Much Ado About Nothing In Accusations Over Text Message Pricing
from the focus,-people,-focus dept
I'm hardly a mobile operator apologist, but the NY Times' Randall Stross is trying to make a pretty tiny molehill into a mountain by picking up on that old, dead story suggesting that mobile operators are somehow ripping users off with SMS text messaging pricing. As was noted when Senator Herb Kohl first tried to make an issue out of this, per message pricing is fairly meaningless, since most users of text messaging subscribe to bulk plans or even unlimited plans. Besides, if pricing really were a problem, then people wouldn't be text messaging so much. The fact that they're using it so much, suggests there really isn't that much of a problem with the pricing. Stross tries to focus on the actual "cost" to the carriers for sending a text message, which is tiny, but that, again, is rather meaningless. A year ago, Tom Lee pointed out just how silly such an argument is for text messaging. As mobile phones grow more and more sophisticated, if SMS pricing really is a problem, alternatives (such as mobile instant messaging) will grow as well, and SMS providers will need to adjust their pricing. If, however, consumers don't have a problem with the current system (and all indications are that they don't), then why is the NY Times even bothering?
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Filed Under: cost, text messages
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The flip side.
You make it sound like the consumer has a choice.
"Take plan A for $5/mo or plan B for .20/message."
(hidden text: go over plan A and we'll fuck you over for .40/message)
Wow, the "choice" is so obvious.
Especially when people like me, who don't text, are forced into this $5/mo text plan because it's "attached" to the data plan and a text plan has to be chosen. How quaint "none" isn't a damn option.
This molehill needs to be addressed. While they're at it, investigate those damn fees as well.
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Let the market decide
Back to Mike's point, if there is a problem with pricing, there is enough competition that market forces will reduce prices to a point where companies will be vying for market share, and therefore be forced to trim margins as close as possible.
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As you point out, other technologies will make the issue irrelevant, but not without the mobile operators fighting it every step of the way, at our expense.
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Re: The flip side.
Meanwhile, SMS should be free. It's an old service and well overcharged on price. It's just the carriers don't want to be another step closer to dumb pipes. Same thing as how android is pushing phones so that the carriers become less relevant as the "mobile web" becomes more capable. Once 4G arrives, mobile carriers are going to be squealing quite a bit about the data plan usage and tethering, so that will be fun in its own way.
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High prices?
Here in Denmark the cheapest plans costs .02$ per message, or 15$ per month for unlimited SMS plans. And this is with no extra fees whatsoever.
(Normal prices for calling is 0.19 cents per second, and no connection fee).
It this really cheaper than in USA?
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I don't want a text plan
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I think you miss part of the complaints with this statement...At 20 cents per message sent or received, it doesn't take much at all to get to the $5/month "bulk" plan. I rarely text at all and usually only if someone texts me first. Even so, at the current rates I am on the boarder of subscribing to the $5/month plan because the rates for individual messages is so high. That is what the carriers want, the guaranteed $5 more a month from people who rarely text at all so I think the complaints about individual messages rates are warranted.
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Pakistan
0.00089341 US$
Thats WAAAAAAAYYYYY lower than ur prices ....
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It's a tax
It's attached to many data plans (pay for it if you use it or not).
It's also unable to be turned off on most phone plans. So if someone texts you, you pay regardless. Even spam. Yes you can can report the spam and they will refund you, but good luck getting through to someone at your phone company who is "authorized" to do that. Does anyone really think phone companies don't love spam?
The excessive overage fees are insane. $0.40/message is just trouble.
Then look at some of the newer phones that don't even have a UI for text message counts. You have to call a special number and get the total if your not keeping track yourself. The iPhone falls into this category. Of course this isn't an accidental oversight.
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Re: Pakistan
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Re: Re: Pakistan
Anyways I do see Mikes point in-so-far-as its about choice. There are free alternatives like using the internet to send out texts (though that is just one way really, but it is an alternative) or for those with data plans, than mobile IMs work better in some cases.
If you want the ability enough, you pay, same as any other service by any other provider. Its not forced on you unless you sign a contract with a tying clause, and even then, you willingly signed, so you weren't forced in that respect either. Your only hope there is that some state AG looking to make a name for himself takes on the big 4 for illegal tying agreements...
You can do very well without SMS, I do even at Sprints .35$ a txt rate with no SMS package. I just tell people to not txt me, and suprise suprise, they call me instead ;)
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NY Times
I ask myself that question when ever anyone quotes one of their "news" stories.
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Re: Pakistan
Tell me, what's a REALLY REALLY fast internet connection cost there?
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Two Different Networks
In short cell carriers are practicing egregious price gouging by taking advantage of a feature built-in to their existing services. The difference in equipment/bandwidth costs for them whether many or few users use TXT messaging is virtually nil, if any exists at all.
All that being said, they've found a convenient way to charge circa $20 a month for something that costs them almost nothing extra, if anything, allowing for a huge profit margin. They'll do it until something forces them to stop.
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Yet more evidence americans are getting ripped off.
In most other countries you pay for outgoing only, voice and text. Only incoming you pay for is premium texting services like weather/stock updates, aka one where there is a 3rd party charging for the service. The whole US thing of charging the sender and receiver for same message/call would be viewed as double dipping and people would not stand for it
If i was american would be more pissed about that than the actual cost of texting, deal with fact you are getting ripped off twice before you argue about the actual ripp off costs individually
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Pricing
The problem is why is the cost going up to 20 cents per message (in or out)why. And why is the overage cost going to 40 cents per message.
Because of this, I have stopped texting due to being afraid of going over the limits... The 200 plan should really say. Plan on sending only 100 text messages with replies before we rape you.
I would like to know why it is 2 cents per sms in europe. The technology is the same, so why are the costs so much higher in the USA.
Hmmm... I smell greed at the base of it...
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There's a reason.
It's like saying kidnap and ransom is not a crime, because most of the time no one gets hurt, because most people choose to pay the ransom money anyway.
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Texting
The reason the congressman and the media is getting involved (I Hope) is because they feel that since there have been a rash of cellco mergers and then "per charges" doubled that there might be a connection. This is a good reason to investigate.
But Mike is right, the fact that there is hardly any overhead on text messaging is not an argument against raising text rates. The only argument should be against punitive and vague voice and text contracts. Again how hard is it to set up a tiered plan instead of overage charges? 1-200 messages: $5, 201-500 another $5, 501 - 1000 another $5, 1001 - unlimited You've paid for it.
Why make the overage charges punitive when this is your customer? If your unlimited plan is $15 for texting, make that the maximum that someone will pay, and do it on a tiered basis so that someone that doesn't text that much will not have to pay the full amount each month.
I know the reason this isn't done. They became addicted to this revenue stream and they don't dare touch it now. Plus some would say it is not fair to people who automatically pay the unlimited fee each month, well no it may not be, but if the cellcos used a tiered method, the client could sign up for that plan instead.
Quote: "If, however, consumers don't have a problem with the current system (and all indications are that they don't), then why is the NY Times even bothering?"
I think all indications are that all the cell cos have the same punitive and deceptive contracts and we have problems with it but we don't complain because they are all the same and we are tired of complaining to deaf ears. So it is good that we all take another look at Cellular Billing practices.
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High prices?
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Try Canada...
I don't care about paying $.10 to $.20 per text message, so much as I care about the services I use and like to stay connected to when I'm mobile can't stay connected to me. Because our telcos are billing both sides at near extortionary rates (causing Twitter to shut down outgoing SMS messages, and probably also keeping Brightkite from wanting to get an SMS gateway working for Canadians) and the fact that two of the three now charge for all incoming texts, even if they're spam, really just cuts open a wound and dumps a bag of road salt on it.
It may be much ado about nothing in the States, where you actually have some semblance of competition in your mobile telco market, but here in Canada, we're getting straight-up fucked.
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Re: There's a reason.
a bulk or unlimited text plan is like paying protection money... you pay your attacker to not steal from you.
paying the overage fee is like paying the ransom. you pay the attacker after they have stolen from you.
it's like saying extortion is less criminal than kidnapping because people choose to pay in and not get hurt.
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Greed and Contracts
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Re:
If i was american would be more pissed about that than the actual cost of texting, deal with fact you are getting ripped off twice before you argue about the actual ripp off costs individually
i've got my torch and my pitchfork in hand and i'm heading to the AT&T building. BRB.
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It's a phone, dammit
I had to go through *major* hoops and at least 3 calls to "support" before Cingular (now AT&T) would even admit that I could turn off *all* texting and internet usage on all phones on my plan. It's a phone, goddammit! If I wanted to type messages I'd use a computer or I'd have a Crackberry. I don't. I have a t-e-l-e-p-h-o-n-e. Don't even get me started on the camera or MP3 player that I don't want either.
Now get off my lawn.
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It is a mountain
And of course it's sent or received. So if I send my wife a text message on our shared voice plan, it's 40¢. If I send her a letter in the mail, it's 42¢. Something's seriously wrong with this picture. Yet if I call her using the telephone part of my cellular telephone, it uses part of our shared plan minutes, costing us nothing (at least until those allotted minutes are used up).
Oh, and did I mention that we used to have an allotment of free messages per month? It was tiny, like 10 messages or so per month, but that has long since disappeared. Now I'm charged starting from the very first text message anyone sends me.
And T-Mobile does not provide a way to disable text messaging to or from your phone. (Fortunately, they do allow you to disable the feature of being able to send you a text message via an internet email address. Doing that at least stopped the spam that we were paying for.)
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choice
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Re:
That's dead on. Pricing of text messages is indicative of collusion in the market. There's no rational explanation for prices to be so far out of whack with the marginal production cost, which is essentially zero.
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Don't count on IM to save the day
Mike says: "if SMS pricing really is a problem, alternatives (such as mobile instant messaging) will grow as well". Given that the carriers (who are raking in insane profits from SMS) control the ability for these alternatives to grow, I don't think that the future looks that rosy. Because of the ridiculous profit margins they're pulling in on SMS messages, the carriers will fight all the harder to block apps and technologies that "duplicate functionality". That's the more insidious danger.
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Re: Don't count on IM to save the day
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Problem
I wish you were right. Unfortunately, those alternatives already exist, and phone companies have already locked them out. On my phone, an "unlimited" data plan specifically excludes instant messaging. Any instant message is charged as "messaging" traffic, and it is charged as a text message. The only people who can get truly free instant messaging are those using PDAs with a full-fledged data plan that costs $20+/month. Even with that, I know that at least Verizon states in their contract that you aren't allowed to use the plan for IM. They can't really stop you, since IM apps are all over the place for Windows Mobile, but they can terminate your data plan if they do catch you. For a basic phone like mine, the apps have to come from the vendor, and the vendor charges any IM app traffic like a text message. Seems a bit like antitrust behavior to me.
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from the stepped-in-one-there dept.
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What suprises me is that a smaller provider hasn't thought to try offering cheap or free texting either always or as part of a deal as a marketing gimmick. It would be ideal, since nothing is lost except potential profit, which would likely be compensated for by the onslaught of new customers they would be likely to get. I know i'd probably switch pretty fast, even if I had to pay full price for a phone or something. Especially in current economic times, i'm sure people would fell more secure just paying a bunch up front instead of adding extra weight to their monthly bills.
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The alternative
And consumers do express their disatisfaction with churn levels at 35%+ i.e. the operator replaces ALL of its current customers every 3 years. But, with the continued consolidation in the industry, the opportunity to enjoy genuine, competitive choice (as opposed to frying in the fat or leaping into the fire) effectively makes these operators a cartel.
Having worked at a senior commercial level for an operator, the internal mantra was that there was no money to be made having consumers on the 'right' plans for them.
So, if a reducing universe of operators run a cartel by offering near identical services, where will genuine competition emerge from? The only likely competitor is Wimax, especially when rolled out at metropolitan / area level. Even if a Wimax operator charges what your mobile operator will charge, the quality of service and flexibility will be a substantial step-up from your 2G / GPRS / 3G offerings.
So there is some good news. However, watch for all those Wimax service providers getting snapped up by the mobile operators - even in this climate they have vast free cash from all of that SMS charging to afford such purchases. Oh, and a cartel to protect.
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Re: High prices?
If you meant 0.0019 Euro/second, then that's still 0.114 Euro/minute, and it's pretty expensive, even for a "pay as you go" plan. If you meant 0.19 Euro/second, then it's a complete rip-off.
At 0.02 Euro per text message, that's a very good price, though, and only the very few would ever use enough to make an unlimited plan worthwhile.
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Re: I don't want a text plan
In Europe, it's rare to have a cell phone plan where you pay for receiving anything. In the US, you pay for sending and receiving.
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Re: It is a mountain
It's worse than that, because unless you have a very odd cell carrier, calls to a phone on the "family plan" cost no minutes at all. In my case, any calls to anyone else with a Verizon cell phone cost no minutes to either one of us.
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Re: Re: Don't count on IM to save the day
It would be stupid to pay that just for an SMS substitute, but even a little bit of web browsing will make that $20 worth while, just in time saved.
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Re:
My point is that it will get there eventually. Price doesn't go to marginal cost immediately.
As you point out, other technologies will make the issue irrelevant, but not without the mobile operators fighting it every step of the way, at our expense.
Maybe I'm missing something, but I've got no problem using those alternatives on my phone for free.
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Re:
Uh, it's not "complaining about the difference between price and cost" but you knew that, right?
The difference is that the *market* in the music world has shown that the price *is* falling to zero. That hasn't happened in the text messaging world yet. The point of my posts in discussing the music industry is that we're reaching that point and companies need to learn how to embrace it. When alternatives in the text messaging world start pushing the price down, the same will apply to mobile carriers who won't be able to get away with continuing to charge high prices.
So, our views are entirely consistent, your confused statement notwithstanding.
We have never said that anyone *should* charge the marginal cost, but are only noting that you need to understand that's where the market will eventually push your price if you are unable to continue to innovate and differentiate. Thus, it's in your best interest to figure out ways to take advantage of that.
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The real problem
The real problem is spam.
My wife gets spam SMS messages somehow, each one of which costs us .20 (we rarely text, and so don't have a plan), and there is no way to unsubscribe or block messages from these spammers without blocking all SMS messages.
Because I can't refuse delivery, I don't feel that I should be charged just to receive something I don't want.
It would be like the post office charging you the price of a stamp for each piece of mail that you receive, including the junk mail.
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Re: Pakistan
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rip off artists
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Choices
kudos to:
twinrova
anonymous coward
robert
gibsonAV
everyone else, if you really think it costs AT&T anything even close to a SINGLE PENNY to send those text messages. you have your head in your ass.
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yeah, right
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There is NO competition with propritary equipment and Contracts
The day when that happens should also herald the coming of non-subsided contracts; where you buy only data-service.
If there were that kind of real competition, the ability to change my plan monthly instead of every 2 years; to keep my hardware, contacts, and preferences on my terms; then I think we would see -real- competition.
Plans might stop arbitrarily caring about what bits are being sent and instead care about the volume and class of service. Is that an interactive stream (low latency requirement)? Is it a bulk data stream (bandwidth over latency; lowest cost please.)? Is it non-interactive priority data (Make a slot and someone will use it; if only on business contracts)?
No longer will there be a difference between voice data, text data, and web data. The provider will merely be a data-service connecting me to the Internet; optionally with filtration of incoming data (to prevent DoS attacks).
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Re: Pakistan
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Re: Re: Pakistan
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Re: Re: Pakistan
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Re: Re: Pakistan
We can buy Windows XP orignal in 25 Rs while u hv to pay $392 to $518 and U win?
We buy any Game or Movie DVD in 60 Rs (DVD Print Quality) While u hv to pay 10-20 $ and U win?
the odds are on our side my frend ...
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Government Involvement?
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