How Much Does An SMS Really Cost?

I read an interesting story over the weekend about a recent survey that said that SMS, or texting, was the most popular form of communication. This doesn’t surprise me, as texting has become second nature to most of us.

What the survey did get me doing though, was thinking. How much, in real terms, does texting actually cost, and how much are the Telco’s making? I have heard through various sources and my own hunting around that the cost to the Telco’s of somebody sending a text message can be anywhere between a quarter of a cent, up to one cent, while they charge you a lot more depending on your plan. They would argue on unlimited plans, the more texts you make, the more value for money you get. But that isn’t the issue.

Can Telcos charge you a lot less and still make a lot of money? Telstra made $3.7 billion after tax last year, while Optus made $583 million. This, on face value, seems a little excessive and both Telcos could offer a little bit better deals in my opinion.

For an excellent article on how pricing works, and why Telcos don’t disclose the true cost, you should look at this American example of why Telcos appear to be making money from nothing. Computer science professor, Srinivasan Keshav from the University of Waterloo, in Ontario, explains it best when he says “…text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless doesn’t cost the carrier much more to transmit a hundred million messages than a million.”

Do I believe Telco’s shouldn’t make money? Of course not. If they want to make money, then it’s up to them, but what they should do it be up front about costs, and charge a fair and reasonable price. The purpose of the company is to provide a dividend to shareholders – what interests me is; is that dividend bordering on usury with regard to what it costs customers to have the service?