You see this type of article design pattern frequently: "You are being ripped off - Product A costs Company B a maximum of C Dollars on the margin, and they are charging you D Dollars, which is many orders of magnitude larger than C"
The common rebuttal is:
"You are making the mistake of calculating on the Margin, you forgot to calculate E Fixed Costs"
But, I think of it somewhat differently:
It is rarely the case that you _have_ to use Product A at Price D, but you still do, which means it usually has more value to you than Price D - and is it that unreasonable that Company B should charge it's customers what their customers value product A at?
I know I would.
As a side note - I've managed to get most of the people I SMS with frequently into using WhatsApp, and, once I see that I've sent less than 100 SMS messages for at least three or four months, I'll shift it over to my Data Plan.
Apple will likewise have simliar impacts when they bring their SMS alternative online.
So - the free market does respond to this in a semi predictable and reasonable manner.
I think the real problem here is all the regulatory and financial barriers to competing in the telecomm arena. The free market has a hard time sorting itself out when there are so few players.
I don't have a solution to propose, but this is my observation.
In France you have 3 main players (and some little ones using their networks, but that doesn't really count). They were already condemned for some "secret" agreements on prices (http://www.cellular-news.com/story/15060.php).
A fourth operator is in process of entering the market, but it has had a lot of difficulties already. The 3 main actors really did all they could to slow the process down and even try to have the government refuse the license to the new one.
Their main reason? The new "challenger" is Free.fr. These are the same ones who pulled the internet market in France.
The ones who came and proposed a free dialup access (minus communication costs), when all other actors were still on "3 hours + comm costs" kind of deals.
The ones who pushed the ADSL market to lower prices for more service, and introduced the concept of "triple play" (you get a special router from the ISP, and you get free TV and phone calls added to the regular internet) ( http://fr.wikipedia.org/wiki/Freebox , the English page is lacking, though ).
They forced the other actors (roughly the same ones as the mobile telecom) to come up with the same offers for about the same prices.
So that's why they did everything they could to prevent Free from entering the mobile market. By fear of the same kind of thing happening.
Free.fr managed to get their license though, and are in the process of establishing their antenna network. So we will see what will be, when they will really start, and announce their mobile deals.
However, there is a difference between bulk, wholesale costs and individual retail costs, and prices. SMS is hardly the one and only example of high markup goods in history. Indeed, there are a plethora of entire industries in the same boat. Consider toys, many toys cost a few percent of their in-store retail prices, but again those costs are in bulk at wholesale. The same applies to batteries. And everyone knows about the huge markups in furniture and mattresses. The best advice is to find alternatives or shop around. If you just give in and accept the price that means you've declared you value the good you receive higher than the price you're paying for it (and in many cases SMS's are worth as much as people are paying).
Adam smith said that something is worth whatever a person at a particular time is willing to pay for it, there is no consistent, inherrent value in any given trade.
SMS is popular because it is ubiquitous, the mobile phone networks have priced it at a point where the vast majority of users are happy to pay for it. There is no law against high profit margins, nor should there be in my opinion. You could argue there is a competition/monopoly/cartel issue here, but that wasn't too apparent in the article.
And as others have said SMS will eventually go away due to the availability of data plans. I wish all my friends had data plans and were on twitter, I would never need to send an SMS again, until then I can afford it, especially since I don't send very many.
Well, in most of the normal goods you listed, someone's free to sell good, cheap furniture or toys. Target's in business, as are smaller businesses. Telecom's a natural monopoly, which is prone to distortions -- in a normal market, you'd think competition would drive the price of texts down to free, right? It's finally happening but it took a long time. Essentially now it's just a hidden cost in the price, add in $15 to what's advertised for the unlimited texts.
Calculating marginal cost+a portion of fixed cost tells you what it costs the cell carrier. But that's the wrong side of the equation to be looking at.
Mkt transactions happen when the cost of something overlaps with what someone is willing to pay for it.
And exactly how much someone is willing to pay for something is defined as the value of their next best alternative. In the case of texting, it could be the hassle of setting up all their friends WhatsApp, or typing in email addresses into their contact book, or something like that. (Also throw in a wee bit of behavioral economics, time discounting etc ) And that's why you get a bunch of people (myself included) willing to pay the $5 or whatever a month for unlimited SMS.
Also to clarify usually when people try to measure "how much you are getting ripped off" they are looking at the difference between the two sides of the equation above (cost, and price-what you pay) which is not always the best way to do it but it does give some indication of consumer/producer surplus. You might feel like you're getting ripped off but that's a judgment call are you really? You currently pay $5 a month for unlimited but I bet you'd be willing to pay 6 or $ if you had to. So really you are getting a deal, saving yourself at least $2 a month what they could be charging you if they knew your max reserve price.
>The common rebuttal is: "You are making the mistake of calculating on the Margin, you forgot to calculate E Fixed Costs"
An even better rebuttal is: "Price is not: (what it costs) + 1, it is the perceived value of the product/service. Costs have nothing to do with it besides deciding the pricing floor".
Anecdotally, this kind of what-it-costs consideration certainly influences my behaviour.
For instance, Easyjet doesn't pre-allocate seats on its planes, and offers 'speedy boarding' for something like £15 ($25). This means you get to board before those who didn't buy it (and, incidentally, sets up a game theoretic-type problem, in that it's only worth buying if enough others don't buy).
Irrespective of the value of this to me, I on principle never buy it. In fact, the very fact that they offer to take £15 off my hands for something that's transparently and utterly free to them lowers my opinion of them as a company.
(Note: obviously the price is set to engineer scarcity -- it wouldn't work if they charged £1 -- and from a rational/economic perspective it's a brilliant little wheeze).
I remember arguing extensively with a friend about this.
Whenever I switch plans, I demand free, unlimited SMS (local and international), and it doesn't take much bargaining to get it. This friend of mine from another country had to pay to receive text messages from anyone (myself included at a premium, for texting him from abroad), which I consider downright apalling.
I told him to negotiate a better deal or to switch providers because he was being blatantly ripped off, and no: he argued quite religiously that doing so would be promoting low standards, and that commodizing his phone service was the last thing he could ever possibly want (no further reason given).
When I argued that I was just trying to be helpful, he accused me of being a nonconformist (as if the expression is inherently derrogatory) and started ranting about how little grasp of economics I have. (At which point I lost my temper to because, as XKCD quite nicely has it [1], someone was wrong on the internet.)
Hello, I am curious what kind of leverage you had while negotiating free SMS. How much do you pay per month? Also, how do frame your request / get to speak to the right person?
On your front, you have leverage because you have options. (Well, assuming there is a reasonable number of carriers in your region.) In terms of demand, by default, they want you more than you want them, especially if you're switching carriers like I was, in which case your BATNA is not to switch.
On their front, they need to generate demand for their service. If by offering me for free something which has zero marginal cost to them they can achieve so, then of course they'll do that.
I was very explicit about that: I didn't want a new carrier, I wanted a carrier which offered me free SMS. If they didn't have that, I bid them a good day.
It was no use trying to buy that plan at the store, and it did take me a couple calls to the same carrier to get everything as I wanted.
There were a couple other perks I wanted, but those were negotiated into a non-refundable monthly floor payment + additional charges if I exceeded my quotas.
The plan (serving two people) had: 1 GB 3G internet access, 500 minutes/month of calls shared between me and my s/o, plus another 500 minutes/month for calls from one of us to the other. National long distance calls charged local call prices. Any excess in minutes or GB is charged additionally.
This makes for R$ 140/month (R$ 70 each). With wi-fi becoming increasingly fast and hotspots increasingly common, this was probably a bad deal on the long term. I guess you should never bet against people who know their trade. :-)
This is just repeating the same old crap that is completely devoid of anything but the most abstract high level concepts of how these things work.
I can't claim to be any expert, but I know at least that in GSM a handset must be allocated a dedicated control channel from a limited number of timeslots in the current cell for the duration of an SMS transaction. This happens on the receiving and transmitting ends. In order to establish said channel, the handset is first woken up through paging, which places load on another shared channel.
For each physical frequency, there are only something like 16-24 slots available. For each physical station, there may only be handful of frequencies in use, perhaps only one.
Installation of a base station is not cheap. In a busy metropolitan area with even 100 teenagers getting upset because their SMS failed to go through the first time they tried to send it (and repeatedly pumping send until it finally works), at least make a guess at the math involved for infrastructure costs to support this kind of thing. Don't forget to factor in the load it places on the random paging channels shared with voice signalling (again, more investment in physical frequencies to reduce error rates here).
In short, I wish someone who actually understood this stuff wrote some kind of rebuttal, the rhetoric is clearly at least a few parts bullshit.
Don't try to imagine this using some analogy like tiny UDP packets being spat out on a packet switched network, that's not what these networks look like. Transaction time is on the order of seconds, which requires a "physical" circuit to be setup beforehand.
Yes, sending SMS would be practically free on the Internet, but that's comparing apples to oranges.
The price of what unlimited text messages should cost aside, the ala carte pricing of text messages (at least for US cell carriers) is definitely price gouging. It cost (at least at one point) ~25c to receive a text message. And I have received spam text messages. This creates a perverse incentive to the carrier to do nothing to block spammers on their SMS network.
Also, my wife has a pay-as-you-go plan and each text that she sends or receives counts as a minute of talk time. I have a hard time believing that setting up circuit from one end of the text to the other takes the same amount of resources as a minute of talk time. Shouldn't a minute of talk time also take up a circuit? Wouldn't a text occupy that circuit for a fraction of a minute?
This, by the way, is specific for the US. In Germany, and I believe in almost any other European country, only the sender pays for SMS and calls. I spent a year in the US and this was something I found quite irritating - being charged for receiving a call.
American cell-phone plans generally give you a fixed number of calling minutes (plus various other bonuses, such as free calling on nights and weekends), and once you go over the quota, you pay for receiving calls. I just checked out the cheapest individual plan for Verizon in my area, and they charge 45¢ per minute after your allowance is up.
I assume they set things up this way because cellphone numbers share the same number space in North America as landline numbers, so if it costs more to maintain a cellphone network, the operator cannot recover those extra costs entirely from people calling into it.
If it's any indication on the informedness of the article:
In reality, an MMS is about one million times more data than a text message.
The payload of an SMS is 140 bytes. The MMS specification does not specify a limit, but providers often cap it at 300kb. Which, of course, is about 2000 times more.
Now, if an MMS had about a million times more data than a text message, that would make each message about 140 megabytes.
The article seems to have updated. It now reads "In reality, an MMS or email is anywhere from a thousand to a hundred thousand times more data than an SMS." Given that the previous paragraph says that it's an "email containing photo(s) and/or video(s)", that seems perfectly reasonable (it puts the range between ~140 KB and ~14 MB).
If that's the case, your sysadmin either needs to stop living in the past, or provide something more convenient than e-mail. Storage and LAN bandwidth are ridiculously cheap.
Stop living in the past? Sure. The Cloud is the new fad, everyone's talking about it. We have our company email managed in the cloud. LAN bandwidth and local storage has nothing to do with the bottlenecks in this system.
To the consumer cost to the company providing the product/service is irrelevant. What really matters is the value you extract for the price you pay.
Some products need to be sold at a loss for anyone to consider purchasing them, some are sold at a loss to get you to buy other products from the same company, and some are sold with significant margins. None of these situations really matter to the consumer, do they? All that matters is that I'm getting X and am willing to pay Y. If I can pay .5Y, then that's great I just earned myself a deal. I may not want to pay 1.5Y though.
So from a consumer perspective... I don't understand "how badly you're being ripped off". As an entrepreneur though I read that and think, potential opportunity. Any product/service that has extremely large margins has potential for competition and profits. For a short time at least, until the race to zero makes it less compelling to compete any longer.
I agree. Part of the value is that it is a default application in every phone. My previous startup provides an SMS gateway that sending 500K messages each year to mostly SE Asia receivers (small amount compared to what other providers do) Even now although data plans are getting cheaper and more common, there are still a lot people NOT carrying IPhones, Androids, BB etc. If you want a ubiquitous push notification mechanism, SMS is still the only app. And maybe part of the reasons why the author is ranting about this is because when I compare SMS rates across different countries, US users are paying quite a premium for SMS as compared to Asia or SE Asia where I am located.
I'm always amused when tech types (who tend to lean libertarian) act so outraged when something they purchase doesn't correspond to costs + some "fair" markup. (People seem particularly fixated on the prices of ebooks and text messages, for some reason.) Do you want to question the basis of capitalism and the free market? I'm all for it! But if you don't, don't complain when companies charge what the market will bear. Don't hate the players, hate the game.
I think the objection here is to the cell phone market, which more resembles a cross between an oligopoly and a cartel than a free market. You only have a handful of players and giant barriers to entry, so it's not easy to send a real signal about your unhappiness or choose an alternative.
A "free market" doesn't necessarily lead to a bunch of competitors. Everyone has this picture of a free market with 20 competitors and low prices, but a free market doesn't always work out that way. A couple of years ago we had a bunch of cell phone companies to choose from, but they keep merging because the infrastructure costs kill the small players. A small part of that is regulation, but most of it is just the intrinsic cost of building and maintaining a telecom network.
Maybe not, but there will be very low barriers to entry.
G+ could be created by anybody who had the dollars to buy enough servers (and the engineering capability to build it), it did not require a government license.
Not that the telcos aren't plundering the citizens, but the SMS messages do travel in a special channel that let's you get them in a timely manner without killing your battery. It has rather small bandwidth compared to the entire cell, and that scarcity for premium functionality should cost more.
That said, AT&T takes so long to deliver a text between my family that they may as well just poll infrequently in the regular channels.
Scarcity? What? Text messages are sent using idle channels that are not busy at the moment. It's only a scarce resource in the case that the available channels become saturated, in which case the provider has no qualms about simply dropping your text message.
Text messages are sent in the signaling channel, this is the channel that tells your cell phone it has a call and other stuff interesting only to telephones. The advantage here is your phone is always listening to that channel.
SMS is sent during idle spots in that channel, but it is a very limited channel and you couldn't run large amounts of data through it, there just isn't enough idle time.
Scarce idle time sounds oxymoronic, but it is only idle in the sense that it isn't connecting and disconnecting phone calls.
In many installations it was very well possible to take down entire cell by mobile terminated short message traffic, which is fact that is highly inconsistent with this "idle channel theory". The GSM signaling infrastructure is not especially suited to reordering and queuing of signaling frames. The scarce resource here is time on PCH (MT case) or RACH (MO case, which is more significant as contention there can waste resources even more), actual data transfer transaction is relatively expensive (and not-so well designed), but comparable in resource consumption to initial allocation of used SDCCH. By the way, it's interesting to note that source and destination addresses of SMS can be larger than it's payload.
You're misinformed about the channels that are used. It's actually the control channels that carry the SMS messages (the channels used for association to towers) not the voice channels. These channels can easily become heavily utilized with a large number of connected calls or devices associated to a single tower. Additionally, the message isn't dropped, it's instead queued for later delivery which typically occurs when your device migrates to a different tower.
As a group of software developers, I suspect there won't be much sympathy found here. You shouldn't price at cost+, but rather at value+. Many of us work on SaaS solutions, which have little to no marginal cost, yet we charge for the service.
But what are the fixed costs of SMS? It's traveling over a network that was initially built to carry voice traffic, and is currently expanding to carry data traffic. How much of the network was built specifically for SMS? It really seems like it was something shoehorned into existing infrastructure. I have a hard time coming up with the fixed costs of SMS (at the carrier level; You could always add the cost of phone makers to build in support, but that's not the carrier's job).
Unlike voice, SMS will be stored in a server and in case your mobile is switched off you will still get the message, when you switch on your phone. So, there will be bit extra cost for maintaining these servers.
They first started charging for sending, receiving remained free for several years (I used my phone as a pager from 2001-2003). Then they started charging both sides of the transaction.
It would be nice if they at least only charged different accounts. Texting anyone on my family plan means I pay for both sides.
I guess it all depends on who you are. Some international carriers I've worked with, handling SMSs is a net loss to them - but they have to do it(as a side offer to gain customers for services they do make money on, mostly voice traffic, and because they're lawfully bound to do it as they're operating a country's international SS7 border gateway).
Also, telco equipment isn't cheap. All those tens of thousands radio towers, exchanges, cables cost arms and legs. They have to make that money somewhere. Though, I've no doubt someone's getting far richer on your SMSs than what would be sensible. Entering this market is a huge barrier - you need expensive equipment, you need licenses, you need interconnection arrangement with other carriers, and you often need to build up a physical network. Thus, few actors and little competition.
Here's btw. a screenshot decoded SMS message captured on a SS7 network for your pleasure :-)
http://imgur.com/E0qKv
I think the main rage people get here is when they get data on their phone and so can make a much more of a "like-for-like" comparison between various means of delivering 132 characters delivered to/from a mobile device.
I mean of the user experience, not of the very different backend networks in place.
Mobilicity in Canada. Coverage isn't great, but hopefully it improves. Fido used to have terrible coverage in Canada, but they've worked some kind of deal with the other carriers, so their coverage is now much better.
Here's a price guide: http://mobilicity.ca/plans/
I do the basic $25/mo plan, then $10/mo for unlimited cross-country calling (for family) and another $10/mo for unlimited data.
I'm not the parent, but if you were grandfathred in (or I've heard there are tricks to get it from scratch) T-Mobile has a $5 unlimited data plan (in the US). It doesn't include texting, but you can just use Google Voice.
Sorry for the late reply. Yes, that is the plan I'm talking about, but the article is incorrect. They never closed the loophole; they completely opened it.
Anyone with the $5 plan actually has free access to any data connection; T-Mobile doesn't even try to separate it from the other data plans. The only problem is they don't officially offer it anymore.
I've heard some people have managed to convince customer service reps to turn it on from scratch by calling with their SIM in a feature phone and saying they want an old cheap data plan that would support their old cheap phone for doing simple online tasks.
the cost of SMS is determined by how much consumers can be persuaded to pay
Correct, that's what happens in a free market. Since when are businesses supposed to price according to the cost of what they are selling? Their job is to make a profit, and the best way to do that is to find the balance between the highest cost and getting as many people as possible to pay that price.
Not to mention that SMS messages being more expensive than they could be is hardly a new fact, and indeed is written about often enough that it has been on HN multiple times in the last year alone.
Did you know that data being sent as a text message is several orders of magnitude more expensive than sending data to the hubble space telescope (about $8 per Mb)?
"prices for individual text messages on pay-as-you-go plans have quadrupled from an average of 5 cents to 20 cents"
Really? In the UK they've stayed static at about 10-12p for at least ten years (for a 'standard' text on a PAYG plan, assuming no extras which give you reduced rates on texts to certain people etc.). We're also not charged for receiving standard texts (there can be a charge for premium ones, but not everyone can send those).
Yes. In the UK, as with most of the world, we embraced text messaging (12years ago I was txting every day). In the USA, this took a lot longer, with phones often note supporting SMS.
Who pays by the text? Don't most plans include a large number of free SMS messages?
Besides, this guy's analysis is very flawed. For one thing, SMS messages don't take the same path as data. They can't, since so many people (still) don't have smart phones. Also, the idea that because one kilobyte costs x that one byte ought to cost x/1024 completely ignores setup and fixed costs.
What are the fixed costs for SMS? Aren't they using infrastructure that was setup for the voice network? Can you really call the cost of setting up a new cell tower a 'fixed cost' of SMS (i.e. doesn't it also carry data and voice)?
Well, the money has to come from somewhere. You say SMS uses infrastructure that was set up for the voice network. But you could just as easily have said voice uses infrastructure that was set up for the SMS network, which would make SMS a bargain and voice overpriced.
Mobile carriers put enormous amounts of money into their infrastructure. Billions and billions, on top of the tens of billions they paid for spectrum. And they're not charities, so one way or another all that's going to get billed to customers, whether it's voice minutes, SMS, data, or plans with bulk minutes/messages/MB.
> Well, the money has to come from somewhere. You say SMS
> uses infrastructure that was set up for the voice
> network. But you could just as easily have said voice
> uses infrastructure that was set up for the SMS
> network, which would make SMS a bargain and voice
> overpriced.
The primary motivation for rolling out the cell networks was to provide voice coverage, or else SMS wouldn't be a hack on to the GSM protocol and we won't have things like a 140 character limit. Also, implementing things like E911 take a lot more money than sending 140 characters of text through some control channels, even if it is a switched connection.
This is hardly a "you say tom-ay-to; I say tom-ah-to" sort of situation. Using your logic we can attribute the roll out of phone lines as a 'fixed cost' of dial-up networking, but I doubt you'll find many supporters in the idea that all those lines were laid for the expressed purpose of dial-up and that analog voice calls are just 'piggy-backing' on the dial-up lines.
> And they're not charities
Where did I claim that they are not allowed to make a profit? I was just generally curious as to what fixed costs could be attributed directly to SMS, seeing as the majority of the infrastructure was rolled out for voice or data.
The primary motivation for rolling out the cell networks was to provide voice coverage, or else SMS wouldn't be a hack on to the GSM protocol and we won't have things like a 140 character limit.
Before there was voice, there was paging. I'm not super familiar with GSM, but I know for CDMA the reason SMS messages have a small fixed size is they used to go out over the paging channel. I don't think that's the case any more for CDMA. I'm kind of surprised it is for GSM.
In any case, the point is there's no objective way to untangle costs in an item that has a large implementation cost but provides more than one service.
A deep problem seems to be a high barrier-to-entry for would-be competing carriers. If it was easy to start a business that charged rates people were happier with, someone would do it, and make a good deal of money. As things currently are, there's no real incentive for carriers to change -- they get away with it because consumers don't have a choice.
That barrier is impossibly high, at least in the US, because there's a constrained resource involved: spectrum. I suspect it's quite literally impossible to start a nationwide carrier at this point without congressional action to reallocate frequency bands from some other use.
Water bottles are great. Way better than those absurdly overpriced bottles of water!
(Odd how one ordering of the two words seems to imply to me a sort of reusable bottle made of heavy plastic or metal while the other ordering implies those cheap plastic bottles of water that often times cost as much as the reusable ones anyway).
Heh. I didn't read it that way. I thought you meant a block of ice with a hole in it.
My sigg has been beaten near death. Horribly dented, etc... I'll keep using it as long as it keeps holding water. Then I'll get a new one and take it snowboarding for a while.
I hate being ripped off just as much as the next guy...
But, I don't think showing the cost of SMS is the right way to fix the market. Guess what, there are a lot of things in this world that you buy with ridiculous mark ups.
Isn't that infuriating? The carrier is literally selling you spam: they charge you to receive that spam message. They could provide a whitelisting service, which would be technically simple to implement and would solve the problem completely. But they have incentive not to.
True, but people tend to get a little irritated when the price is jacked up by what amounts to a government-sanctioned cartel. "Voting with your money" has little to no effect.
I suppose 37 Signals and Adobe are ripping off their customers as well because their marginal cost is close to zero and they are charging... more than zero.
Actually, I agree SMS is a ripoff, but the marginal cost isn't why. It's a ripoff because it's something people want and there is no other way for them to get it, which is an effective monopoly. With Google Voice and other competitors gaining adoption on smarter phones, I expect this to change.
This. Let's remove all of the technical arguments and just put it this way: even if the telcos were using magic to transmit messages, which is theoretically free, I would still be willing to pay them $5-$10/month for them to perform that magic, because contacting my friends through texts is worth that to me - I have no cheaper way of getting that exact service and ultimately it's worth what they are charging, to me.
The monopoly argument does resonate, however, and I agree that introducing competition is a great advance.
Do people feel that self-sustaining websites are a ripoff because the creators no longer have to put in any time or effort to earn revenue?
SMS is "expensive" anywhere in the world when counting $s/byte, it's not just the US. The reason is that you cannot simply do price comparison based on data-rates: it's a flawed top-level down approach ignoring very real concerns and constraints.
The reason for SMS being relatively expensive per byte is that it's actually a hack which allows us to send data over the global GSM control channel, not a regular phone-allocated voice/data-channel. This makes it's main carrier a very bandwidth constrained channel and SMS is second class traffic sent on a as-available basis, but with queued on demand push-reception for the recipient.
Your data-traffic however has a dedicated channel, realtime priority, and realtime constraints, and it would need to go trough a intermediate service which can queue it if the receiver is not there. And the recipient would have to have an always on data-connection polling for incoming messages, draining your battery, much like Email push-notification does on modern smartphones.
In other words: Data and SMS are fundamentally different services, operating with fundamentally different channels and technologies. Your OSI-minded application-level analysis is incomplete.
True, this might not make much difference to the end-user of the service provided, but there are technical reasons for why SMS and data is treated and priced differently.
As long as SMS is a defined standard as it is now, and that standard involves piping shit trough the GSM control channel and not using data (something you don't want when roaming abroad), the fact that they are priced differently is perfectly reasonable. If the price-difference itself is reasonable is another debate all together.
Why do people keep texting? Everyone I know uses a smartphone that could be utilizing free data via Google Voice, not to mention there is iMessage, Huddles and other cross platform alternatives that are cheaper and technologically superior to SMS.
I think it's down to either plan structure, compatability, not knowing a better way or lazyness. In my case the best plan I can get an iPhone 4 on on a good network just so happens to include unlimited text.
Chicken and egg problem ?
None of my friends are using any of the smartphone bundled programs/services. Thus I can't send them messages by other than SMS.
Once you go down the path of using one of these other services, there's a standarization problem. I'd go nuts after a while if I had to juggle Google Talk, MSN, Huddles, or even fiddle with setup to make the multi protocol messaging applications play nice.
Sensationalist crap. If the costs to to the company to send a thousand text messages is a penny and they're charging $5 for it, then they're getting a 50,000% profit. You'd think that investors would be car-bombing each other for returns like that.
'Greatest ongoing con job'? Really? When the US housing con job was exposed, the world economy tumbled. SMS con job exposed... people shrug and go on.
I find it somewhat ironic that on a site dedicated to "find a niche and exploit it", there comes this article screaming 'bloody murder!' about business providing a service for a price above the bare bones wholesale cost.
The common rebuttal is: "You are making the mistake of calculating on the Margin, you forgot to calculate E Fixed Costs"
But, I think of it somewhat differently:
It is rarely the case that you _have_ to use Product A at Price D, but you still do, which means it usually has more value to you than Price D - and is it that unreasonable that Company B should charge it's customers what their customers value product A at?
I know I would.
As a side note - I've managed to get most of the people I SMS with frequently into using WhatsApp, and, once I see that I've sent less than 100 SMS messages for at least three or four months, I'll shift it over to my Data Plan.
Apple will likewise have simliar impacts when they bring their SMS alternative online.
So - the free market does respond to this in a semi predictable and reasonable manner.