The economics of texting

One thing I never understood about the way mobile operators work is why texting (aka SMS) is so freaking expensive. I figure its something like what the drug dealer ‘Nick’ in New York Magazine’s recent feature on profit making said about maximizing profit:

Sell to many users in small quantities. “It’s like taking a pound of coffee and selling one grain at a time,” says Nick. “If you sell by scoops, you’ll make a couple thousand dollars, but if you break it down into quarter grams and work for a few days, you’ll make tens of thousands.” Most top dealers don’t actually do this, and lazily sell in bulk, as Nick did.

Sure, 10c a message doesn’t sound like a lot, but what do you get in return? A mind blowing 160 bytes of data transferred! So, that works out to…

(1048576/160 * $0.10) = $655.36 per MB of data tranferred by SMS!

Even if you have some sort of a package that lets you send, say, a 1000 messages for $10 a month (i.e. $0.01 per message), it still works out to $65.54 per MB of data transferred.

So, how does this compare with other forms of data transfer?

  • Home Internet: Ok, so this may not be the fairest comparison – since we’re comparing against a fixed line with a sunk initial cost (for laying down fiber/cable), but I thought I’d make the comparison anyway. Most internet providers don’t have any fixed upload/download limits (atleast in the US), thought they’re often rumored to send nastigrams to users who transfer large amounts of data – like 200-500 GB per month. So, lets be conservative and assume that the download limit on a regular Comcast 6-12 Mbps line is 100 GB (or ~100000 MB) per month. For this privilage, I pay $45 per mo. with no discounts. So, that works out to…

($45/100000) = $0.00045 per MB of data transferred by Cable Internet

That’s right – around a million times cheaper than SMS! Dropping the bandwidth cap to 10 GB or even 1 GB changes the order of magnitude, but it’s still thousands of times cheaper.

  • Mobile Internet: So, I have the el-cheapo GPRS/EDGE mobile Internet plan from t-mobile that I pay $5.99/mo for. The contract doesn’t state any caps other than a 1 MB file download limit –  so, let’s assume that you get 100 MB/mo on this plan. This works out to…

($5.99/100) = $0.06 per MB of data transferred by GPRS/EDGE.


  • Mobile Voice: Voice rates vary a lot, but I figured I’ll use the common $40/mo for 1000 mins T-Mobile plan for the comparison, since it doesn’t include unlimited nights or weekends. Wikipedia tells me that GSM transmits at 12.2 kbps with the GSM-EFR codec. 1000 minutes at 12.2 kbps is (60 * 12.2/8 = ) 87.26 MB. For $40, that’s

($40/87.26) = $0.46 per MB of (audio) data transferred by GSM.

So, the underlying medium used by texting is still waay cheaper than SMS by a factor of a 1000. And I thought SMS just used the unused bandwidth in GSM networks.

No wonder there’s an abundance of free texting websites like .

3 thoughts on “The economics of texting

  1. http://

    Good way to put things in perspective!

    I think a few start-ups have got the money-hungry telcos in their sights.

    I just got onto a beta test at for a new mobile messaging program that lets me send about 52 text messages from my mobile for the same price as i pay for 1 SMS message (it uses data, but i dont have any included, im on PAYG, otherwise i guess it would be free).

    But based on my calculations – if you have 1MB of data, that equates to about 7000 text messages (160 character equivalents of SMS messages)

  2. Steve M Nash


    Nice article. Good way to explain just how expensive texting is (even though people seem to think differently).

    By the way, is not a free texting site, exactly, but a *directory* of free texting sites! (Thanks for the mention, though! 😉 )



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