Re: You might be paying $1,000 per MB of SMS

[David Farber <dave () farber net>]

Begin forwarded message:

From: Bob Frankston <bob37-2 () bobf frankston com>
Date: July 30, 2007 12:47:39 AM EDT
To: dave () farber net, ip () v2 listbox com
Cc: dpreed () reed com
Subject: RE: [IP] You might be paying $1,000 per MB of SMS

David is right – the costs aren’t directly associated with the  
individual bit or even message.  Determining cost is not at all  
simpler nor deterministic – it depends on the model you use and many  
assumptions. Pricing too is not directly related to cost. Ideally  
competition keeps the price in check but today’s telecom industry is  
defined by legislation more than marketplace dynamics.

The industry explains why it has to force us to pay for SMS as a  
service in slides I point to http://www.frankston.com/? 
name=AssuringScaricty. It make sense to charge prices based on the  
value of services – after all, does a restaurant charge you for the  
raw materials? The problem here is that there is no pushback from a  
marketplace because we don’t have access to the raw materials the  
carriers use - the physical transports.

While $1000/MB is outrageous, it’s really 10¢/message and most people  
have unlimited plans thus the apparent lack of rage. The number is  
important as a symptom of the larger problem of being forced to stay  
in the same service model we had with telegraphy nearly two centuries  
ago. The Internet had a different history – rather than trying to  
deliver specific solutions we discovered what we could do with the  
available cheap bits. If you wanted telephony you had to use the  
phone network. But things have come to a head because with a large  
number of bits, thanks to statistics, we can do telecom applications  
ourselves. This is why I found it so strange that people are fixated  
on regulating the industry into being neutral rather than questioning  
why are we stuck in the service model.

There is a cruel irony in SMS. In theory we’re paying a very high  
premium because the telecom industry guarantees delivery (Quality of  
Service) yet in this case computer IM is far more reliable since we  
use protocols that can confirm delivery and resend whereas SMS  
messages are often delayed and can get lost and MMS (the multimedia  
version) is a mess. You can get IM clients for smart phones but as  
long as most people have less capable phones (which are dependent  
upon telecom services) you have to use SMS.

As long as we frame the telecom debate in terms of services rather  
than basic connectivity we’ll find ourselves dealing with each  
symptom in isolation rather than effecting real change.

-----Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Sunday, July 29, 2007 16:35
To: ip () v2 listbox com
Subject: [IP] You might be paying $1,000 per MB of SMS



Begin forwarded message:

From: "David P. Reed" <dpreed () reed com>
Date: July 29, 2007 3:00:24 PM EDT
To: dave () farber net
Cc: ip () v2 listbox com
Subject: Re: [IP] You might be paying $1,000 per MB of SMS

The idea that the cost of operations of a network or the price of a
network service is largely determined by the number of bits
transmitted is widely assumed to be true.   However, it is absolutely
false.

The cost of an SMS at the implementation level largely consists of
maintaining the HLR (home location registry) as users move around the
network.   It has very little to do with the number of bits transported.

And some careful thought about networks would suggest that the
infrastructure cost is a fixed cost that can be allocated in a
zillion ways, highly dependent on depreciation/amortization and on
other assumptions.   This is not amenable to a cost/bit notion of a
"fair price".


David Farber wrote:
>
>
> Begin forwarded message:
>
> From: Debi Jones <debi.jones () gmail com>
> Date: July 29, 2007 1:55:08 PM EDT
> To: dave () farber net
> Subject: You might be paying $1,000 per MB of SMS
> Reply-To: mojo () mobilejones com
>
> Most mobile phone subscribers love texting.  And they love that it
> saves them money over making phone calls.  Ten to twenty cents for
> a communique versus $.10 per minute for voice is seductive, indeed.
>
> But have you ever gone through an exercise to determine how much
> per MB SMS is costing you?  This comparative cost exercise
> demonstrates why carriers/operators continue to receive the lion's
> share of their data revenue from SMS.  At $600 - $1,000 per MB,
> what is standard margin for the telcos is a web company's wet dream.
>
> http://mobilejones.com/2007/07/27/you-might-be-paying-1000-per-mb-
> for-sms/
>
> for IP if you wish
>
> ...Debi Jones
>
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