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10 Products With Big Markups

Text messages
Back in 2008, when the typical text message cost 20 cents for those lacking an "unlimited" plan, Dr. Nigel Bannister, a physicist who specializes in space research at the U.K.'s University of Leicester, determined that sending text messages cost nearly 4.5 times more than downloading data from the far reaches of space via the Hubble Space Telescope.

Comparing megabytes to megabytes, his calculation held true even with "conservative assumptions" about labor costs associated with the telescope transmissions.

"Hubble is by no means a cheap mission -- but the mobile phone text costs were pretty astronomical," he said.

That same year, U.S. Senator Herb Kohl, D-Wis., then chairman of the Senate Antitrust Subcommittee, chided Verizon (VZ - Get Report), Sprint (S), AT&T (T - Get Report) and T-Mobile in a letter to their CEOs for "sharply rising rates for its customers to send and receive text messages ... What is particularly alarming about this industrywide rate increase is that it does not appear to be justified by rising costs in delivering text messages."

"Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit," he added.

At a related Congressional hearing chaired by Kohl, he said various experts pegged the actual cost to carriers for facilitating a text message at a mere 0.3 cents.

The website added perspective on the cost of texting. It compared a base rate of 20 cents a message with broadband costs and found that sending and receiving the 2,560 MP3 files on an iPod would be $1 of broadband usage -- but add up to $61,356,851.20 if transmitted at texting rates.

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KO $41.11 0.07%
PEP $97.03 0.71%
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S $3.43 1.80%
TIF $94.89 -0.85%


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