Readers: The following post is lengthy to say the least.  The point of the post is obvious, what I do in it is break down the overall cost of text messaging compared to other data services.  Feel free to skip to the middle portion called “Cost Per Gigabyte of Data” for the interesting stuff.  I’m not the first person to do this, but I want to do my part to point out how much of a scam text messaging is.

Introduction

You’re sitting at work, bored as always when you realize you forgot to mail off your latest cellphone bill.  You wrote the check and licked the stamp but forgot to put it in the outbox.  Don’t worry, your roommate is still back at the apartment.  Instead of calling him you whip out your trusty cell phone and send a text message.  It probably reads something unintelligible to the baby boomers like “Hlp! 4got 2 snd att bill. On ktchn table undr ur stoopid cat”. Language professors of the world collectively cringe.  No worries though because even though your roommate is useless in all walks of life, he is capable of getting your cell phone bill sent off to AT&T, Verizon, or wherever it may be headed.  It’s a good thing too because you didn’t want to have to pay the late fee which can be as high as 10%.  Those damned telecoms really nickel and dime you everywhere they can right?

Right.  But they may not be doing it in the places you think.  A 10% late fee is perfectly appropriate, you didn’t pay on time so you pay a late fee.  Even your library does that.

Maybe before you sent off your bill you should have examined it closer.  You probably would have found some random fees and taxes that everyone pays and of which their cost ranges from a few dimes to a $5 spot.  But for many of us in the last few years we likely see something on there that reads like:

Text Messaging: 1500 ……………….$20
-or-
Text Messaging: 1500 ……………….$15
-or-
Text Messaging:  200…………………$5

These are the various plans offered by AT&T Wireless, which is the carrier I use.  The amounts and rates are similar for other wireless providers in the US.

Now these plans seem like reasonable add-ons.  Text messaging is convenient, there is a cost to send one, so the telecoms charge for it.  But how’s about we get a little technical real quick on text messages:

Many times a day your cell phone and the nearest cell tower talk to each other and each time a bit of data is transmitted on the control channel.  Every time you make or receive a call the channel is filled to capacity with data, but every time the phone and tower talk but no call is made, the channel is mostly empty.  Years ago researchers figured out how to shove some data in there on those “empty” signals.  This became the text message*.

What this means is aside from devoting a few servers to processing data, sending a text message costs the cell phone company nothing.  But I suppose it’s alright to charge for a service.  After all, $5 for a few messages won’t kill anyone, especially compared to the price of an iPhone plan ($70).

I’m glad you mentioned the iPhone plan.  The iPhone plan, as with many smart phone plans, includes unlimited access to data.  What is data?  Data is the information that passes from the cell phone tower to the iPhone (or any other phone) usually in the form of internet browsing.  I use my iPhone to play on the web, check email, and of course update Twitter.  Each time I want to look at something that requires data my phone asks the cell phone tower to send the data I’m requesting.  As raw data, internet, twitter, email, and text messages are all the same.  They all come down to bits.  The cost of access to this data is $30 a month.  This does not include any text messaging, but I can (and do) send text messages using my data plan.  But since everything comes down to bits of data, we can compare the overall cost of data on a text message to the data on internet access.

Cost Per Gigabyte of Data

Let’s start with a typical cable internet connection.  This is the cheapest form of fast data on the planet.  To make the math simpler I’m going to borrow the proposed plans from Time Warner Cable’s internet capping program.  This program makes cable internet data more expensive per bit than it has ever been.  With TWC you can get 100 gigabytes of data for $75 a month.  The cost per GB of cable internet is $0.75.

With my iPhone I (theoretically) have no limit on usage.  However in practice if you use more than 5 GB a month in cell phone data you’re contacted and asked to upgrade to a business account.  So essentially I’m charged $30 a month for 5 GB of data.  Regardless I don’t use nearly 5 GB.  Though I’d consider myself a heavy user, I used less than 10% of that 5 GB cap last month; this means I paid $30 for 0.5 GB of data.  This makes my cost per GB $60.  That is considerably more than cable internet, but let’s look at the cost on the 5 GB cap to keep things simple; this implies you maximize your use of data.  $30 for 5 GB makes the cost per GB of cell phone data $6.00.

The most liberal text messaging plans charge $20 for unlimited messages.  Theoretically you can get a good deal on data going this route.  In practice though there is only so much that can be said.  The current world record for text messages sent in a month is 182,689.  This works out to about one text message every 15 seconds.  The record holder clearly has maximized his messaging plan. When you send a text message utilizing the full amount of space available you take up 140 bytes of data.  In 182,689 messages our world record holder used 25,576,460 bytes of data or about 0.025 gigabytes for $20.  That means the cost per GB of text messaging data is $800.

Keep in mind that $800/GB is what the world record holder is able to get.  If you use a different text messaging plan or none at all the cost is higher still:

  • 1500 at $15/month = $75,000/GB

  • 200 at $5/month  = $192,307/GB

  • Non-plan per message = $1,533,742/GB at $0.20 per message

In case you haven’t forgotten, it costs them next to nothing to send text messages because they already charge you for access to their network through the actual phone plan.  And if you were asking yourself how much data your voice takes up, here is a quote from the Washington Post that includes snippets from the Consumer’s Union that was sent to the Senate last year:

The group said that 600 text messages contain less data than a 1 minute phone call. It said that at 20 cents a text message, wireless carriers would collect $120 for 600 messages.

“Does $120 for the equivalent of one minute of voice seem reasonable?” the group wrote in the letters. “Or do these usurious rates evidence an extraordinary amount of market power?”

Conclusion:

If the outrageous data charges weren’t bad enough, the cost of text messaging charged to customers has doubled from $0.10 to $0.20 over the last few years.  It’s surprising that each major cell phone carrier changed the prices of text messages all around the same time.  Actually it’s not, this is plain and simple collusion and is illegal.  The price of this technology should remain relatively stagnant, if not having decreased with time.

What can we do?  If you want you can join me in protesting text messages by refusing to use them.  I send or receive maybe 3 a month and so the $1.5 million per gig hits me up for less than $1, it’s a convenience tax in my world.  However text messaging is so popular in this country and around the world that it will likely be impossible for enough consumers to protest text messaging.  This might require government oversight, and it pains me to say that.

What do we need?  My cell phone plan includes 450 minutes.  With the nights & weekends and free mobile-to-mobile I use less than 100 of those minutes every month.  How’s about you let me trade in some minutes for text messages.  Give me 300 minutes and 150 text messages.  This still makes the per/GB cost super high, but at least I feel like I’m paying for a unified service with unified features instead of being screwed by telecoms.  AT&T actually tried something like this with the first iPhone.  It came with 450 minutes, unlimited data, and 200 text messages.  But poor business planning dipped into their profits so when the iPhone 3G was released last year the data and minutes went up $10 (from $60 to $70) and the text messages became an a la cart option.  The increase in data costs was appropriate for the faster speeds, the dumping of text messages was nothing but a profit scheme.

Corporations are not evil entities with the singular motive of profit.  However that is the goal of business and we are all capitalists here and respect their quest.  But sometimes the business model gets out of whack and it is up to the consumers to set things straight.  Sometimes we can do it on our own, sometimes corporations realize they should change something, and sometime the government has to step in and make some changes.  Hopefully government won’t be needed here, but it might come to that.  The text messaging system is a ripoff, spread the word.

*To see how your phone reads a text message, click here.  This is highly technical material.

Special thanks to the following links for contributing information to this article:
Mobile Mag
PC Mech
How Stuff Works
Wikipedia
Washington Post
There were others too, but I lost some links along the way.

Photos: amacedo, nohodamon, monsieur paradis

Be Sociable, Share!
categories: personal finance, technology