How much data cost to AT&T and Verizon and how much do they make from it?

Cost is a rather complicated calculation for the carriers. Especially only for data. Here are some of the costs they have:

Government bandwidth allotment
physical tower purchase
tower maintenance
technology upgrades to towers
Local taxes on towers
federal taxes on towers
bribes to government for tower placements
lawyers for bandwidth allotment and tower placements
pipeline for data and voice comms
pipeline maintenance
Processing/routing center
processing/routing center equipment
Employees to man the processing/routing center
retail stores
retail store employees
CS employees
CS facilities
CS equipment
management fees
management facilities
management equipment

The list goes on for quite a bit. If you can calculate all of those costs on a running basis every single month, you have the cost of running a wireless telecom.

 

How much they make on data is likely a guarded secret.

When the carriers offered unlimited data, the devices used less and ther were less of them. Now there are MANY more phone and tablets that are stressing the carriers network to provide the bandwidth for today LTE speeds.

The network has to put more money into it network to keep up, but they also see an opportunity to make money. You really do not get more for nothing in today's world, there are just more people, now, that are expecting that they are "entitled" to get more without paying for it.

 

Something tells me it is not nearly as much as Apple makes selling their products. With $100 billion in case, I think most phone companies would kill for those kinds of profit margins. Just sayin....

 

$1

$19

 

It costs AT&T about 10x as much for bandwidth to/from Alaska as it does in the Lower 48, because each of the main providers (ACS, GCI, ATT) have their own fiber running to Seattle. In the Lower 48, you can have 15+ companies sharing a fiber link and thereby splitting the cost instead of taking on the full cost of the pipe and bandwidth.

 

They make a ton, and very healthy profit margins. They're keeping data plans on tiers so they can nickel and dime everyone as they move away from the old calls and texts that were profitable.

AT&T lost $4 billion in breakup fees when the government stopped their tmobile merger. They didn't bother to see that setting up another monopoly would be illegal. Now they're just taking money from customers however they can. Got to pocket bonuses!

 

Hah, Anchorage is probably cheap compared to Barrow. Then again their EDGE goes out all the time up there.

And why do they each have their own fiber lines? I remember when it was a big deal when Juneau got fiber through GCI, but their internet is still capped way down from what we get down here in the lower 48.

 

Short story is that ATT, GCI, and ACS are in such competition with each other that they don't work together on anything. Because each provider only has one connection to the Lower 48, they can't provide speeds on par with what's available down there either. For example, in my hometown of Chattanooga, TN, I can get fiber to the home with 100 Mbps symmetrical internet, TV, and local phone for less than 22Mbps internet by itself in Anchorage...

 

I'm surprised. GCI's network is crap, except for rural villages where they have coverage, and no one else does. They don't even have data at all between maybe Wasilla and Fairbanks, AT&T is EDGE all the way up. According to my cousin, who lives there, GCI is like the T-Mobile of Alaska (maybe partly because they both use PCS).

It sounds like they aren't investing in the fiber, as it's not like they can't get more bandwidth up there.

I'm surprised ACS is in real competition. To me it looks like much of their existence is as a roaming partner for Verizon and Sprint, mostly for the Verizon folks who expect their phone to work everywhere. It also looks like they are getting ready to either sell out to Verizon or do LTE in Rural America.

I was appalled when I learned that even Barrow doesn't have a real internet connection, apparently it would still be too expensive to build a microwave relay system from Deadhorse, although GCI and the state are building some microwave systems in the southwest corner of the state. In Barrow, their cable internet is 512/128 with a 5GB cap for $50. OUCH!!!

 

I don't think AT&T and VZW know how much they really make. They definitely price adequately now that they've taken off unlimited data. The problem is the continuing cost of upgrades and pipeline expansions. Those 2 things cost a HUGE amount over the course of about 5 years or so. Tie in together all of the cost of maintenance, management, salaries, and commission, I'm surprised AT&T or VZW turning a profit easily and survive until next year.

 

Why can't they offer unlimited again? Because you have stupid people who were tethering excessive amounts of data to their computers or streaming NetFlix and Pandora all day simply "because they can." This slowly began to kill the networks (especially AT&T's as they had the most abusers).

Unlimited data is long gone, and you really can't count Sprint because theirs is way too slow. Most ISP's have some sort of cap. Comcast is 250GB I believe.

Thank all the people who abused it and ruined it for people who only intend to use the phone as a phone.

 

It depends on how you account for upgrades and such. They make plenty of money, just how much is questionable.

 

My guess is that it costs the service providers about 10 cents a gigabyte, max. And I think that is high.

 

In terms of their actual variable cost per additional GB transferred, we're talking pennies. The problem with that is that a cell carrier's true costs are in its overhead, or fixed costs.

The only way carriers can offer unlimited is if they can set a price point for everyone that covers their overhead, plus a profit margin. Tiered pricing allows less frequent data users to pay a smaller portion of the carrier's overhead costs and forces heavier users to pay a larger share of those costs. If they offer unlimited data across the board (which I'm not necessarily against), then like it or not the less frequent users begin subsidizing heavier users.

 

As a few have said, there are many factors. Even with a building full of accountants, they would be hard pressed to put a cost on it. And to be honest, the question is somewhat simplistic. They don't just "get the data" or buy it from someplace, and then mark it up. It is very, very complex.

Why can they not offer unlimited? Simple - it costs way too much to wire everything so everybody can stream movies, music, etc.

 

Read one of the carrier's quarterly reports, like this pdf from AT&T for 4Q11.

On Page 9 it notes that for Wireless, the Data ARPU (average revenue per user) was $19.30.

That's for 90 days, so if I read that correctly, they're making about 21 cents a day per user on average.

 

I think one perception the carriers have with unlimited data plans is that customers tend to use their data more frivolously than when they're limited to a certain number of GB/month.

I don't think any carriers will give out raw numbers (it's proprietary information), but one thing I do know is, the one service that they make an absolute KILLING on is SMS text messaging. People pay $5+/month for 200 inbound/outbound SMS messages or even $0.10/message when the cost to a carrier like Verizon is probably less than one tenth of a cent per SMS message sent.

 

I just wish they could offer at least a limited form of rollover. Save unused data for the month you may really need it, with an incentive to not use data unnecessarily on the other months.

 

Revenue is not profit. What that means is that they receive an average of $19.30 in data plan revenue for every phone on their network. That is on a per month basis if this link is to be believed and I think it is.

SMS rates are a massive ripoff but if they lower SMS rates something else would go up to keep similar revenue.

 

I am a little bit confused about this thread. Are we saying AT&T is making too much money? I mean, isn't that their JOB? Should we now start criticizing say, APPLE, for making so much money on what they sell?

$69 for a Smart Cover is a ripoff if you ask me...

 

In this case, the ARPU is listed under each quarterly heading, so it's the total revenue for three months.

However, as they noted in their report, "ARPU is defined as cellular/PCS service revenues during the period divided by average cellular/PCS customers during the period." So it might be an average across all users, whether they're on a data plan or not.

People often think that texts must cost nothing. On the contrary, text messages are mini phone calls, which are resource intensive.

Each incoming SMS is a nearly complete phone call, and so is charged like one. E.g. 10 cents a minute (with a minute minimum) if you don't have a plan, or less if you do.

SMS require a phone to be found somewhere in the world and paged, for the phone to acquire a comm channel and authenticate both itself and the network, then for the text to be sent down to the device...and finally the device must send back a receipt acknowledgement, which sometimes also must be delivered back to the originator.

And that's just the beginning.

A side complication is the way networks page phones. They don't just use the last cell you connected to. They send the page to a group of cells in that area, in case you've moved around. This increases the control channel usage (and congestion) in more than just one cell. Again, resource intensive.

Wait, there's more. Unlike phone calls, texts can have a life of their own. If the target phone can't be paged right away, the text has to be placed in a store-and-forward center, and retried later on. Moreover, they have to deal with SMS gateways for translation between email and texts. All that requires servers, real estate, maintenance, power and data backup. No, this isn't done on PCs.

Nowadays, people spend more time on texting than on phone calls. This puts a strain on carrier networks which were designed for voice calls. Sometimes during the day, a carrier is literally handling millions of texts per minute.

Are carriers making money on texts? Obviously. Are they super cheap to give away? No. If they were, ATT and Verizon would have $100 billion in the bank instead of $100 billion in infrastructure.

 

No more resource intensive than sending a few bytes of data. As it is, everything that's transmitted and received on our phones nowadays is digital information, so whether it's a voice call, an SMS message, or a TCP/IP packet, it all boils down to 0's and 1's.

A standard SMS message contains up to 140 bytes (1120 bits) of data (7 bits/character == 160 characters total). So a full SMS message length is about a tenth of a kilobyte (.13671875 Kbytes).

Assuming you are paying 1 cent for every 7 bytes of data based on a normal SMS messaging plan, this equates to $1,497.97 per MB of data transferred. Even if you consider the overhead that's paid for by carriers in the form of cell towers, infrastructure, etc., you cannot assume that all this is paid for with SMS messaging revenue alone because the same infrastructure is used for voice and other data communications. Not to mention the fact that there are services like Google Voice and TextPlus that offer free, unlimited SMS messaging as well as proprietary services such as iMessage and BBM. You don't consider that overpriced?

 

Whomever told you GCI uses PCS doesn't know what they're talking about. PCS is a CDMA technology that Sprint used to use (hence their old name of Sprint PCS). GCI's network is a GSM network (one that originally shared AT&T's towers in Alaska). Even the old Alaska Digitel network (which is a CDMA network GCI now operates) has nothing to do with PCS. Also, it was GCI that built cell towers all along the Parks Highway from Wasilla to Fairbanks, not ATT.

The microwave system in SW Alaska is part of TERRA SW, and GCI is looking to build another system called TERRA NW that would cover Barrow and other areas. GCI actually has run fiber from Anchorage to Bethel as a hard link for TERRA. The plan is to have multiple redundant rings (so a break somewhere does not disrupt) traffic throughout the Alaska interior, just as they have done with their fiber running to Seattle (multiple routes through Prince William Sound).

One other thing: Verizon is coming to Alaska in the next year or two. They bought a bunch of spectrum from a local company that was just sitting on it, and are currently building their Alaska data center right across the street from ACS headquarters. ACS has seen a massive drop in wireless customers in the last couple of years, so I'm not sure they even have the financial means to try to expand their services beyond the larger urban areas.

 

Just to clarify, PCS is not limited to CDMA systems. Before ATT became ATT, around here it was Pacific Bell/SBC/Cingular and their GSM system was advertised as PCS.