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Telecom companies turning huge profits on text messaging

By Justin Crann     Jun 27, 2011 in Business
Recent research into the cost for consumers to send text messages and for cellphone companies to carry those messages suggests that carriers could be marking up SMS services by as much as 5,000 per cent.
According to findings published in the Toronto Sun, which compared SMS data costs to those of tablet data, it is suggested that because tablet data generally costs around 17 cents per megabyte, the average text message – which generally contains half a kilobyte of data – should only cost an eighth of a cent. It actually costs almost 20 times that amount.
University of Waterloo professor Srinivasan Keshav offers similar estimates. According to his research, some telecommunications companies are marking up the cost of text messaging by almost 5,000 per cent. He based that estimate off of his belief that the cost to a telecom company for carrying an individual text message was "very unlikely" to exceed a third of a cent, while most companies charge 15 cents per individual text, the CBC reports.
The reasoning behind the markup is for anyone to guess. The phone companies are mostly quiet on the topic, and a survey conducted by the CTIA suggests that more people have been sending more texts year-over-year.
In a comment to the Toronto Sun, Marc Choma, a representative of the Canadian Wireless Telecommunications Association, said:
Market forces are going to decide what someone is going to pay for a particular service, whether it's a text message or a megabyte of data, whether it's a picture message, a ring tone or a whatever anyone is downloading.
The model of bulk pricing used to determine the price of individual text messages for those without a plan is 'typical', Telus spokesman Jim Johannson told the CBC.
But even with unlimited text messaging included in their plan, the average user is still overcharged, the Sun estimates suggest. This is because the standard cost to add unlimited texting to a phone plan is $15, meaning that users would have to send almost 2,000 texts each month at an eighth of a cent per text to meet – let alone exceed – the carrier's expenses. At those rates, only teens are really getting their money's worth.
This is not the first case of a phone company overcharging consumers: in the United States, there is an ongoing problem with 'cramming'. Cramming involves sneaking charges for services that customers have never even used on to their bill, and it has become so commonplace that the Federal Communications Commission is now moving to put an end to it.
The markup on text messaging is among the more dubious and carefully hidden ways in which mobile carriers turn a quick profit. In the long run, however, the price carriers charge for SMS messaging may have to be lowered to remain competitive with the new messaging services that will be available for iPhone and Android users in the near future.
More about Cellphones, Sms, SMS Messaging, Texting, Text messaging
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