Opinion: Text messages small on content, big on profit

Macworld - Much as I've tried to avoid it, text messaging has become part of our society, with an estimated 2.5 trillion messages sent in 2008. But like anybody else who's thought long and hard about the perils of texting, I've found myself wondering: Why is it so expensive? The major providers charge around 20 cents for sending tiny messages that are about 160 characters long.

Meanwhile, the same companies are sending a higher volume of far-more-complicated voice data every single day for prices that are far lower. Furthermore, if you buy your messages in bulk -- AT&T's $5 for 200 messages, for example -- it lowers the price per message to almost one-tenth of what individual messages cost. Which makes text messaging almost pure profit for the wireless companies -- especially if you don't use the full amount of messages you pay for.

The real question, of course, is how much does text messaging cost the wireless companies? Well, according to a professor of computer science at the University of Waterloo in Canada, that cost is next to nothing. Turns out that not only is sending the text messages extremely cheap, it also uses bandwidth called "control channels" which are there to manage the operations of the network. That space is set aside, regardless of whether or not it's being used (think of it as an empty carpool lane at rush hour).

It's hard to say whether or not this situation will change in the foreseeable future: With just four companies dominating the U.S. wireless industry, competition is not exactly running rampant. However, new questions about pricing have been raised recently by a letter to the providers from Sen. Herb Kohl (D-Wis.) and by nearly 20 class-action lawsuits that have hit the carriers with charges of price-fixing.