Monday, December 29, 2008

Getting Reamed On Text Messaging Cost

Interesting article in the NYTimes on how cellular text messaging works.

Turns out that the digital systems that the cellular carriers use sandwich text messages within packets of data that are already required for a cellphone to keep in constant touch with a cell tower.

That's right, the cellular companies aren't using any extra bandwidth at all to accommodate text messaging.

The cost of providing text messaging is very very very small and yet the cellular companies are charging customers big time.

In fact the cellular carriers are making so much money on a service that is costing them so little that none of them are prepared to release the actual numbers on this incredibly profitable area of their operations.

Now this might seem unimportant - so what if Sprint, AT&T, T-Mobile, and Verizon all charge from fifteen to twenty dollars per month for unlimited texting, or around 20 cents per text outside a package?

Right?

Wrong!

Since the cost to the carriers is very, very, very little this would imply that competition would drive the price that the carriers charge down - but this hasn't happened at all.

Which means - you guessed it - price fixing - which is illegal.

The carriers are facing dozens of class action lawsuits, and in the future we should see some rebate checks headed our way, as well as a reduction in the cost of texting, and a probable increase in the portion of our cellular bills for other services - because in the end - we is screwed.

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