Toby DiPasquale on 28 Dec 2008 20:00:46 -0800

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Re: [PLUG] [OT] NYTimes article: What Carriers Arent Eager to Tell You About Texting

On Sun, Dec 28, 2008 at 10:45 PM, sean finney <> wrote:
> there's two things worth mention:
> (1) my take on this is that the government isn't intereseted in "setting
>    a fair rate", but instead protecting the public from a small cartel who
>    may be abusing their market position to fix prices[1].  not that i
>    expect any results from this effort given the power of telco lobbies.

More likely is that they are trying to shut up a vocal minority of
their respective constituencies. If you do the math on this, its
pretty easy to see that SMSs are not a huge part of anyone's recurring
expenditures no matter how you slice it.

> (2) "supply and demand" is a bit more difficult as a justification when the
>    rising demand is against an almost unlimited supply (since the costs to
>    scale the system are mostly required already from the increase in
>    normal usage/subscribers).   IANAE[2] but i imagine that the landscape
>    would be a bit different if the bar for entry into the market weren't
>    so high for potential competition.

The supply is nowhere near unlimited. The control channel is very
small and enhancing the ability to transcieve SMSs requires putting in
capacity for the entire line, not just SMS. This is pretty damn
expensive in the mobile phone world but its being done because the
demand and potential for profit is greater than the cost.

> this assumes a free market, which is a bit of a stretch here imho.  currently
> you have a case were the competition is declining and the remaining players
> are very large and possibly acting in an anti-competitive fashion.  also point
> (2) above about "supply".

See, this is the thing: the free market exists whether regulations
allow it or not. As per laws, there's never been a "free market" as
described in the text books anywhere in the world at any time.
However, whenever people are free to choose how to spend their time
and money, the free market exists.

Again, the key factor here is that people *want* SMSs and the ISPs
aren't charging enough to make them not want it. If you want the
economic description of it, the price is low enough on the demand
curve to capture a portion large enough to make this the most
profitable recurring revenue source for telco's today.

As well, remember that the service is currently drastically
underutilized, as there are significant numbers of cell phone users
that have never sent an SMS, yet pay for the privilege every month.

Toby DiPasquale
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