March 8 2010|02.34 PM UTC

Erik Chang

Dissecting The Mobile Phone Plan Markup

Category: Featured, WirelessTags: , , , ,

Mobile phone companies provide the basic service of transferring information, whether that be in the form of phone calls, text messaging or internet data plans. However, the method in which they charge for these services is not so basic. By coupling various services into packages and failing to disclose specific details, these companies make it difficult to understand exactly what you are paying for, and exactly how much you are paying for it. With messaging and phone calls, both the sender and the recipient are being billed, doubling the charge on the transfer of the same data. When we took a look into exactly how much data is being transferred, and how much it is costing the customer, we found that each service is each being charged at relatively high and largely different rates.

(click image to enlarge)

Dissecting The Mobile Phone Plan Markup

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{ 79 comments… read them below or add one }

Varuka_Salt March 8, 2009 at 4:46 pm

You forgot one. MetroPCS. All services, voice, data and text, with taxes and fees, less than $65 per month, all unlimited. And no, I don’t work for them.

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Commenter March 8, 2009 at 5:40 pm

SMS text messaging uses only 7 bits per character, resulting in a total message (max) size of 140 bytes. So they’d actually be getting more messages per MB than what is listed, making the chart look even more dramatic.

In reality, though, SMS text messaging uses almost no additional bandwidth. There is some overhead with maintaining the system, but overall it is a total ass rape to the customers.

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Mark March 8, 2009 at 7:38 pm

That’s why I don’t have a cell phone.

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AEC March 8, 2009 at 8:14 pm

Nothing a little competition wouldn’t fix. Google?

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Neo March 8, 2009 at 8:47 pm

The reason is simple, they provide mobility.

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lowell March 9, 2009 at 12:13 am

about the lack of disclosure you state on the bottom of that chart: you’re either lying or ignorant. i checked the terms and conditions of four of the largest US carriers (T-Mobile, AT&T, Sprint Nextel and Verizon Wireless) and two of them mention the bandwidth limits clearly in the terms and conditions while the other two imply a soft cap. definitely far from ‘most’.

interesting research you’ve done otherwise, don’t cloud it with lies and/or misinformation.

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Jake March 9, 2009 at 12:38 am

Neo – bull**** that the reason is simple. Price gouging is unacceptable any way you slice it, and this is a classic case of it. Why would you defend getting bent over and having to take it, unless you’re already used to being pounded in the ass?

SMS is built-in to the carrier’s networks… essentially the data stack through which mobile data is sent has a built-in header of around 256 characters. The carriers all realized they have this extra room and could start charging people to send messages on it.

Of course, only in the US will you find such exorbitant charges and only in the US will you find users getting charged for RECEIVING text messages.

At least some government reps are finally starting to investigate. Check out this New York Times article for more on the history of getting drilled without lube by the cell carriers:

http://www.nytimes.com/2008/12/28/business/28digi.html?_r=2&partner=rss&emc=rss

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Suits March 9, 2009 at 1:20 am

How can they get away with this! Isn’t some consumer group going after them?

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Neo March 9, 2009 at 1:47 am

The reason is simple, they provide mobility.
Sorry, forgot to add great post! Can’t wait to see your next post!

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Peeple March 9, 2009 at 2:55 am

yes but metro pcs is not everywhere.

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barb March 9, 2009 at 3:16 am

i use net 10 and i pay as i need works for me

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RolandD March 9, 2009 at 4:33 am

Contracts are always more expensive than they seem at first. It used to be more economical to have a contract phone as opposed to a prepaid, but now the prepaid cell phones are a way better option. There are actually prepaid plans with cheaper per minute rates out there so why sign into a restrictive contract when you can have the flexibility of a prepaid? I switched to a Tracfone prepaid a while ago because of hidden costs, overage charges and bad service on my contract. Now I decide up front what I want to spend and don’t get a heart attack at the end of each month.
I simply have to have a cell phone but I can’t see why I must be a slave to some contract.

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BillShrink Guy March 9, 2009 at 5:12 am

MetroPCS and other smaller carriers were not included because they aren’t as widely available as T-Mobile, AT&T, and Verizon Wireless.

lowell: Sorry for the wording issue. What we meant is, when carriers advertise the messaging or data plans, they don’t generally disclose the cap. If you add in the servicing through your online account or through the phone via a customer service rep, there isn’t a cap limit mentioned. It is of course buried in the thousands of words terms and condition.

Jake: you have a point that being charged for SMS receiving is somewhat of a unique feature of the US consumers. I’m not sure about you guys, but I’m always tired of my European friends telling me about how outdated and anti-consumer our wireless phone networks our whenever they’re in the states.

RolandD: Excellent point. For some people, if you use less than 100 or so minutes per month (or you’re in certain regions), you may be better off going with a prepaid plan. Taking the ‘hidden’ fees, taxes and other misc fees out of the equation will often make the prepaid plan the better bang of the buck!

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mark March 9, 2009 at 5:40 am

Well, I pay about 25 euro’s for a 300 minute outgoing call plan with unlimited text and internet (about $32).
That is in the Netherlands.. still way too much money.

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BillShrink Guy March 9, 2009 at 6:44 am

mark: Equivalent plan in the states is about 60 euros (or about $75 USD). Ouch to us Americans!

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Sean March 9, 2009 at 7:14 am

Did that graphic come from a template / tool?

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BillShrink Guy March 9, 2009 at 8:22 am

Sean: we made the infographic. Hope you found it informative!

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mike March 9, 2009 at 10:41 am

Disclaimer: I do not work for the mobile/cell industry, I just happen to know a little bit about the engineering:

This is a ridiculous comparison, utterly stupid.

You are comparing fixed-line cable service (ISP) to mobile cellular service where each provider has coverage and wireless service almost anywhere in the country.

This may be a poor analogy, but I’ll give it a shot:
Compare taking a train vs a car. Trains are your cable/ISPs: faster in a straight line, get more data through from point A to point B, more efficient and cheap (for that purpose).
But guess what, most people like the freedom of (mobile) cars. They are way more expensive (gas, insurance, maintenance), but you have the freedom and convenience to ‘roam’ everywhere, even if at slower speeds.

People who come up with such ‘data comparisons’ are most likely clueless to the differences in the technology and the costs behind them!

Bandwidth over RF costs multiple times compared to over fixed cable… but you knew that, right?

This comparison is naive at best.

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Phil March 9, 2009 at 1:14 pm

Some of your pricing is incorrect or no longer available.

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Kyle March 9, 2009 at 1:21 pm

I don’t deny your dataset, although I don’t agree with the point you are trying to make either. You are taking a very small portion of a corporations business and blowing it up. The larger companies use mobile phone contracts as their main source of profit. AT&T & Verizon are taking record losses on the land line side of the phone market due to increased federal regulations, and federal leasing requirements. Your graph doesn’t factor those things in. As an example, Dell charges between $20-50 for a keyboard/mouse combo. The cost of that combo might be 10-25% of that price, but because their margin is so tight on the multitude of other products offered, they use that increased profit percentage to sustain a small profit margin across the board. I understand people are upset over cell phone plans, but until the government lets these companies operate freely in this supposed free market we live in, this will not change. Your scope is too minimal, and you are blaming the wrong people.

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justin March 9, 2009 at 1:29 pm

where is sprint on this grid? would be interesting to see considering their “all you can eat” everything plans.

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BillShrink Guy March 9, 2009 at 1:56 pm

mike: The majority of the infographics is simply showing everyone a breakdown of a mobile phone plan’s data and SMS servicing cost. We’re aware that both types of service has vastly different infrastructures, but we’re just giving a point of reference for people in how much more data transfer cost when you use a mobile phone device compared to regular Internet services.

Kyle: We’re not really out to blame any of the specific corporation for trying to make money in providing a service. The graph’s main point is to educate and highlight some of the cost of a mobile plan’s data/SMS service to the general consumer so people are more aware of what they’re paying for.

Phil: We’ve approximate some plans where necessary as different regions/areas will often give different prices even with the same carrier. That’s one of the true headache for many consumers when trying to find the right cell phone plan, the prices keeps changing!

justin: Unfortunately we didn’t include Spring Nextel in the current graphics.

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benjy button March 9, 2009 at 2:00 pm

Great article! Too bad no-one feels strongly enough about the price gouging to do anything about it.

As a comparison, its 4 times more expensive to get 1MB of data from one phone to another via text message than it is to get 1MB of data from the HUBBLE TELESCOPE
http://www.physorg.com/news129793047.html
That is some serious price gouging going on there. Telecoms are the new oil it seems ;)

http://testingthetesters.blogspot.com/

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futurich March 9, 2009 at 2:05 pm

That’s why im happy with Sprint :D I pay $33 per month and get 500 anytime (and free nights/weekends), unlimited texts, and unlimited data. Can anyone beat that? (not unless you are on their referral program =Þ)

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Roberto March 9, 2009 at 2:05 pm

I’m with Telcel in Mexico, I pay 100dlls a month for 900 outbound minutes, unlimited inbound, nationwide and free ld, unlimited data, and a free iPhone 3g.
2 year contract tho…

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Anonymous March 9, 2009 at 2:06 pm

Using two dimensional shapes to represent the cost is very deceiving. Yall should use 1D!

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jmndos March 9, 2009 at 2:17 pm

Text messages are sent over a portion of the cellular framework that is part of the framework and when not in use, 0ed out. So text messages don’t cost the company ANY bandwidth…..

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Tom March 9, 2009 at 2:32 pm

Your information on the price of unlimited Blackberry data on the AT&T network is incorrect. 5gb unlimited Blackberry data (without Tethering) is $30. 5gb unlimited BB data with 200 messages is $35. Tethering is an additonal $30 on any plan for access to a less-public APN which in theory grants better speeds. Not being an AT&T customer (just a peon) I can’t speak for the speed increase by having the tethering plan on the account. Just thought i’d update your information.

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dougmwpsu March 9, 2009 at 2:34 pm

The data costs should actually be .6 cents per MB, but what’s an order of magnitude between friends?

That would make cell data only about 22x more expensive than 250GB capped Comcast. (but really only $30 vs $55)

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Ritchcraft March 9, 2009 at 2:58 pm

This is also why I do not own a cell phone. You are all being raked over the coals and smiling about it.

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Wayne Edwards March 9, 2009 at 3:04 pm

Cellular South, a regional company in the southeast USA has an unlimited voice and texting plan for around $50, and piggy backs of the Verizon network when roaming. A great plan for those who live in that area.

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Andrew Choi March 9, 2009 at 3:06 pm

i think in the first graph, the 300min plan should not be included in comparison b/c it makes it seem like tmobile charges more per/min

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David Gómez-Rosado March 9, 2009 at 3:41 pm

This is exactly why Apple has not released an integrated iChat for the iPhone despite all the good sense it would make from a user-experience point of view: They would kill the cash cow!

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Anonymous March 9, 2009 at 3:43 pm

if you don’t understand the network you can’t understand the economics. a byte over SMS doesn’t cost the same as a byte over your home DSL for a reason — and it’s not rape by the telcos this time.

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Oscar Wolf March 9, 2009 at 4:30 pm

Well, over here in the socialist democracy of Sweden were state monopolies are in place with the biggest operator being, thats right, owned by the government, I pay $6 a month to call for free to 50% of the nation and 7 cents a minute to the rest. Oh and I get 3,000 sms and 3,000 mms for free a month to whomever I wish to send it. That plan is put in place by the government company Telia Sonera and is called Max 25 (look it up if you wish)

Oh and I get to surf unlimited on the web with my cell for a maximum fee of $1 a day. (7,2mbits)

Did I mention we are socialist?
As a reporter from the Economist put it; “Sweden is the closest thing to a communist state in the western world” :-)

Oh and there are no such thing as roaming charges or long distance calls within Sweden

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Stuart hannig March 9, 2009 at 4:34 pm

I don’t getr it. only idiots buy something that expensive. I don’t own one and i think people who buy every apple product just because its new and they want to show off are douches.

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Kyle March 9, 2009 at 4:50 pm

To everyone making statements such as ‘text messages don’t cost the company ANY bandwidth/cost’, you’re misinformed. There are costs associated with text messaging. Cell sites have a limited number of control channels. These are the frequencies that are used to setup voice calls. In basic terms, mobile devices contact the cell site on the control channel to get details on what frequency to use to make the voice call, the encryption key to use, etc etc. Text messages are sent using these control channels. Now, if a lot of people are sending text messages, there is a chance that all of these control channels will be in use. I’m sure everyone has received the ‘Call Failed’ message when trying to make a phone call – I’m sure you’ve even wondered why your call failed when you had full bars displayed on your signal strength indicator on your phone, this is probably the reason. So while yes, text messages themselves are not large, cell companies have to increase the number of cells to ensure service is available to everyone, even if the cell sites themselves can handle more voice calls, but has only run out of control channels…

Now, with that being said, prices being charged still are still far too high, but price comparisons like this do not really paint the real picture.

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Former Emp of ATT March 9, 2009 at 4:58 pm

Those carriers employee over 750,000 people.

I’m sure they should lower there prices so we can make america hurt some more.

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lewis March 9, 2009 at 5:37 pm

It’s not price gauging if you pay it. You can easily refuse to use their services – don’t blame the company for raping you up the ass after you tell them they can.

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jared March 9, 2009 at 5:51 pm

I am not saying i enjoy being raped by phone companies, the prices ARE ridiculous, but when you send a text message it DOES tie up one of the pipes that would be otherwise used for voice call connections. so saying sms texts cost them next to nothing isnt accurate.

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Brett March 9, 2009 at 6:37 pm

I work for a major cellco & text is NOT FREE. It is outsourced to a third party which must be paid for. Granted there is profit in texting, but it isn’t just as if you should be charged data rates for it. It’s a completely different service. If you have a data plan & don’t want to pay for text then goto any free site to send texts and use your data plan. Minutes come from the sky too, but isn’t it fair to pay more for MORE minutes/service?

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Allie March 9, 2009 at 6:42 pm

These prices are insane.

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ward March 9, 2009 at 6:48 pm

@jared: I am not saying i enjoy being raped by phone companies, the prices ARE ridiculous, but when you send a text message it DOES tie up one of the pipes that would be otherwise used for voice call connections. so saying sms texts cost them next to nothing isnt accurate.

That’s nonsense. Please read up on the GSM spec and implementation. Text messages are *not* sent in voice channels, but in the ‘maintenance’ channel that goes along with them, which is also used for lower-level communication between your handset and your carrier – e.g. the data that keeps your cell phone clock up to date, and that allows the handing over of your phone between cell towers. So, yes, text messages cost the operator practically zero to send/receive.

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frank aguilar March 9, 2009 at 7:06 pm

Yeah, but what can we do :(

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ZCBrown March 9, 2009 at 7:23 pm

Competition would probably put a strain on these current plans, HOWEVER, the trick is that these major corporations own a lot of the towers and pipelines used to hold the cell infrastructure together.

So even if a company (like Google) attempted to enter the ring with better prices, they may be eaten alive by the prices that Verizon/AT&T/T-Mobile/Sprint charge THEM to make use of their networks for subscribers.

Just a thought that’s always floated in the back of my mind.

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insider March 9, 2009 at 7:57 pm

The data for SMS isn’t nearly accurate because your dealing in different scales of data.

SMS uses a seperate delivery system that is forward and reverse acknoledged .. while it uses unused bandwidth on the paging channel ,. it’s not an infinite resource. The cell companies have to augment their SS7 signaling and allocate additional paging channel resources to allow SMS traffic on the networks.

What your implying is that there is somehow a magical unused T1 sitting in the air wherever you are, if only they made it available.

I can pretty much guarantee if somebody tried transferring a meg worth of data through SMS, the provider would shut down their service as abusive, even on an unlimited plan .. considering that’s 8333 separate transactions per meg and many times that amount of signalling between the SMSC, MSC, tower and handset.

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robby March 9, 2009 at 8:18 pm

Well Oligopolies have kinked demand curves (relatively low decline to a point, then a sudden drop). And the mobile phone market is a natural oligopoly. Yea the prices suck, but this article isn’t giving any new information, the most valuable part of this piece was the infographic, which is a great way to compare prices!!

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elpepe March 9, 2009 at 8:40 pm

Let’s not forget about the pesky taxes/surcharges/fees they constantly tack on that drive the plan 15% or more higher than the advertised plan price. I once called my carrier and asked to explain one of the fees and the rep told me to contact my city or state. I asked her they should know if they are charging for the fee.

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Randy March 10, 2009 at 12:52 am

@Varuka_Salt: Too bad Metro PCS isn’t available everywhere. Sometimes even where they are available you can’t get a signal. I’ll give them credit for their rapid expansion, but until I cant talk on the highway no matter where I am, I won’t be investing $119 for a horrible phone.

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Randy March 10, 2009 at 12:53 am

Edit: “until I can”

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