The cost of SMS

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webstereo

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#38852 5-Aug-2009 12:19

I read that a standard GSM SMS is 140 bytes. (is that correct?)
Vodafone charges $0.20 per SMS.
So $1.00 = 700 bytes.
Thank goodness ISP's don't use that logic.

sbiddle

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#242958 5-Aug-2009 12:31

A SMS is 160 characters. On top of that you also have extra data for the headers so you math is slightly wrong.

adresdendoll

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#242961 5-Aug-2009 12:38

Txting is in essence free for the provider. The only cost that can be justifiable is backend maintenance and MTR. MTR's are also arbitrary, as they are set by the providers, but in real terms they have no cost.

Handsomedan

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#242962 5-Aug-2009 12:39

And yet the value of a text message as opposed to the cost, is indefinable.

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#242967 5-Aug-2009 12:44

webstereo: I read that a standard GSM SMS is 140 bytes. (is that correct?)
Vodafone charges $0.20 per SMS.
So $1.00 = 700 bytes.
Thank goodness ISP's don't use that logic.

Vodafones MAXIMUM charge in NZ is 20c for a person to person message, there are bundles and plans that make this a lot cheaper.

Show me an ISP that will charge you zero for months, then let you send ONE message for 20c or less using their network.

SMS is a brilliant service, and breaking it down to bits and bytes is a pointless exercise.

As sbiddle pointed out too, the actual data is more, in addition to the fact that unlike normal internet traffic, your phone operator will hold your message for a period of time, and deliver it when the recipient is online.

If you send a request to a webserver via your ISP, and the webserver is not online, your request will typically be dumped, or offloaded to a third party.

That's just one example of the value-add attached to SMS.

mjb

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#242985 5-Aug-2009 12:59

adresdendoll: Txting is in essence free for the provider. The only cost that can be justifiable is backend maintenance and MTR. MTR's are also arbitrary, as they are set by the providers, but in real terms they?have no cost.

You are forgetting the cost of the equipment and infrastructure to support messaging.

Granted, it's not that expensive, but it's not 'free' for the provider.

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webstereo

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#242987 5-Aug-2009 13:01

Ok, well as I said, it wasn't my maths. So are you saying it's actually 160 bytes?
At any rate it's too expensive IMO. That's why I don't use it often.
I'm not sure the ISP comparison is relevant in this case. I know I brought up ISP's but really I was just saying that it seems to me that as a data charge a SMS is beyond extortion.

adresdendoll

62 posts

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#242997 5-Aug-2009 13:19

@mjb

Sorry, what I was trying to say was that MTR's have no real world cost to the provider.

@tonyhughes

I don't quite follow the argument that "SMS is a brilliant service, and breaking it down to bits and bytes is a pointless exercise."

The argument that because something is brilliant, we have no need to evaluate the actual costs doesn?t make any sense. Just because people are conditioned to being overcharged for a service that some deem to be valuable, does not eliminate the need to break down the actual costs. We are discussing the cost of a SMS, not its perceived value. Although the point of a provider holding a SMS until it is delivered is valid, it is still less than a 1Kb at most.

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tonyhughes

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#243002 5-Aug-2009 13:31

adresdendoll: We are discussing the cost of a SMS, not its perceived value. Although the point of a provider holding a SMS until it is delivered is valid, it is still less than a 1Kb at most.

I text a lot. It costs me $10, and covers 75% of my conversation with friends.

That is far cheaper than conveying the same conversations via telephone calls, or postal service or an internet connection.

I think the cost of moderate to heavy use of text messaging in New Zealand is extremely favourable.

If 20c to take your message, and deliver it anywhere in the country is too high a cost for you, then switch to 2 Degrees Mobile and get it for 9c, or get a text plan, or better yet, find a cheaper (i.e. actual lower monetary cost to send one 160 character message, that doesnt incur a monthly cost) method of communication, and let us all know what it is.

adresdendoll

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#243009 5-Aug-2009 13:40

Once again you are missing the crux of the argument.

I am not discussing the value of the txt message services e.g. what you are willing to pay for the service. I am discussing the costs that the providers are incurring.

sbiddle

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#243012 5-Aug-2009 13:48

adresdendoll: Once again you are missing the crux of the argument.

I am not discussing the value of the txt message services e.g. what you are willing to pay for the service. I am discussing the costs that the providers are incurring.

What do you believe the costs to the provider are? Do you have any idea how much a SMSR costs?

Klipspringer

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#243140 5-Aug-2009 17:41

SMS's are very expensive in NZ? And I have no idea why.

See my sig, I use the fishtext application on my phone, it uses very little data.
From my Vodafone Mobile I can text anybody in NZ for 0.0133Pounds. (NZ 3c)

Why are people still bothering with texting the old fashioned way?

sbiddle

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#243175 5-Aug-2009 18:52

BraaiGuy: SMS's are very expensive in NZ? And I have no idea why.

Says who?

SMS costs if you're on a SMS plan are exceptionally cheap.

Our prices without a plan of 20c per message are fairly typical if you look at operators anywhere in the world. 25c in Aussie, 10p in the UK on Vodafone etc.

adresdendoll

62 posts

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#243209 5-Aug-2009 19:47

I don't know how much a SMSR costs. Didn't even know what one was until a couple of minutes ago.

Once the infrastructure is purchased, i don't see the running costs being a major factor in pricing, I say this as I imagine the running costs to be very low VS revenue.

I think the better informed parties below can summarize my suspicions better than i can articulate them.

"Besides being an attractive revenue generator, high profitability is also a big benefit of SMS for mobile operators. Operators " SMS margins estimates vary, but typically maximum of up to 80-90% of SMS messaging revenues being profit are often quoted."

http://www.huawei.com/publications/view.do?id=279&cid=94&pid=61

"A better description might be “cost carriers very, very, very little to transmit.”

A text message initially travels wirelessly from a handset to the closest base-station tower and is then transferred through wired links to the digital pipes of the telephone network, and then, near its destination, converted back into a wireless signal to traverse the final leg, from tower to handset. In the wired portion of its journey, a file of such infinitesimal size is inconsequential. Srinivasan Keshav, a professor of computer science at the University of Waterloo, in Ontario, said: “Messages are small. Even though a trillion seems like a lot to carry, it isn’t.”

Perhaps the costs for the wireless portion at either end are high — spectrum is finite, after all, and carriers pay dearly for the rights to use it. But text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network."

http://www.nytimes.com/2008/12/28/business/28digi.html?_r=1

And please don't misunderstand me, I am not complaining about the price of txting at all. I am on a large txt plan myself and it has cut my spending down nicely, but i do think that a great many people do not understand just how much money their provider is making out of them. Having worked in the industry for a few years i have seen the price fall dramatically, namely because of consumer pressure and competition, not due to a lowering of operational or 'production' costs on the providers side.

sbiddle

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#243219 5-Aug-2009 20:15

Their is no disputing SMS's can be are highly profitable, particularly if they are on network. What a few people seem to be forgetting however is that the biggest cost of an SMS is the interconnection costs.

Vodafone charge Telecom 9.5c every time an SMS is sent from Telecom to Vodafone. At 20c Telecom are making a profit.

The minute a person buys a $6 TXT pack on Telecom they get 150 TXT's which cost 4c each that they can send to any network. If all 600 TXT's were send to Vodafone Telecom would be making a significant loss on that that customer. There is no 80% - 90% profit margin in that.

An article written for the US market which operates under fundamentally different business models to NZ is also not entirely relavent.

adresdendoll

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#243231 5-Aug-2009 20:47

How are the business models different, apart from the recipient customer having to pay a fee to receive a txt?

Interconnection costs are false costs. The operators have agreed upon a figure that they charge each other for an SMS to terminate on their network. This is a service cost that doesn't cost the receiving party anything in either resources or value. If each party sends a roughly equal number of txts, then the costs are nullified by the equaled revenue.

The telcos did a fantastic job marketing on-net txt plans for virtually pure profit for many years. It was not that long ago that many people were carrying two phones to take advantage of the 'cheap' txt plans.

But i suppose that the cost only makes up part of the equation. What people are willing to pay makes up the rest. I'm pleased to see that consumers today are far more educated and better informed than what they were a few years ago and hope that they apply pressure to slim the profits of the providers a bit in favor of cheaper rates.

at the end of the day, i do understand that these are corporations and that maximizing profit is the priority.