The Untold Story: SMS Costs

Have you ever wondered why it's possible to download hundreds of Gigabytes of data through an ISP for less than $50 per month, but it costs 20 cents or more to tell your buddy you're "@ the pub" via SMS? Sam Garfield from gthing.net did, and calculated the relative costs of sending data via an ISP, a cell phone, and via USPS to boot. Here's what he found, using the data equivalent of 2,560 MP3s as a baseline:

TCP/IP: $1
TCP/SMS: $61,356,851.20
TCP/USPS: $307,072.00 (Bits written out on paper)

So is there a reason service providers need to charge such a dear price? This slashdot commenter doesn't think so:

I know the true cost of SMS messages!

I made a paper for the university some years ago. The marginal cost of a SMS is 0.
They do have a little cost/opportunity. As a matter of fact SMS messages are sent on the control channel.

Initially SMS were implemented in the GSM standard as a control system, just like the ICMP protocol of the IP stack. Then NOKIA though to implement a actual instant message function using SMS. The Contol channel is the channel that your mobile listens to in order to receive calls. So for receiving a SMS a control signal is sent. Since bandwidth is somehow limited on these channels it could happen that in a situation of massive usage of texting the control channel gets saturated and normal voice protocol initiation is disrupted.

To prevent this carriers nowadays apply a kind of QoS delaying SMSs until there is no risk of congestion. So we can state that the marginal cost is 0 and the cost/opportunity is also 0

Another story is for the MMSs. Their cost/opportunity is even lower since they run almost enterely on GPRS thus using most bandwidth on normal data channels. Thus a MMS with pictures sounds and maybe video SHOULD cost less than a SMS.

So you wonder, why do I pay so much for a SMS or a MMS or even a Call: after the debts for the initial hardware infrastructure have been paid by the carrier you are still paying because of market segmentation (You won’t change the carrier on the fly) and a little monopoly (Almost impossible to start a new carrier from 0).