4,900% markup on some text messages, researcher estimates
4,900% markup on some text messages, researcher estimates: CBC News
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It costs a cellphone company a mere third of a cent to transmit a text message that it charges customers as much as 15 cents to send, estimates a University of Waterloo professor.
"Some people think it's not a big deal," Srinivasan Keshav told CBC Radio's The Current Thursday. "But others might think that the markup of 5,000 per cent is a bit excessive."
Two days earlier, Keshav testified as much to the U.S. Senate Subcommittee on Anti-Trust, Competition Policy and Consumer Rights, which was examining text messaging rates and competition among wireless carriers.
According to the Canadian Wireless Telecommunications Association, which represents the cellphone industry, Canadians send 77 million text messages a day. Like carriers in the U.S., most Canadian wireless providers charge 15 cents for each text message for customers who don't have a text messaging plan. However, most wireless users do have a text messaging plan that offers cheaper rates, Keshav said.
Keshav, who holds a Canada Research Chair in tetherless computing and has studied cellphone networks for the past five years, was asked by the U.S. Senate committee to:
* Estimate the cost to the carriers of delivering a text message.
* Give his opinion about whether recent increases in the price of text messages for customers without a text messaging plan were justified.
Keshav estimated that the cost of carrying the text message, based on the network equipment required and the billing costs, was "very unlikely" to exceed a third of a cent.
He told the committee he did not think price increase were justified, as they would only be reasonable if they were intended to decrease network congestion. Such congestion is unlikely being caused by text messages, given the number of messages transmitted compared to the number of available cell towers, he said.
Bulk pricing 'typical': Telus
But Telus spokesman Jim Johannsson defended the markup charged to customers without text plans as being similar to practices use by companies that sell other commodities.
"It's in line with bulk pricing that's used elsewhere in the world," he told The Current Thursday from Edmonton. "It's pretty typical."
He also challenged the accuracy of Keshav's estimates, saying they left out some big costs such as the cost of running secure data centres that the company needs for data storage.
Johannsson added that about 90 per cent of Canadian cellphone customers have a service bundle that includes text messaging. For Telus customers, prices range from $3 a month for 30 outgoing and unlimited incoming messages or $15 a month for unlimited text messaging. Customers whose plans don't include text messaging are typically people who don't use text messaging much, such as those over the age of 50, he said.
Some people wonder why I'm opposed to text messaging. I'll admit that part of it is the medium -- I don't enjoy typing things out on my phone, and I think that txtspk or whatever the kids are calling it these days is the bane of the English language. However, a big part of the reason that I'm opposed is because of this.
Text messaging costs the carriers virtually nothing to implement. The infrastructure existed before the service was widely adopted, and the data itself requires no extra overhead; it 'piggybacks' on the existing transmissions. A third of a cent is a reasonable estimate of the actual cost, I think, and I dislike paying an exorbitant mark-up. Since I send at most 2-3 text messages per month, even a $3 plan doesn't save me money. If I buy in bulk, I'm simply paying for unused capacity and the end result is that my per-message cost is even higher.
Sadly, my carrier is amending their policy next month to charge me for incoming text messages as well as outgoing. This change will likely result in them successfully extorting me into a paying for a feature I neither want nor need; I can't control who decides to send me text messages, my carrier does not offer any method of disabling the feature and I unfortunately fall into the demographic that heavily uses this feature, meaning I often receive unsolicited text messages from my friends. All of this together means I have to pay for outgoing messages simply to avoid being charged for incoming ones.
Needless to say, this is a situation that has me extremely irritated.
Thoughts?
Ed. Note - I was unable to find a by-line on the story, and so had nothing better for an attribution than the news service it came from; perhaps I'm simply being thick. If anyone can see who actually authored this article, please let me know so I can edit accordingly