Monday, September 1, 2008

Cheap(er) SMS - Why we need it

Cheap SMS is a possible thing for telcos. I mean cheaper SMS than the current rates. Current rates of national SMS are at Rs.1 per SMS. Considering that there are 160 characters in an SMS this works out to 7490 SMS per 1 MB. At Rs.1 per SMS this would be Rs.7490 per MB of SMS. At Rs.0.5 per SMS this would be Rs.3745 per MB of SMS.

160characters per SMS
140bytes per SMS
7490SMS per 1 MB
7490Rs. for 1 MB of SMS at Rs.1 per SMS
3745Rs. for 1 MB of SMS at Rs.0.5 per SMS

Now compare this with voice calls.

13.2kbps for a voice call
33bytes per frame of 20ms
1650bytes per 1 sec of voice call
99000bytes per 1 minute of national long distance call
10.6national long distance calls per 1 MB
10.6Rs. per 1 MB of national long distance calls at Rs.1 per call

The price of SMS is found to be 350 to 700 times costlier than voice calls. Why this is so? If we go back in memory, mobile calls were also ruling very high. There were times when an outgoing call costed Rs.16 and an incoming call Rs.8. Across the markets this was the general trend when telecom watchdog bodies brought about directives and enabled legislation to reduce the tariffs of mobile calls. For doing this the watchdog bodies called mobile telephony a "basic service" and asked the governments to reduce their various charges towards the basic service and also pressured the telcos to reduce their tariff. SMS, as opposed the basic service of mobile telephony, is called a "value added service" (VAS) and the efforts of the watchdog bodies were not so strong for value added services. Though SMS prices have come down, they have not matched the voice service and we continue to pay very high prices for small pieces of the bandwidth offered by SMS.

Why cannot SMS prices be lower? The keyword here is value added services. If SMS can be reclassified as a basic service, telcos would be forced to reduce the SMS tariffs inline with voice services. SMS can well be classified as a basic service as users have started to use the service for basic needs like finding the best prices for their produce to getting storm warnings. There can also be texting providers similar to long distance providers to open up the market. You can already purchase bulk SMS from a variety of sources. However, a service like SMS should also have eat-as-much-as-you-can flat rate tariffs like web tariffs. This would be the ideal situation for the market.

In the cusp of 2G and 3G services now, it is time we had better SMS at cheaper rates. With 3G there will be many opportunities for pursuing new value added services. SMS can be kept basic.

1 comment:

  1. Well, I am from Pakistan. Your post seems nice. SMS are the main source of revenue for these telecommunication industry I guess. Whereas the Calls over IP is cheapest of all.

    Business VoIP phone