The rising cost of texting

If you thought gas prices were rising too quickly, check out what's been happening to text messaging.

Since 2005, rates to send and receive text messages on all four major carrier networks have doubled from 10 cents to 20 cents per message. This percentage of increase is on par with similar price hikes at the gas pump as crude oil prices skyrocket. In 2005, Americans paid on average about $2.27 per gallon for gas compared with more than $4 a gallon today.

Last October, Sprint Nextel was the first to introduce the new price of 20 cents per text message. AT&T and Verizon Wireless soon followed with their price hikes going into effect this spring. And this week Engadget reported that T-Mobile USA will match the other big three wireless operators in jacking up SMS texting rates to 20 cents per message. The price increase goes into effect August 29.

On Tuesday, AT&T announced that texting will cost new iPhone users more than it had previously. The old iPhone plan included 200 text messages in the $59.99 voice and data plan. But plans for the new iPhone 3G that hits store shelves next week will cost $5 extra for 200 text messages, bringing the total price of a comparable voice and data plan on the new iPhone 3G to $74.99 a month. (This is with the $69.99 "Nation 450" bundle plus $5 for the 200 text messages.)

The new wave of price hikes comes just one year after all the major carriers raised individual text messaging rates from 10 cents a message to 15 cents per message.

So what's with the 100 percent price hike in two years? Well, there's nothing that has changed in terms of the cost associated with delivering this service. In fact, text messages cost carriers very little to transmit. And when compared with what carriers charge for transmitting other data services, such as music downloads or surfing the Web, the text messaging rates seem exorbitant.

Carriers limit the number of characters that can be transmitted in a text message to 160 characters. Each character is about 7 bits, which works out to a maximum of about 140 bytes of data per text message. This is peanuts compared with the size of sending or receiving an e-mail or downloading an MP3 song over a cellular network.

One blogger has done the math. If the same pricing was applied on a per-byte basis to downloading one 4MB song it would cost the user almost $6,000 to download a single song via SMS texting.

One can easily assume that the mark-up on a text message is several thousands times what it actually costs carriers to transmit this little bit of data, considering that mobile operators are only charging $30 to $40 a month extra for mobile data plans that offer 5MB worth of data per month.

The reason that carriers are charging so much for text messages is because they can. Even at 15 cents and 20 cents a pop, people are willing to pay for it. The carriers are also trying to get consumers to sign up for text messaging packages and unlimited plans that vary in price from $5 a month extra for 200 messages to $20 a month extra for unlimited texting on AT&T's network, for example.

The massive price markup on texting and the growing popularity of texting have resulted in huge profits for mobile operators. Verizon reported that for the first quarter of 2008, its wireless customers spent $11.94 a month on data services, an increase of about 33 percent from a year earlier. The carrier didn't break out what percentage was spent on text messaging versus other services, but there's a good guess that a lot of the additional revenue from data came from texting. In total, mobile data accounted for about 20 percent of all wireless sales for Verizon's first quarter.

Unfortunately, it doesn't look like consumers have much legal recourse for getting carriers to adjust their pricing to a more reasonable rate. There's nothing illegal about charging as much as the market will bear for any service.

But that doesn't mean that consumers like it. What do you think about the high cost of texting? Are you feeling the pinch in your wallet yet? I'd love to hear your thoughts in the "Talk Back" section below.

[hawaiiinsomniac]

Yup, I remember the good ole days; when I had Voicestream, right before they switched to T-Mobile, $10 unlimited for SMS.

I am preparing to get the new iPhone 3G, and currently I pay $69.99 which includes 450 minutes and 1500 SMS messages, my new bill will be $74.99 with only 200 SMS messages.

AT&T is really milking the iPhone for all its worth. I know their landlands aren't moneymakers, but come on!

No worries though, I just hope that Google Talk will be available on the new iPhone.

Take that SMS!

[BLSCPTS]

What do I think of the high cost of texting? No much. I don't text much at all with my BlackBerry. I'll use email instead. I get a couple of text messages from a couple of family members in another state every once in a while but is isn't enough for me to get the texting plan along with my voice/BB data plan.

[Squashman2]

Sounds like Price Fixing, which is illegal. If all the major carriers are getting together behind closed doors and saying "OK AT&T and Sprint will raise their prices first and T-Mobile will go last, then next time we want to raise prices T-Mobile will go first." That is illegal.

[nickclark567]

I'm with Verizon Wireless and recently switched my plan from a regular voice plan to the unlimited texting plan. Previously, there was the account holder plus three additional lines, with two of them adding the $10 a month texting package for 500 texts. Since switching to the new plan with the same amount of minutes, we are only paying $5 more, while getting unlimited texting on all four lines, instead of only 500 on two of the lines. So the cost isn't bothering me, since I don't pay for each individual text.

[gsmiller88]

With my regional provider I get 1,000 for $9.99, which seems a bit too high if you ask me.

[jbrunhaver]

It actually turns out that it doesn't cost anything for a cell-phone provider to transmit text. The text messages utilize a reserved field in the header of packets which transmit other types of data. This piggy-backing mechanism is why there is significant variance in the delay of text messages.

[jbrunhaver]

It actually turns out that it doesn't cost anything for a cell-phone provider to transmit text. The text messages utilize a reserved field in the header of packets which transmit other types of data. This piggy-backing mechanism is why there is significant variance in the delay of text messages.

[mikekrause]

Never sent a text, never will. What kills me about this is when I see all the teenyboppers in the movie theater with their glowing phones texting each other during the movie. Who's paying for it? My guess is mommy and daddy. Like most addictions (I would lump my own addiction to Starbucks in this category, ) people will pay a premium for their fix. It's a simple as that.

[mjconver]

"text messaging rates seem exurbanite"? What, you can only get them in the country?

[mikekrause]

Never sent a text message, never will. What kills me about this is when I see all the teenyboppers in the movie theater with their glowing phones texting each other during the movie. Who's paying for it? My guess is mommy and daddy. Like most addictions (I would lump my own addiction to Starbucks in this category, ) people will pay a premium for their fix. It's a simple as that.

[soccre55]

I think you mean to say collusion, which is hard to prove. You would have to have a memo or email or something between companies stating a plan to keep prices high. Sadly, reacting to other companies successful pricing policies isn't illegal, as shady and greedy as the pricing is.

[accounts--2008]

SMS is the biggest scam job of today's information world. Not only do we have to pay exorbitant rates for something much simpler than email, but we have to pay when we RECEIVE them!

Since when is it legal to charge someone for something they didn't request? people who pay $20/month for unlimited texts love to send texts to all of their friends who may not have those plans and have to pay for something they probably didn't ask for. Not to mention spam SMS. Am I supposed to call AT&T every time I get a spam SMS to get them to remove the 20 cents?

It represents the worst that capitalism can bring us. Consumers should boycott SMS!

SMS - "Simple Message Scamming" (others should post their own acronym meanings!)

[soccre55]

I just hope there is an iphone app that gets around sms....

[Rants&Raves]

When you say exurbanite, you speak of people living outside of the city (you know, where stuff is cheaper). I think you wanted to mean exorbitant, which has grown to mean really expensive (but literally means out of orbit).

[Tradeur]

Text messaging is the ultimate ripoff. But it will endure as long as hapless consumers continue to use it. I will stick to free instant messaging.

[globalVariable]

I still have the old old ATT Wireless plan from the pre-Cingular days which gives me unlimited incoming text messages. I have been heavily using this feature to receive mail, IM, calendar, weather, traffic, stock alerts and even messages from visitors to my website. The new ATT has coaxed me into signing up for new plan which will give me "Free Phones" but will snatch away this very useful feature. On one occasion they arm-twisted me into doing this by shutting down the text messaging feature under the pretext that I am under the "Blue" network and now they only support the "Orange" network (whatever that meant). But I have resisted all attempts and am still enjoying free incoming text messages and 10c per outgoing message. I won't give this feature up, now that it is a 20-dollar value !

[brianmedia]

This is exactly what i knew would happen. Years ago when there were lots of main wireless providers including AT&T Wireless (not to be confused with the new AT&T with Cingular) the plans were MUCH better. now with all the buying out we only have 4 major providers and prices are actually rising.

My old AT&T family plan was $69 for 2 lines that shared 2200 minutes, unlimited N&W @ 7pm, unlimited text....

you better believe they are silently working together to keep prices where they are at and nickel and dime you with little stuff to make even more money.

[stlhobbit]

Text messages waste more time for me than a 30 second call. I don't feel the need to be so completely digitally connected & obligated to respond. I actively discourage friends from texting me & I rarely respond when they do.

I don't anticipate buying a SMS texting plan.

On a more philosophical note: Solitude is both a value and a sanctuary that we seem to have forgotten. Being digitally plugged in 24/7 is not the way I want to live.

[ittesi259]

Any type of IM client typically is billed as a text message for cell phones....AIM, Yahoo, MSN, all of them....read the ToS before you go crazy.

[skellener]

Time to bust up the large carriers again. And while we're at it but up the large oil companies as well. Competition is good. This is collusion. There is no free market in the oil or cellphone industries. That's why they raise prices and we suffer. It's government's job to make sure this type of monopolistic abuse of the market doesn't happen. BREAK THEM UP! Have real competition. Watch the prices fall!