November 14, 2012

No, It Does Not Cost 1/1000th Of A Penny To Send A Text Message

Eric Barker tells us that it costs something like 1/1000th of a penny to send a text message over a mobile phone network. It is of course possible to put the numbers that way: but itís grossly misleading Iím afraid. Forbes reports.

quotemarksright.jpgSMS does indeed produce very good revenue for the telecoms companies but not the sort of amount that would be implied by selling for 20 cents something that has cost you one thousandth of once cent to do:

For cell phone users paying a la carte, the retail price of transmitted data is around $1 a megabyte. At that rate, the price of a 10-character message ought to be about 1/1,000 of a cent. Rounded to the nearest cent: free.

Even the 1/1,000-cent figure arguably overstates the true cost of a text. Unlike e-mail, Internet, and voice data, text messages are piggy-backed onto the cellular network. They occupy otherwise unused space in a control channel used for network maintenance. So as far as text messages are concerned, the cell phone companies are like the mean clique in high school who sold elevator passes (and thereís no elevator.)

Whatís happening here is a confusion between marginal costs and total costs.quotesmarksleft.jpg

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