Text Messaging Revenues Almost All Profit, Professor Claims

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Text Messaging Revenues Almost All Profit, Professor Claims

6:05 am on December 30, 2008 | Category: Business, Telecom Services, Wireless, Messaging

The revenue wireless carriers generate from text messaging fees is virtually 100% profit, according to Srinivasan Keshav, a computer science professor at the University of Waterloo, Ontario, who was interviewed for a recent New York Times article about SMS pricing.

“Operating costs are relatively insensitive to volume,” Keshav said, explaining that text messages are sent over otherwise-empty airwaves reserved for operation of the wireless network. “It doesn’t cost the carrier much more to transmit a hundred million messages than a million.”

With about 2.5-trillion SMS messages sent this year, and an additional 3.3-trillion expected to cross the airwaves in 2009, text messaging is a growing cash cow for mobile phone carriers around the world.

Of course, one cannot begrudge carriers the right to generate a profit, especially from a discretionary communication service which hundreds of millions of people choose to make use of on a daily basis. But knowledge of such massive profit margins doesn’t exactly illuminate the integrity of cell phone operators like Bell and Telus, which recently doubled their revenue from pay-per-use text messaging by adding a new $0.15 fee for each incoming message.

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A correction to the post. Revenues did not double by adding a $0.15 fee. In fact, the majority of customers are on bundles that allow them unlimited incoming text messages so the change only affected a small percentage of users.

Comment by Blaine — December 30, 2008 #
Blaine,

Fair enough. Overall text messaging revenue was not doubled. But as I deliberately specified in the article, pay-per-use text messaging revenue effectively was.

Telus has every right to change its pricing, but consumers have a right to know when they’re getting a bad deal.

– Editor.

Comment by Jeremy — December 31, 2008 #