m locked into a two-year contract…and even if I weren’t, my friends and colleagues use the same service provider and benefit from unlimited mobile-to-mobile calls, so it’s highly impractical for me to switch to another carrier. And I’d have to get a different phone, too.
Furthermore, it wouldn’t make any difference anyway because ALL the carriers charge the same for text messages. Speaking of which, there are only four carriers in the market now, down from six a few years ago.
This is a perfect example of how inadequate competition hurts the consumer.
March 27th, 2009 at 10:30 pm
I work in the cell phone industry myself. It’s not a non-profit orginization, so why do we expect it to be free? If you want to use texting, then you pay the price. If you don’t like it, don’t text! That simple! And think of all the other costs it takes to run a cell phone company. They don’t profit in all areas. In fact, texting is one of the only areas they do profit! So take away the profit, and you will be stuck at home dialing from a landline.