How Facebook plans to bust up the SMS profit cartel | Hacker News Reader

How Facebook plans to bust up the SMS profit cartel

tech.fortune.cnn.com

57 pointspanarky38 comments

It's quite a stretch to say that Facebook's purchase of Beluga will lead to a "bust up" of SMS.

SMS will be around for a long time because it's compatible with every cell phone, regardless of OS or carrier and it's compatible internationally, even in countries where Facebook is blocked.

This sounds like the start of a cycle of "death of email" style stories for SMS.

It's not going to kill SMS, it's going to drive prices down by competing in an overlapping market.

It's already begun. With Virgin Mobile I pay $25/month for unlimited 3G data and unlimited SMS.

In the UK (I can't speak to other regions) unlimited SMS plans became common because the networks realised it was a great way to hook young people - and it's been available for several years.

Unlimited SMS plans are common in the US, but the 'cartel' part comes from the pricing structure:

  $10/month for unlimited
  $0.35/text sent (without an unlimited plan)
  $0.25/text received (without an unlimited plan)

The pricing structure is there to drive you to the unlimited model by price gouging you if you remain ala carte. They even make it difficult for you to turn off the ability to received text messages. This way when you rack up the charges from receiving text messages, you are up-sold to the unlimited plan rather than given the option to disable receiving of text messages. [This is also rather annoying when someone spams you with a text message advert... b/c now you've just PAID to get an advertisement that you didn't want.]

Paying to receive is the part of the US system that I don't understand, not just when it comes to SMS.

In the UK/Europe (and afaik most other non-US regions?) receiving never costs - even if I receive a call when in another country, doesn't cost me anything.

That's not true in Sweden. Most plans in Sweden charge when you receive a call in another country, but never for an SMS.

Same in denmark, it costs to recieve a call in anothe rcountry, but not sms messages. The reason is that you can decline to recieve a call, but you cant decline a sms.

Do you check your bill? It does cost to receive calls in other countries (cheaper than dialling out, so always get people to call you if you can)

Guess from the other replies I was wrong to over-generalise about Europe, but it certainly doesn't cost me to receive calls when abroad (I'm on Vodafone UK), and I know the same is true at least for O2 and Orange.

I'm on O2 and they definitely do charge.

Take a look at http://www.vodafone.co.uk/personal/price-plans/managing-my-c... and you will see Vodafone do charge as well. Perhaps you have Vodafone passport which makes it cheaper?

Sorry to be a pedant, but I wouldn't want you to end up with a big bill you didn't know about!

fyi: even receiving voice mail once a SIM is registered in a foreign network generally incurs a cost with EU carriers and is charged like a passive call in roaming, even when the phone is subsequently turned off. the only way to reset this is for your SIM to register again with your home network.

on a minor note, receiving return receipts is typically charged like an outbound SMS.

Its not going to kill the SMS. However, its going to impact operators revenue. SMS has been the cash cow to operators for a longtime now. The cost for sending/receiving SMS is almost zero except for the network maintenance cost. So this will definitely impact operators revenue. Mobile VoIP didn't kill circuit switch calls, but did dent operators voice revenue especially international calls.

No mention of Google Voice? So far it's the best option I've found for free texting from a smartphone.

Good to see Facebook using their power for good. SMS prices are outrageous. Although on second thought, I really don't like the idea of all my texts going through Facebook.

Do a lot of people pay per SMS message? I've been on an "unlimited" text message plan for at least 4 - 5 years. Granted it's still a lot of money in terms of the raw bandwidth consumed, but as is pointed out here very often, the price of a product is more about its value to its users than the cost of its raw materials.

Not only do they pay per SMS message to send, quite a few people pay per message received.

Which has always seemed insane to me. That's like being billed every time someone called your phone, whether you picked up or not.

Deciding to move to an unlimited plan from the price gouged ala carte pricing seems like caving into the whims of the cell providers. They want you to go to the unlimited plan, otherwise they wouldn't raise the pricing of ala carte text messaging so high. Once you are paying a flat fee per month, they can count on 'guaranteed' income from you rather than hit-or-miss income from ala carte charges that they can't predict from one month to the next. [Either way, the raw costs of text messages are waaaay below what you actually pay for them.]

Just because it's a hugely exploitative tactic doesn't mean it's not a better deal for me. Should I fight The Man by paying him $200 extra in SMS fees?

I suppose I could just disable SMS on my account, but then I'd be stuck without my favorite method of mobile communication. Fight the power.

It's always easier to join the 'evil empire' than it is to be a 'rebel fighter.' You seem to advocate giving up on your principles just because it's too hard to stick too them. 'Fight the power' indeed...

Yes, because I send/receive on the order of ten or fifteen a month. Every time I actually talk to Verizon I have to endure a dumb conversation where they try to convince me that I'll save money by switching to a text plan, and they seem genuinely nonplussed when I point out that even twenty messages times 20c/message ($4) is still less than the $5 for the text plan.

SMS is in a dominant position because it is ubiquitous. It has had this advantage on every IM platform to date. It is for this reason alone that it still exists and thrives.

The SMS prices are indeed ludicrously high, particularly in the US. Unjustifiably so and I can't see how you can't look at the actions of Spring, Verizon, AT&T and T-Mobile and conclude anything but price collusion.

To me this looks like CNN making a story out of nothing. Facebook has said that every acquisition made to date (at the time of the quote at least) was a talent acquisition. I'm far from convinced Beluga is any different.

It's an app for group messaging? Unless I'm missing something, that's neither new nor revolutionary. How exactly does it conquer the ubiquity of SMS?

How does Beluga's offering differ from push notifications on any other platform? Are they actually making SMS cheaper? If so, does anyone know how?

Isn't the SMS pricing racket pretty much limited to America? Do other countries also charge exorbitant amounts for sending text messages?

Most serious texters here in England have contracts which include a large number of "free" texts, but my own experience is paying £0.10 per message which is about $0.18. I'm on a contract phone now with "free" texts, so prices may have changed in the past few years.

In the US, you pay to receive text messages as well when you aren't on an unlimited plan.

Yes, they do. In India the average price of sending an SMS is 1 rupee, the same as making a call for 60 seconds.

EDIT: Which carrier ? Unless you buy SMS pack, the default rate per SMS is rupee 1. Am talking about Airtel and BSNL. I think the article too mentions this. Quoting it: "The wireless companies all told Kohl's antitrust committee that while the price of individual texts was going up, consumers were paying far less per text by buying huge bundles for flat rates."

Seriously? I live in India and I get something like 3000 free messages a month. (I don't think I use more than 150 of those).

I'm under the impression that local messaging in India is practically free.

I'm using Airtel. I have no idea what my actual scheme is but I do know that I hardly pay anything on local text messages. And almost everyone I know in India (regardless of carrier) has a similar deal where the cost of sms is, as they say, a rounding error.

The exception is when they charge extra on holidays. I guess that part is a bit of a racket, though a more benign explanation would be that they're just trying to keep the network traffic to a maintainable level on those days.

Having just moved back to India, and having researched SMS rates/recharge behaviour for an app I'm building, you're getting a bad deal. The bad deal is the default in India, but knowledge of how to fix that is so widespread, and fixing it is so easy that effective SMS prices are closer to Rs0.02-0.05.

Singapore too isn't perfect. They don't charge as much as in the U.S., but it's still much greater than zero. Phone plans in general are much more reasonable here (prepaid phone plans are much more common, I got a SIM card with a decent amount of time for $10.) I'm not exactly sure how much they cost, but I've definitely noticed my $10 running out quickly with nothing other than texts.

Honestly, I really don't mind the SMS charge. Sure, each text isn't very expensive, but cell phone companies have to take huge risks to build the infrastructure to send those texts.

It's kind of like bashing Facebook for charging for "virtual drinks". Sure, it's free for them. But they've earned the right to sell it.

I would liken it more to your ISP charging you an additional $30 a month on top of your internet subscription to be able to use instant messaging.

I wouldn't. That would be comparable to phone networks charging for access to instant messaging on their phone (on top of data costs).

Charging for SMS is more like your ISP charging you an additional $xx/month to use an instant messaging system that they themselves provide and host.

I can see that, but the lockstep price doubling in the last few years is pretty clearly collusion.

If you want a real ripoff, look at tethering "plans" where they charge you for literally nothing except not deliberately blocking certain data traffic.

If they had taken risks in a perfect market, I would agree. The problem, at least in the US, is that because a limited amount of spectrum is available, and only a few companies have been given an exclusive right to use it, wireless data is natural monopoly / oligopoly.

Cable, telephone, wireless monopolies are very similar to, and should clearly be regulated in a similar way to power and water utilities... The only reason that they are not in the United States is political corruption.

I'm not sure if this isn't an urban legend (I couldn't find any references on wikipedia)) but I was under the impression that the infrastructure used by sms would have been needed anyway for other GMS related services: transmitting things like the time etc., and sms doesn't cost them any extra. In this case at least, it definitely reeks of double dipping.

Will Beluga have push messaging? I think that's one reason SMS is so successful - the near instantaneousness of it.

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