Fifteen years ago when mobile phone services were launched in the country, operators used to charge Rs 16 per minute for phone calls and Re 1 for every SMS sent. Over the years as competition increased and as costs went down mobile tariffs for voice calls kept falling. Voice calls can now be made for as less as half a paise a second making it the lowest tariffs in the world. However, despite so much competition in the mobile market, SMS still continues to be charged at Re 1.
This can happen only if for some reason the cost of sending an SMS has not changed over the years. But is that the case? Mobile network comprises of various components such as routers, switches, radio antennae, core and signalling. Operators spend billions of dollars to set up this infrastructure and charging consumers is the only means to recover the cost. In the case of a voice call, the entire mobile network is activated from the time a user presses the green button on the handset till the conversation ends. However when you send an SMS, only the signalling part of the network is utilised. Logically, the cost of sending an SMS should be just a fraction lower than transmitting a voice call.
According to data submitted by a leading mobile operator to the Telecom Regulatory Authority of India, the cost of sending an SMS is just one-fifty sixth of the cost incurred for carrying a phone call. This means that if operators can offer voice calls at an average of 50 paise a minute, SMS should actually be free.
A standard SMS message comprises of 160 characters which is just about a tenth of a kilobyte. With a tenth of a kilobyte you could fit 1/4000th of a song on it, which is simply nothing. Operators, therefore, assign only limited bandwidth on the signalling channels that carry SMS. That's why in a situation of massive usage of texting which happens on Diwali and New Year's eve, the control channel gets saturated.
Professor Srinivasan Keshav at the University of Waterloo in Ontario showed in a paper that wireless channels contribute about a tenth of a cent to a carrier's cost, that accounting charges might be twice that and that other costs basically round to zero because texting requires so little of a mobile network's infrastructure.
Keshav concludes that a text message doesn't cost providers more than 0.3 cent
So why are operators charging you Re 1 when the actual cost is close to zero? That's because mobile operators in India earn close to 8 per cent of their revenues from SMS. On an average mobile subscribers send 45 SMS each month according to the Trai. That's a whopping 40.5 billion messages a month considering there are 900 million mobile connections.
You don't have to be a rocket scientist to do the math and realise that operators do not want to give up on a service which gives them near 100 per cent profits, not at any rate when subscribers are willing to pay. This is the reason why mobile operators are able to offer SMS at 1-10 paisa to telemarketers and still make profits. This is also why operators are able to offer you schemes wherein you get to send unlimited short messages for an additional charge of Rs 50 a month. While you think that you have landed a great deal, the service provider is laughing all the way to the bank.
Telecom operators have so far been able to get away with this because mobile tariffs are under forbearance, i.e. not regulated. The telecom regulator recently floated a paper seeking to undertake a review of this policy. While operators are up in arms against any regulatory intervention, perhaps it should look into the SMS pricing, which despite competition, has not changed over the last decade.
