There has been a recent trend of showing SMS prices as if they were a byte-charged service to compare them to unlimited data. Is SMS really just another data service that should be included in your unlimited data plan? After all, instant messaging on your computer doesn't seem any different and it's included with your broadband. Or is SMS something completely different?

As it turns out, SMS is different. My understanding of SMS on a CDMA network is that it goes over the public channels in the same way a call origination will hunt down a handset.  Since the data is short, by definition, this the only packet that goes out. The problem is this uses up one of the channels available for connecting a voice call to a receiving handset. The channels are a very limited resource as there are only a limited amount of them per tower. This limit increase the value of the channels to the carrier. I believe this is handled similarly on a GSM network.

It's also interesting that SMS became popular in Europe, before the US, where it wasn't uncommon for each message to cost the equivalent of 25 or 50 US cents.  If I also recall correctly, the first SMS in the US was billed at similar rates but that was too expensive for us Americans. So, the carriers kept lowering rates until, finally, adoption started increasing. For a while it was even extremely cheap or even free to receive SMS messages. That was replaced with bulk and unlimited plans, though, and receiving returned to the same price as sending.

Now that SMS is so popular, the per message prices are increasing. However, the bulk and unlimited plans are still around. To me, this means that the carriers are trying to get more people to sign up for the recurring charges of the plans rather than reduce usage. If SMS usage is clogging up the public channels and causing an increase in busy signal and connection failures, they may actually want to reduce the usage until they can build out their networks better.

So, I think there are multiple possible reasons why SMS pricing has been increasing again in the US. It may not be fair, but I also don't think it's fair to say that 20 cents for a 140 byte message is like paying $1,500 per megabyte since it's a completely different service. What do you think? Does the technology behind SMS matter when the user is billed for its usage?

Posted by Shane on July 14, 2008 10:46 AM | Permalink