The True Price of SMS Messages

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I just found out that AT&T (A-fee&fee?) is raising their text message pricing. When I first signed up for AT&T 6 or so years ago it cost 10 cents to send an SMS message, and it was free to receive them.

When AT&T switched to Cingular the price of sending a message dropped to 5 cents, but they started charging for incoming texts - also 5 cents. Assuming you send a message for every message you receive, this works out at about the same price as before.

AT&T came back online and phased out the CIngular brand name, and prices were again changed. This time to 15 cents each way.

More changes have taken place that I can't quite remember. At one point text messages were 10 cents either way, and at another point they even included MMS (multimedia messages) at the same price as SMS.

As of March SMS messages on AT&T will cost 20 cents and MMS will cost 30 cents - both to send a receive.

So let's do some math here, and figure out how much this simple transmission is actually costing us.

A standard SMS message contains up to 140 bytes (1120 bits) of data - this takes care of the 160 characters allowed in your text message. This might not make sense at first, until you realize that SMS uses 7 - not 8 - bit characters - leaving you with 128 possible character values instead of the normal 256. So 1120bits/7bits = 160 characters.

So our total message length is about a tenth of a kilobyte (.13671875 Kbytes). In terms that the iPod generation would understand - if you had an iPod with a tenth of a kilobyte you could fit 1/4000th of a song on it. I assume here and for the rest of this article that 1 song = 4 Megabytes.

If you divide 140 (the total number of bytes available to you) by 20 (the cost per message), you find that you are paying 1 cent for every 7 bytes of data. This leaves you with a cost of $1,497.97 for the 1024Kbytes contained in a single megabyte. iPod users: It would cost you $5,991.88 to transfer - not even to buy - a single song via SMS.

By comparison, I pay $50 a month for a soft bandwidth limit of 500 gigabytes through a local ISP. That comes out to 512,000 megabytes or 10,240 megabytes to the dollar. This allows me to transfer 2,560 songs for the same price as a Junior Bacon Cheeseburger off the value menu at Wendy's: $1. I will use this my standard measurement for the rest of this article.

So far I can make the following statements concerning the costs of bandwidth:

Cost to transfer 2560 songs:

From my ISP: $1
Via SMS messaging: $15,339,212.80

But wait, there's more!

When calculating SMS charges, most people don't take into consideration that the message is really being paid for twice! If I send a message to another AT&T user, I am paying to send it AND they're paying to receive it! This should probably be illegal, but that's for another discussion.

So how much does an SMS message actually cost? Not 20 cents - but 40 cents! This doubles all of my numbers above.

Furthermore, my above figures estimate that people actually use all 160 characters available to them. Say people on average actually only used half of that (which is still being generous) - then their price of data has again doubled from the numbers I gave above!

Making adjustments for both of the above statements, we realize that our above number isn't even close to correct! Corrected, the comparison looks more like this:

COSTS OF TRANSFERING 2,560 MP3s:

via my ISP: $1
via SMS: $61,356,851.20

Phew! THAT is premium data! It's no wonder that SMS texting alone is a 100 Billion dollar a year industry!

How big is that? Take all of hollywood movie box office revenues worldwide. Add all of the global music industry revenues. And add all of videogaming revenues around the world. Even all those three together, we don't reach 100 billion.

Let's even go more premium - how much would it cost to hand deliver data?

The U.S. Postal service is currently charging 41 cents for this privilege (hmm.. only one cent more that AT&T charges to automatically handle an SMS message). So how much written data could we send in a letter?

Google says 250 is considered the standard words per page measurement, and a sheet of paper weighs about 4.5 grams. The U.S. postal service allows your letters to weigh up to 1 ounce before charging you more, which is just over 28 grams. So you could send 6 sheets of paper, minus 1 for the envelope. If you write on both sides that gives you 2500 words (10 pages x 250 words).

According to this page, the average english word is 5 characters long. Add in a space for every word and you have 6 characters per word or 1500 characters for page for a total of 15,000 characters.

Now we are not limited in any way in the types of characters we can use, but let's assume we are using a 256 character (8 bit) set.

Our letter therefore gives us ~14Kbytes for 41 cents. To transfer an MP3 using this method, we would be looking at about $119.95. To transfer 2,560 MP3s, that comes out to only $307,072. We would also need to take into consideration the bulk rate, but for the sake of argument (and because I don't feel like figuring it out), let's leave it where it's at.

The cost would drop dramatically if we compressed the data onto, say a DVD and our cost would be something more like $1.20.

Updating our chart from above:

COSTS OF TRANSFERING 2,560 MP3s:

TCP/IP: $1
TCP/SMS: $61,356,851.20

TCP/USPS: $307,072.00 (Bits written out on paper)

So getting a SMS delivered is bit for bit 200x more expensive than getting a message hand delivered to your doorstep anywhere in the United States.

What exactly justifies making SMS messages sixty one million times more expensive than ISP data and 200x more expensive than TCP/USPS? How come technology, communication, and infrastructure is getting cheaper while the costs of SMS messages are increasing exponentially? My theory: SMS messages are transfered over air made of solid gold.

edit: A few readers pointed out that from the title, this article sounds more like it's about the carrier's internal cost for transmitting SMS messages. For that, we turn to an informed slashdot poster:

I know the true cost of SMS messages!

I made a paper for the univeristy some years ago. The marginal cost of a SMS is 0.

They do have a little cost/opportunity. As a matter of fact SMS messages are sent on the control channel. Initially SMS were implemented in the GSM standard as a control system, just like the ICMP protocol of the IP stack. Then NOKIA though to implement a actual instant message function using SMS. The Contol channel is the channel that your mobile listens to in order to receive calls. So for receiving a SMS a control signal is sent. Since bandwidht is somehow limited on these channels it could happen that in a situation of massive usage of texting the control channel gets saturated and normal voice protocol initiation is disrupted. To prevent this carriers nowadays apply a kind of QoS delaying SMSs until there is no risk of congestion. So we can state that the marginal cost is 0 and the cost/opportunity is also 0

Another story is for the MMSs. Their cost/opportunity is even lower since they run almost enterely on GPRS thus using most bandwidht on normal data channels. Thus a MMS with pictures sounds and maybe video SHOULD cost less than a SMS.

So you wonder, why do I pay so much for a SMS or a MMS or even a Call: after the debts for the initial hardware infrastructure have been paid by the carrier you are still paying because of market segmentation (You won't change the carrier on the fly) and a little monopoly (Almost impossible to start a new carrier from 0).

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229 comments so far:

nurbles (not verified) says: I would love to see this

I would love to see this comparison done against the typical cost for digital voice transmission, which is what most phones are doing these days. How does the cost of X bytes of SMS differ from the costs of X bytes of voice...Let us see, I get 450 min/mo for about $40 (but I get unlimited min nights, weekends and anytime to other Verizon customers -- that tosses a wrench in the calcs). That is 11.25 min/$1. Typical MP3s are around 1M/min, so say the phone is 100 times smaller, that is 10K/min. So, for about $1, I can transfer about 110K of digital voice data.At a mere nickel to send SMS, I can send about 3K of SMS data for $1 -- assuming I can use all 160 char/message every time.That makes SMS data a mere 36 times more expensive that digital voice (ignoring all of the time that digital voice is free, of course). This is only from my point of view, as I only pay for one side (and the author failed to include the cost of internet service for the source of his data, too).Quite a bit lower than the apples/oranges comparison made by the author, but still ridiculous. Other pricing plans will vary, of course, I am likely near the best case from the SMS side of this comparison, many better plans will increase the gap. Especially since the cell companies do indeed dip twice.Please, PLEASE correct me if I am wrong...

Колко реално скъпи са СМС-ите | In F (not verified) says: [...] след като

[...] след като попаднах на четивце озаглавено The True Cost of SMS Messages Реших да си направя подобна сметка за мойте любими [...]

Spalooga (not verified) says: lol well the major telco

lol well the major telco here is aus has an option so a txt only costs 1c so like 100 txts for every dollar, but only to other users of the telco

RXE (not verified) says: This article contains only a

This article contains only a fraction of the full story of SMS economics in the United States. While SMS originally used the control channel, the huge amount of SMS traffic we are seeing now in the US makes that impossible. (The average US carriers transmits right now per month as many messages as all of the UK - the average large US carrier has also about as many or more customers and the UK has inhabitants). In most GSM carriers, and by default CDMA carriers since they have no control channel, a regular data channel is used for SMS traffic. This costs money and opportunity cost. Also the increase in SMS traffic requires further acquisition of gateways, which cost money. The messages use electricity... all in all for an intra-carrier SMS the cost if much closer to 0.1 cent. Still not a lot of money, but there is cost associated with it. Then we also have to consider that inter-carrier SMS in the US is not conducted via direct interconnect like in Europe, but through gateway providers such as Sybase 365 and Verisign/WiderThan. The going rate is a high fraction of a cent to provide that connection per message.
Also what the article assumes is that all pricing decision are made on a "cost plus" basis, which is not really founded in reality. Most sophisticated pricing decisions are based on a perceived value added approach. The true motivation behind the US carrier's approach to single SMS pricing is their desire to entice customers to sign up for bundles that give the customer a lower cost than the European 10 cents and give the carrier more predictable revenue. The customers who pay 20 cents per SMS fall into two categories. Light users who are captive users and largely price insensitive due to the small amount of messages sent or uneducated/indifferent users who somehow not care how much they spent (the large segment of consumers that are not rational profit maximizers)

David (not verified) says: Actually, a modern network

Actually, a modern network provider does need to have an SMSC because SMS is used for phone provisioning, so this is not an incremental cost WRT providing SMS services to the customer. I'm not sure if the same situation exists for the MMSC.

Also, let's be a bit more precise about just how the SMS messages get transmitted. First, you have to RACH to connect to the network, that takes precious bandwidth. Then you get assigned either an SD (on fraction of an SDCCH) or, depending on the design of the network, a FACCH. SDCCHs are statically allocated in a network and can become a bottleneck if the usage patterns are not what the provider expected. FACCH use normal TCH (traffic channels), so are a bit more flexable.

Please forgive me if I got one of the acronyms wrong, I haven't designed BSS software in a decade.

shawnson (not verified) says: try helio - unlimited

try helio - unlimited SMS/MMS/data... I never realized how useful SMS could be until I had a plan that was unlimited. Of course I have to be aware of friends who aren't on unlimited plans!

CrunchGear » Archive » NEWSFLASH: Text messaging is a huge (not verified) says: [...] to A Gthing Science

[...] to A Gthing Science Project, A standard SMS message contains up to 140 bytes (1120 bits) of data - this takes care of the 160 [...]

“SMS messages are transfered over air made of solid gold†(not verified) says: [...] Sam’s Comments [...]

[...] Sam’s Comments [...]

This Place Is Dead » Blog Archive » Nikes, SMS and Bicing (not verified) says: [...] post from gthing

[...] post from gthing regarding the true cost of SMS messages. I was always under the impression that SMS messages (or texts as they’re known over here) [...]

Michael (not verified) says: Not that I am in support of

Not that I am in support of the high cost of SMS and MMS, but i feel that one of the telco costs has been ignored.

When they purchase the systems that support the text messaging, said purveyor may have slipped in some usage fees. For example the system may have an annual support and service fee. the makers of the system may also rate the system for a specified number of messages , after which there will be incremental fees for messages handled.

I do not have the actual numbers around this, but it would be interesting to see what they are, because I know they exist.

Свободные исследователи » Blog Archiv (not verified) says: [...] сегодня на

[...] сегодня на slashdot-е пост, в котором автор рассказывает о стоимости SMS в США. [...]

Bechster (not verified) says: Paying to receive an

Paying to receive an sms?

how sick is that? i pay roughly 80 USD a month but for that i get a really low cost for calls, free SMS and MMS(send and receive from all companies in Denmark) i also get to use MSN Messenger from my mobile phone for free from anywhere in Denmark...

Marxz (not verified) says: that's just corporate theft,

that's just corporate theft, straight up and center......

here (south east asia) it costs less than about 0.06USD to send and nothing to receive SMS

Honeyman (not verified) says: In Russia, I have a pretty

In Russia, I have a pretty typical plan; I pay about a $1 monthly (that includes 50 SMS), $0.04 per any additional SMS, and each outgoing call costs $0.12/minute. Incoming calls and SMSes are free. But GPRS costs about $0.10 per megabyte, so I prefer to use a J2ME-client to chat with people using gtalk/AIM/ICQ, rather than to send any SMSes.

Progression » Links of the day (not verified) says: [...] cost of text messages:

[...] cost of text messages: http://gthing.net/the-true-cost-of-sms-messages/ Only in russia (pics): http://www.yeeta.com/_Only_In_Russia_Pics-maxspeed017 Kansas Education [...]

life hereafter » sms (not verified) says: [...] a lovely little

[...] a lovely little article I read today on why it costs so much to send a text message: What exactly justifies making SMS [...]

Tom (not verified) says: Of course, for USPS you

Of course, for USPS you would not use paper to transmit your MP3s, you would buy a CD-R and mail that. Total cost should be under $10 for all materials & postage - nicely protected.

Keeps it digital too, so it is a better standard for comparison.

Peter Manager SMS company (not verified) says: There are some possibilities

There are some possibilities to send SMS from web sites, or programs like Skype. We offer the posibility to send SMS to Cuba (15 Ctvos USD) and to the rest of the world in (33 ctvos USD)

Etienne (not verified) says: When I started to use a cell

When I started to use a cell phone with Telus Canada. SMS was FREE. And now it cost 5cents and more. What a crappy system. Canada and US providers are the most expensive in the world.

Kvantum (not verified) says: How about comparing SMS to

How about comparing SMS to GPRS or voice data?
Since all these services are chargeable on the cell phone, they should technically have the same cost. First, GPRS. Aside from the fact they use different protocols, just a simple bandwith calculation. My provider is Rogers Wireless. Without a data plan, GPRS data costs me 5 cents per KB. Therefore, I can transmit 1024/120= 8.5 full sms messages, or 0.6 cents per message.
And the voice data? Regular phone conversation runs at about 4kbps(that alone is awesome compression). that means that for every second it transmits about half a kilobyte of data. Without a monthly plan one minute will cost you about 30 cents. That's 0.5 cents per second, or one cent per kilobyte. At THAT rate, SMS should cost 0.12 cents each.

esmith512 (not verified) says: Pricing like this means the

Pricing like this means the market allows this pricing and the businesses are maximizing the value. This arrangement reminds me of what happened with ATMs over the past few decades--ATM usage used to be free, justified by the savings in teller overhead, then gained fees as the banks saw a market potentials in addition to the overhead savings. ATM use dropped so much that ATMs began to disappear as people got out of the habit of using them. SMS and MMS will eventually be replaced with true IM and e-mail clients as technology evolves to the point modern cell phones have the same facilities and internet connectivity as PCs had a decade prior.

César (not verified) says: nice article, here in

nice article, here in Colombia we only pay for the sms and calls we make, we don't pay for the calls or sms we recieve.

engrpiman (not verified) says: how about this. 2500 songs

how about this.

2500 songs at 4 MB /song = 10,000 MB a 16 GB flash drive is $84. now add two stamps to be safe and well you can now send

2500 songs for $84.82 : not only that but the pendrive is reusable so you can keep sending it for $0.82

cheaper then printing it out

NEWSFLASH: Text messaging is a huge rip off (not verified) says: [...] to A Gthing Science

[...] to A Gthing Science Project, A standard SMS message contains up to 140 bytes (1120 bits) of data - this takes care of the 160 [...]

Bizzle (not verified) says: Well... It is like

Well... It is like this..

The pizza guys shows up with a pizza box...

OOH pepperoni! I didn't order this but I love pepperoni..
10 bucks...

or

Onions and olives... ugh... I dont really like those... I dont think I even ordered pizza.
10 bucks...

or

Hey I didn't a pizza... WTF!! Why does the box only have 3 slices???
10 bucks....

Woadan (not verified) says: @ Renato: The reason for

@ Renato:

The reason for the differences in how the mobile providers operate in Europe vs the US/Canada is primarily based on how they came into being.

In Europe, the mobile operators were initially arms of the state-owned and operated telcos in most countries. As such, their mandates were the same.

In the US/Canada, however, although the telcos were also involved, others developed the initial networks. And the services in their infancies weren't as regulated, nor were they regulated in the same way as the telcos. Too, the telcos were state-mandated monopolies, but they were not a part of the state.

That explains why in the US/Canada we had parallel advancement of the CDMA, GSM, and TDMA infrastructures--no government intervention. (We let the market determine the outcome).

Yet in Europe, the EU wanted to have a common standard and GSM was cheap to implement.

Because the European mobile operators were part of the state telcos, incoming calls could not be charged for. (And since you never started out paying for an incoming call, you won't ever.)

Because the US/Canada mobile operators weren't state controlled, they could set whatever pricing models they wanted, and they charged for both incoming and outgoing calls according to your individual plan.

In those early days, you could probably have made a good point for charging for both because the network was being built, and the costs are not insignificant. But the counter-point could be made that you could simply charge enough for the service to begin with.

For the present, I think we can make the point that we get milked enough by the mobile carriers, and a change would be welcome.

Woadan

~Please note that Sprint has some plans where your incoming calls are free. However, the price is higher than its other plans, and the number of minutes is less than in the non-incoming plans.

Soruk (not verified) says: I've roamed on AT&T with

I've roamed on AT&T with Virgin Mobile and Orange (UK). Even when roaming most GSM carriers do not charge for receiving SMS messages.

Which makes the really insane position that a roaming user of AT&T's service is receiving texts free while a local user is being shafted, despite the roaming inbound SMS coming from possibly halfway around the world.

Jason (not verified) says: > My theory: SMS messages

> My theory: SMS messages are transfered over air > made of solid gold.

This sounds about right.

One could certainly argue that RF spectrum is currently one of the most valuable commodities - look at the current 700 MHz band auction, which last time I looked was up to $3.2 billion.

It's unfair to compare the cost of a severely limited commodity (RF spectrum) with that of something like land line based broadband (e.g. DSL), whose capacity is (basically) limited only by the infrastructure you're willing to build.

The other Tuesday post « The UWTLIT Weblog (not verified) says: [...] someone has broken

[...] someone has broken down the true cost people are paying for SMS: $1500 per megabyte?  You bet.  I suspect that cell phone companies aren’t going to change this pricing [...]

Bruce Dawson (not verified) says: The article says: > So our

The article says:

> So our total message length is about a
> tenth of a kilobyte (.13671875 Kbytes).

The 1.367... number is correct, but summarizing that is one tenth is a bit odd. It's between one seventh and one eighth. It doesn't affect the conclusion that AT&T is ripping off consumers, but it struck me as odd.

ExtraCharacter (not verified) says: Is there not a slight

Is there not a slight mistake in the article ? 1/4000 th of a 4 Megabytes song leaves us with 1Ko, not with a tenth of it, doesn't it ?

no free lunch (not verified) says: None of ya are getting

None of ya are getting anything FREE, it's included in the fees you pay. This seems a petty thing to point out, but when we call things like this free, we are lying to ourselves.

Usman (not verified) says: Its amazing, the analysis

Its amazing, the analysis may not have completely taken care of the underlying protocols in exact for the cost calculation, BUT i m sure its very close to the actual calculations.

I am in Pakistan and I pay 0.23 PKR for sending SMS and nothing for receiving. (60PKR=$1USD).

Amazing!

Norman Duffield (not verified) says: In the US, we are supposed

In the US, we are supposed to have a regulatory commision called the FCC to look after the consumer's interests. But unfortunately, the carriers have managed consistently to ensure that the FCC does what is best for the carriers and continue to nickel and dime the consumers.
If this situation continues, you can bid goodbye to global competitiveness - given that the US is at least 3/5 years behind the Asian/European markets in the mobile market.
It is very depressing to see that you cannot do moble e-commerce whereas in India, I can buy my airline tickets using SMS!
Wakeup Americans - fight the big company monopoly!

Greg Leffler (not verified) says: SERO now includes unlimited

SERO now includes unlimited SMS again (as of 01/01/08, valid until 2/18).

That notwithstanding, you're exactly right in that the pricing of SMS is mainly designed to force customers, even light-use customers, to carry a messaging package, because at 20c a message, you only need to send/receive 25 messages total before that $5 a month cheapie message plan comes in handy, but the odds are good that someone on such a low plan probably won't send/receive many text messages, so it's all gravy.

To people saying that the cellular companies face a marginal cost per message: I seriously doubt it, because of the existence of unlimited message packages. If Interexchange operators really charged "high fractions of a cent" then anyone sending more messages a month off-network than they're paying in cents for their plan would be costing them money. Cellular networks don't let customers who cost them money stay on the network.

I have an unlimited SMS package and have used over 4,000 in one month, almost none of them to subscribers of my network. For this package, I pay $9.99, yet if you believe people that say carriers are paying close to 1c, we'll say .6c as a 'significant fraction' of a cent. That's $24 in these costs alone.

Yet carriers keep offering unlimited SMS packages, so these fees are either obviously less, or the carriers just lump all SMS profits into one big bucket that they then gloat about having.

Off The Island » The cost of Texting (not verified) says: [...] texting so much!  It

[...] texting so much!  It still might be worth the cost of not having to talk to people in person. READ THIS by West Coast Probst | posted in Technology Trackback URL | Comment RSS Feed Tag at del.icio.us | [...]

True cost of SMS messages - Nokia N95Users (not verified) says: [...] True cost of SMS

[...] True cost of SMS messages Here's a link to an article about calculating the cost of SMS messages. I thought it to be an interesting read. The True Cost of SMS Messages » a gthing science project [...]

EU guy (not verified) says: Bummer! It is so weird

Bummer! It is so weird hearing about SMS receiving charges as a European. Also, I pay only 3 eurocents per sent message.

Sean (not verified) says: Yeah allb, you love India

Yeah allb, you love India for the texting rates, I love America for the running water, garbage removal system and overall sense of civilization we manage to maintain.

But yea, I mean, we pay more for texts.

Uninnovate.com » AT&T raising the cost of text messages to (not verified) says: [...] The True Cost of SMS

[...] The True Cost of SMS Messages » a gthing science project [...]

the postal service (not verified) says: The True Cost of SMS

The True Cost of SMS Messages...

Bookmarked your post over at Blog Bookmarker.com!...

The True Cost of SMS Messages at John Thomson: Thinking out (not verified) says: [...] The True Cost of SMS

[...] The True Cost of SMS Messages » a gthing science project [...]

anon (not verified) says: lol it seems phone companies

lol it seems phone companies are worse than the oil companies.

how much do YOU text? - Page 7 - Computer Forums (not verified) says: [...] how much do YOU text?

[...] how much do YOU text? Here's some interesting info on texting. Makes you go hmmm... The True Cost of SMS Messages » a gthing science project [...]

nico (not verified) says: In France my provider

In France my provider charges 0.15 Eur / Sms, and even better 0.3 Eur to archive a voice mail message - 1 min @ 13 kbps - Figure out the cost of a 500 GB Hard disk at this rate !

Fernando (not verified) says: Same - SMS is still free

Same - SMS is still free under SERO. Every time they reach the deadline, they push it back again. Right now the deadline to sign up for SERO and get free SMS is February 16. Recently it was December 31; before that it was September 30.

You don't need a Sprint employee's email address anymore. Sprint has created a pseudo-address that anybody can use. Details are at http://forums.slickdeals.net/showthread.php?t=563252

Cynical (not verified) says: To the few people claiming

To the few people claiming that the US are usually so advanced with regards to technology: Have you ever been there? If you look at cellphones (at least 5 (3) years behind Asia (Euope)), computers (okay-ish, but nothing revolutionary happening here), or in a more broad spectrum houses (ever hear of brick walls? No wonder hurricanes and earthquakes manage to destoy whole cities) or even public transportation (mostly buses - how very advanced...), the US are NOWHERE near the standards that prevail in Western Europe and parts of Asia (especially Japan).

So this shouldn't exactly come as a surprise. I am also mildly shocked that nobody has sued the carriers yet for charging for incoming messages. With incoming calls (that you have to pay for, too), you at least have the option of not answering, but you cannot choose to receive a message or not. I'm waiting for a case where a kid uses up all the money on their prepaid card because of incoming messages and isn't able to call their parents in a "real" emergency. If something like this happens, there's going to be hell to pay...

Daniel von Asmuth (not verified) says: SMS is sent as control

SMS is sent as control messages for virtually nothing along with GSM voice data, but you forget that over 90 % of the costs to the phone company are incurred by the billing process.

Fatal Claws (not verified) says: Last time I checked America

Last time I checked America was a free country with a capitalist driven economy, so if people are willing to pay the cost, then the companies will keep pushing it out. If you don't like it, change providers! Problem solved.

gambrinous with griffonage… » Incoming Message, Captain†(not verified) says: [...] what prompted me to

[...] what prompted me to write this was a blog post about the true cost of SMS messages. Wow! Cell providers have obviously seen that they can make butt-loads of money off of people from [...]

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