Text Messages Small on Content, Big on Profit

Much as I've tried to avoid it, text messaging has become part of our society, with an estimated 2.5 trillion messages sent in 2008. But like anybody else who's thought long and hard about the perils of texting, I've found myself wondering: why's it so expensive? The major providers charge around $0.20 for sending these tiny messages that are just 160 characters.

Meanwhile, the same companies are sending a higher volume of far more complicated voice data every single day for prices that are far less. Furthermore, if you buy your messages in bulk-AT&T's $5 for 200 messages, for example-it lowers the price per message to almost a tenth of what individual messages cost. Which makes text messaging almost pure profit for the wireless companies-especially if you don't use the full amount of messages you pay for.

The real question, of course, is how much does text messaging cost the wireless companies? Well, according to a professor of computer science at the University of Waterloo in Canada, that cost is next to nothing. Turns out that not only is sending the text messages extremely cheap, it also uses bandwidth called "control channels" which are there to manage the operations of the network. That space is set aside, regardless of whether or not it's being used (think of it as an empty carpool lane at rush hour).

It's hard to say whether or not this situation will change in the foreseeable future: with just four companies dominating the U.S. wireless industry, competition is not exactly running rampant. This recent round of questions, however, was provoked by a letter to the providers from Senator Herb Kohl of Wisconsin, and around twenty class action lawsuits have been filed against the carriers claiming price-fixing.