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View Full Version : Carriers make 6500% markup on text messages


pukifloyd
Feb 2, 2010, 10:31 PM
Original article here (http://money.cnn.com/galleries/2010/news/1001/gallery.americas_biggest_ripoffs/index.html)

Text messages are short, quick and cheap to transmit. So why are they adding so much to your wireless bill?

The messages are such a tiny piece of data that they cost carriers only about one-third of a cent to deliver, according to computer scientist Srinivasan Keshav, who testified before U.S. senators on the issue last summer.

Read the whole article...and check out other things that are a rip-off...click on the next button at the bottom of the page or the top right...

Its amazing they manage to charge so much...in my country the government have laws and don't allow companies to charge higher than a certain price...you can send 1000 texts for $2 (last time i checked) or each message was 1-2cents...which was too much so they reduced that also...
and they also charge 1 cent per minute on all local calls...or you could make unlimited calls for $5-$6:D

dukebound85
Feb 2, 2010, 10:34 PM
i have no issue with this as that is whatthe market allows them to be priced at

its our fault

mscriv
Feb 3, 2010, 09:22 AM
^^ I hear what you're saying Duke, but I'm not sure I agree. Pure capitalism is about getting the highest price you can get, however, consumers trust that products are priced at a reasonable profit margin in relation to cost of production. The problem is profit margins and information like what is found in the OP's article are not always available prior to purchase and are not generally broadcast to the masses.

You are correct in saying, it is our fault, but consumers could better dictate with their dollar if they had all the information. It's kind of like corporate monopoy, the government deemed this was an issue big enough that they needed to get involved to ensure fair business practices. Sometimes I think cost related matters are similar. If it only takes $1 to make a widget, but all the companies that make widgets "agree" to price widgets at $5000 then consumers are forced to that price point because there are no alternatives.

It's easy to say, and I'm guilty of saying it myself, "If no one would buy it then they would be forced to lower the price". However, we all know that putting this theory into practice is usually both unreasonable and unrealistic.

iShater
Feb 3, 2010, 09:32 AM
We also don't have real good competition in the US when it comes to wireless pricing.

If all our companies were on the same field in terms of platform (GSM vs. CDMA for example), then people can switch back and forth as they pleased. Oh, we would have to get rid of those crazy 2-year contracts as well.

For example, when I look at my t-mobile services, I found out that my SMS and total internet packages have actually gone up in price if I signed up for them today vs. my grandfathered rate.

Ambrose Chapel
Feb 3, 2010, 09:39 AM
didn't the us carriers all raise their text rates nearly simultaneously to the same price? i remember there was supposed to be a senate hearing on it, though i doubt anything came of that besides grandstanding

Dagless
Feb 3, 2010, 11:48 AM
It's ridiculous but I stopped using text messages years back so it has no effect on me. Would be nice if they were free or cheap though, given how more advanced forms of communication are now free on phones.

Mousse
Feb 3, 2010, 01:20 PM
It's ridiculous but I stopped using text messages years back so it has no effect on me.

I've NEVER text messaged, but it still effects me. Stupid kids keep texting me.:mad: Calling the numbers and telling them to stop didn't work. But finding their addresses and threatening them with grievous bodily harm did.:D

I'm switch back to T-mobile after my AT&T contract runs out because T-mobile allows you to kill text messaging completely, both incoming and out going. AT&T gave me a load of bovine excrement about how it's not possible.:rolleyes:

paddy
Feb 3, 2010, 02:29 PM
I work in the mobile industry, and while they may make a 6,500% markup on each individual text, you're not hearing both sides of the story.

Building a phone network in a tiny country like Ireland costs around €700 million. That's a tiny country like Ireland!! Add to that maintenance costs, customer care, store costs, staff costs (with v. high commission rates) and marketing and handset subsidisation and you're looking at a very expensive industry to operate in.

Markups like this are what make it worthwhile to enter the industry.

mscriv
Feb 3, 2010, 04:06 PM
^ While I hear you it's still ridiculous to put that mark up on text messages as opposed to raising the overall cost of service operation. That's like a retaurant saying "hey the cost of our business is great and so to offset that we are now placing premium mark ups on condiments. We know an entire bottle of ketchup cost a few dollars, but in order for us to operate successfully we need to charge you one hundred dollars for that side of ketchup."

It's also interesting to note that mobile companies still seemed to be turning a profit before they were even offering text messaging. So that argument of yours kinda smells funny if you know what I mean. ;)

paddy
Feb 3, 2010, 04:13 PM
^ While I hear you it's still ridiculous to put that mark up on text messages as opposed to raising the overall cost of service operation. That's like a retaurant saying "hey the cost of our business is great and so to offset that we are now placing premium mark ups on condiments. We know an entire bottle of ketchup cost a few dollars, but in order for us to operate successfully we need to charge you one hundred dollars for that side of ketchup.

It's also interesting to note that mobile companies still seemed to be turning a profit before they were even offering text messaging. So that argument of yours kinda smells funny if you know what I mean. ;)

Yes, well before mobile companies didn't have near 100% coverage and 3G networks. ;) They gotta make money from somewhere.

Dagless
Feb 3, 2010, 05:22 PM
I've NEVER text messaged, but it still effects me. Stupid kids keep texting me.:mad: Calling the numbers and telling them to stop didn't work. But finding their addresses and threatening them with grievous bodily harm did.

Do you have to pay for receiving text messages as well as phone calls in the US?

aristobrat
Feb 3, 2010, 05:46 PM
^ While I hear you it's still ridiculous to put that mark up on text messages as opposed to raising the overall cost of service operation. That's like a retaurant saying "hey the cost of our business is great and so to offset that we are now placing premium mark ups on condiments. We know an entire bottle of ketchup cost a few dollars, but in order for us to operate successfully we need to charge you one hundred dollars for that side of ketchup."
Restaurants do that already. The soft drink that they charge you $1.99 for costs them $0.04 worth of syrup to make. They mark up beverages in order to price their entrees lower.

paddy
Feb 3, 2010, 06:34 PM
Restaurants do that already. The soft drink that they charge you $1.99 for costs them $0.04 worth of syrup to make. They mark up beverages in order to price their entrees lower.

Or in the case of the mobile industry, data. Costs a lot.

FSMBP
Feb 3, 2010, 06:45 PM
Do you have to pay for receiving text messages as well as phone calls in the US?

Yup.

I love setting SPAM text messages too. No idea where they got my number or if I tell them to stop. I wouldn't care as much if I was charged for receiving them though.

corduroygt
Feb 3, 2010, 07:03 PM
I've NEVER text messaged, but it still effects me. Stupid kids keep texting me.:mad: Calling the numbers and telling them to stop didn't work. But finding their addresses and threatening them with grievous bodily harm did.:D

I'm switch back to T-mobile after my AT&T contract runs out because T-mobile allows you to kill text messaging completely, both incoming and out going. AT&T gave me a load of bovine excrement about how it's not possible.:rolleyes:

I have incoming SMS turned off by AT&T.
http://mymessages.wireless.att.com/

Abstract
Feb 5, 2010, 08:53 AM
Do you have to pay for receiving text messages as well as phone calls in the US?

Yup.


I knew you were charged for calls, but for incoming text messages as well? You have no control over those! :eek:

Surely that couldn't be true for every mobile company. I think I remember when those charges were introduced (somewhat recently), and only some companies had those charges.

In Canada, only 1 or 2 (of the 4) major mobile providers charge for incoming texts.

Gav2k
Feb 5, 2010, 08:58 AM
It's one of those things that the US is so far behind on it's stupid. There is no way a mobile company in the EU would be allowed to do that.

steve2112
Feb 5, 2010, 09:52 AM
I knew you were charged for calls, but for incoming text messages as well? You have no control over those! :eek:

Surely that couldn't be true for every mobile company. I think I remember when those charges were introduced (somewhat recently), and only some companies had those charges.

In Canada, only 1 or 2 (of the 4) major mobile providers charge for incoming texts.

No, it's not true for every company. I have texting turned off on my phone right now, but I can receive them for no charge. I just can't send them. Then again, I am using a small regional carrier. I really hope they don't get bought out any time soon, since they still know what customer service is.

mickhyperion
Feb 5, 2010, 01:01 PM
The cost for text msgs to customers with unlimited data plans (i.e. iphone users) should be ZERO. The wireless companies are just gouging people otherwise. The additional amount of data sent/received in a text msg is miniscule. Text message pricing is a cash cow for these companies.

lionheartednyhc
Feb 5, 2010, 01:05 PM
Technically, isn't it an infinite markup since it doesn't cost them anything?

miles01110
Feb 5, 2010, 01:11 PM
This isn't really anything new.

http://www.nytimes.com/2009/11/15/business/15price.html?_r=2&pagewanted=1&partner=rss&emc=rss

King Mook Mook
Feb 5, 2010, 06:09 PM
If you don't like it you are free to set up your own wireless company. You can build up all of the coverage, pay for customer service, pay for use of the spectrum etc. And then see how cheap it is. While I am sure the companies make money on the text messages, what did you expect? The companies to say "Okay, just give them text messaging for free, who cares if we lose money?"

That's how it is. I repeat if you don't like it, you can set up your own wireless company. That's the beauty of capitalism. If services are too highly priced then a competitor can come in a undercut them.

King Mook Mook

pukifloyd
Feb 5, 2010, 06:14 PM
Technically, isn't it an infinite markup since it doesn't cost them anything?

No...it does cost them something...i think the article said 1/3rd of a cent...

Abstract
Feb 5, 2010, 06:19 PM
And an iPod is made up of around $100 worth of parts. Too bad there's R&D involved, along with warranty and customer service people to pay for.

If we replaced the word "AT&T" (and I know that's not a real word) with "Apple", "SMS" with "iPhone", and "1/3 of a cent" with "$150" (or whatever it costs to build the iPhone, there would be 100 people in this thread to defend Apple and point out all the other costs that this article doesn't mention.

King Mook Mook
Feb 5, 2010, 06:43 PM
If we replaced the word "AT&T" (and I know that's not a real word) with "Apple", "SMS" with "iPhone", and "1/3 of a cent" with "$150" (or whatever it costs to build the iPhone, there would be 100 people in this thread to defend Apple and point out all the other costs that this article doesn't mention.

Exactly. If this article was about how Apple makes 'money' off their iPhones (shock, horror!) Everyone here would stand up for them.

It should come as no surprise that companies make money off their services, or products.

King Mook Mook

RedTomato
Feb 5, 2010, 07:09 PM
Texting's effectively almost free in the UK.

Unlimited text plans are easily available on monthly contracts / pay as you go for around £15 per month. Sometimes cheaper. Some people send 5000 a month on these plans. Note that £15 sometimes also includes unlimited data as well as unlimited texts, all in one package.

If you want to pay less, you can get 500-odd texts for between £5 - £10 /month which is more than enough for most people. That's around 1p per text.

If you're foolish and dont get a package or just don't text much then you end up paying around 10p-15p per outgoing UK text max, which I think is similar to USA prices.

Sargiel
Feb 6, 2010, 01:49 AM
Texting's effectively almost free in the UK.

Unlimited text plans are easily available on monthly contracts / pay as you go for around £15 per month. Sometimes cheaper. Some people send 5000 a month on these plans. Note that £15 sometimes also includes unlimited data as well as unlimited texts, all in one package.

If you want to pay less, you can get 500-odd texts for between £5 - £10 /month which is more than enough for most people. That's around 1p per text.

If you're foolish and dont get a package or just don't text much then you end up paying around 10p-15p per outgoing UK text max, which I think is similar to USA prices.

Or if you mostly text overseas and therefore don't have any packages available that are of use ;) I was with a carrier years ago that let me use free sms's internationally - however they got bought out by Vodafone which put paid to that quickly enough :D Maybe if my handset wasn't so many years old I could look at getting some sort of funky data package and use some kind of online website to send sms ?

guifa
Feb 7, 2010, 04:44 PM
It's one of those things that the US is so far behind on it's stupid. There is no way a mobile company in the EU would be allowed to do that.

Are you kidding? In Spain text messaging was MUCH more expensive than in the US. The concept of unlimited messages didn't exist. Sure, incoming were free, but at 8c or more a message, even a hundred outgoing messages makes it as expensive as an unlimited American plan.

Eraserhead
Feb 7, 2010, 07:05 PM
^^ When were you in Spain? I expect they have similar plans to the UK now. Especially as Telefonica owns O2.

alphaod
Feb 7, 2010, 07:31 PM
The worse part is incoming messages cost money here in the US; I have to get an unlimited messaging for that sole reason alone. Everyone messages me and assumes I have a texting plan; now I do, but it's not what I really need.

guifa
Feb 7, 2010, 07:49 PM
^^ When were you in Spain? I expect they have similar plans to the UK now. Especially as Telefonica owns O2.
I left June of last year. That was disgusting thing. Orange, Telefónica, and Vodafone are all in other EU countries with better rates.

Here are the current Movistar SMS offers:

Megabono SMS Día: 100 outgoing from 8am to 8pm for 4€ ($6)
Megabono SMS Noche: 100 outgoing from 8pm to 8am for 4€ ($6)
Megabono SMS finde: 100 outgoing on weekends for 4€ ($6)

Otherwise, text messages at other times of the day are 0.15€ ($0.20)

There is also an offer to have texts to Movistar clients at half price, for a 2€ ($3) fee. They also have one contract for 9c a message at all times.

Either way, by the time I've reached 1000 outgoing messages, which isn't common, I've spent more just on messages than someone in the US with unlimited minutes, SMS/MMS, and data. (with all three Megabonos, which I think are mutually exclusive anyways, and the cheap message contract, and presuming all messages to Movistar only, 1000 messages would be 31.5 (700x0.045) + 4 + 4 + 4 + 2 = 45.5 €*($62.27). If they weren't movistar it'd be 76.5€ ($104.69)

Vodafone, while having the most attractive voice rates, offers 200 SMS for 18€ but otherwise charges 15c a message, or for 1000 messages 18 + 120 (800x0.15) = 138€ ($188.86).

Yoigo with it's Tarifa del Ocho gives messages at 8c a pop (including int'l which is nice), or 80€ ($109.48) for the 1000 messages.

Orange can give you 1000 for a mere 20€, but only as long as you don't do more than 300 to another carrier. So, if they're all to Orange, 1000 messages is 20€ ($27.37), but if they're all to another carrier, it's 15c a message, or 20 + (700x0.15) = 135€ ($184.75) at which point you'd probably just as soon stick with their 9c a message option to leave you at 90€ ($123.17) for the 1000 messages.

That's current rates. Compare to T-Mobile where the unlimited text runs you $10. $10 for 4000 messages, or 8000 messages, or 16000 messages. God help the person in Spain who sends several thousand.

Blinkwing
Feb 7, 2010, 09:51 PM
For a technology that's 25 years old, I'm surprised that it costs so much in some countries.

instaxgirl
Feb 8, 2010, 06:18 PM
Texting's effectively almost free in the UK.

Unlimited text plans are easily available on monthly contracts / pay as you go for around £15 per month . . . Note that £15 sometimes also includes unlimited data as well as unlimited texts, all in one package.

Indeed. I pay £10/month (payg) for unlimited text and data (well I think there's a data cap but I've never hit it). I should be paying £15 but it's an iPhone payg sim so free data for the year, but I'm sure T-Mobile's doing a text and data for £10/month thing just now. I could probably find a plan with a few hundred minutes included as well for £15 on a 30 day contract.

I love the phone deals in the UK. The real beauty of the UK market is the good payg and 30 day plans. I'll never take out another contract - buy a phone, unlock and switch carrier when there's a better deal :)

I left June of last year. That was disgusting thing. Orange, Telefónica, and Vodafone are all in other EU countries with better rates.

I spent the last half of 2009 in Austria. I just stopped using my phone because unless I took out a contract the plans were useless. The contracts didn't look all that spectacular either, nothing like the sort of deals I've had here.

Although Orange Austria did offer a porn plan for your phone for €5/month which I've yet to see here. :rolleyes:

corduroygt
Feb 10, 2010, 03:09 AM
The worse part is incoming messages cost money here in the US; I have to get an unlimited messaging for that sole reason alone. Everyone messages me and assumes I have a texting plan; now I do, but it's not what I really need.
Well, you can have incoming texts turned off, and when people don't get any responses from the texts they've sent you, they'll get used to it real quick.