Thursday, September 11, 2008

Why R U paying so much per text message?

Salon’s tech blog the machinist has a piece today on text messages. A bunch of cell phone companies are doubling their prices on text messages from 10 to 20 cents a message. Now when I text my wife to say “I’m running late” it will cost us 40 cents and not 20 (since we pay for both receiving and sending).

But most of my friends text a lot more and especially younger people. I would guess that most people who text buy the $5.00 all you can text add on. Although there are 82% of cell phone users who have never texted.

I think few people text like my wife and I do. We send about $7-8 a month in text messages, so paying $5.00 teach to buy the all you can text plan is not worth it. In that sense the phone companies are getting you to pay a lot for the first few messages, which have the highest value to you and pay nothing for the least important messages which have the lowest.

So in short they are trying to get everyone to sign up for an all you can text plan, and to get the most money out of people like me who don’t text enough for that type of plan unless the per text message is really high.
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1 comment:

Erik_Simpson said...

I think you've got the motivations exactly right, Seth, but how can they get away with this in a competitive environment, given that the marginal cost of a text message has to be pretty near nothing? Is there some logic of price discrimination that could let them get away with it? Or can the companies just do this temporarily, since all of them are doing it at the same time, but within a few years competition will drive the price of a message down to nothing?

I wonder what your predicted cost of a text message in 2013 is.