Catching up on various fights, here's Business Week taking the New York Times to task for taking the wireless carriers to task over the cost of SMS service. The Times said the carriers overchage for SMS; Business Week says the carriers have to make up for spectrum and infrastructure upgrade costs, and ought to be able to jack up prices for wildly popular services like SMS. Far be it from me to criticize the wonders of the free market, whose benefits are all around us today for everyone to see; certainly you charge what the market will bear. But make no mistake; the carriers are making a killing on SMS, as Andrew Odlyzko demonstrated in a paper last year.
The key stats from this paper of Odlyzko's are his comparison of the price per Megabyte for the following services:
wireless texting: $1000
wireless voice: $1
wireline voice: 10 cents
residential Internet: 1 cent
backbone Internet: .01 cent
So the infrastructure that the carriers are really blowing the money on--fiber to the neighborhood/home--is far less lucrative than texting, which is basically a license to print money.
What's the difference? Residential Internet, which also suggests ultra-high speeds in the future to carry video, is still in the relatively competitive phase of its duopoly, where the telcos are challenging the entrenched cable companies. In contrast, wireless is a much more mature oligarchy, where no one is waiting in the wings to come in and massively undercut the carriers on SMS pricing.
It sure makse wireless IM look more attractive.
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