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Carriers make 6500% markup on text messages

pukifloyd

pukifloyd

macrumors 6502a
Original poster
Jun 25, 2008
994
93
Scottsdale
Original article here

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.
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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
 
^^ 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.
 
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.
 
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
 
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.
 
Dagless said:
It's ridiculous but I stopped using text messages years back so it has no effect on me.
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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 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.
 
^ 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. ;)
 
mscriv said:
^ 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. ;)
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Yes, well before mobile companies didn't have near 100% coverage and 3G networks. ;) They gotta make money from somewhere.
 
Mousse said:
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.
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Do you have to pay for receiving text messages as well as phone calls in the US?
 
mscriv said:
^ 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."
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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.
 
aristobrat said:
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.
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Or in the case of the mobile industry, data. Costs a lot.
 
Dagless said:
Do you have to pay for receiving text messages as well as phone calls in the US?
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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.
 
Mousse said:
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:
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I have incoming SMS turned off by AT&T.
http://mymessages.wireless.att.com/
 
Dagless said:
Do you have to pay for receiving text messages as well as phone calls in the US?
Click to expand...

FSMBP said:
Yup.
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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.
 
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.
 
Abstract said:
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.
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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.
 
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.
 
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
 
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.
 
Abstract said:
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.
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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
 
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