I’m wondering what service are we actually paying for every month. What does it actually cost to provide data and how do they turn your services off if you don’t pay. Even before the internet was on phones, what did it cost them to provide us with minutes? I understand the phone companies provide the phones, tablets, etc but aside from that I don’t really get what they do that costs so much.
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You’re also paying for network infrastructure. You’re only using wireless up to the cell tower, which then takes your call or data, and routes it out over the backbone fiber optic network. Your phone number is contained within a database that is queried every time you connect to the network. It is during this handshake that the network checks to see if your phone number and device are supposed to be active or disconnected for non-payment, etc…
The phone company generally does not provide the phones. Google, Apple, and, in the past, firms like Nokia and Ericcson provide phones but do not provide cell service.
Companies like AT&T, Verizon, and T-Mobile’s job is to maintain the hundreds of thousands of towers and other facilities that receive and transmit cellular data. These facilities are what actually makes phones work.
Bandwidth in the air is a at premium. Carriers pay the FCC (or equivalent in your country) for permission to use frequencies exclusively, but each frequency can only carry so much data. Minutes and data limits are intended to keep people from just using the service non-stop or exclusively, ensuring there’s air time on the wireless side generally available for people when they do need it. I mean… if there weren’t data limits, SO many people would just use their cell phone as their only internet and most ISPs would go out of business…. if the cell performance wasn’t horrible because everyone was using it at the same time and congestion ruined it.
After that, the carriers need to built the infrastructure for cellular. All those cell towers need to be set up, maintained, and connected to each other and the carrier’s main network. There’s software that routes calls, validates owners of SIM cards, acts as a data endpoint. Every decade or so it seems like there’s a Next Generation of cellular service that requires upgrades to everything, starting in the busy urban areas but still expected to roll out nation-wide. Enough wireless towers to cover the majority of the country isn’t cheap.
There’s general business costs… employees, electricity, building maintenance and taxes, and all that. Never underestimate how much salaries/wages costs.
And then there’s roaming. Oh god there’s roaming. If you want your cell phone to work in another country, let alone another provider’s network in the same country in areas where you don’t have cell tower coverage, those other companies are going to want to be compensated for having your customers on their towers. And of course I mean money. And if you want your customers to have a good experience away from home, you’ll pay the rates they specify. “It’s nice to be in the position of leverage for once,” said those roaming carriers.
In no particular order:
Network infrastructure, such as the cell tower and the wiring to hook it up the communications grid. Also any technical upgrades, such as the transition to 5G.
Technical and customer support, such as people on the phone lines or at stores. For example, I went into a AT&T store last week to get a problem with my account fixed.
The simple costs of doing business such as advertising and regulatory compliance.
The important part are the cell phone towers that the cell phones connect to.
Cell phone companies need to build and maintain them or pay someone to do it for them.
These towers receive the signal from your phone and pass it via a cable or some other means to then be connected to the internet and phone network.
These things are expensive.
> but aside from that I don’t really get what they do that costs so much.
these companies generally also own the infrastrucutre that enables the devices to actually connect and as they are responsible for building it and maintaining it(and this isnt free for them) that is how they pass the cost to the customer.
plus the cell companies are not the one providing the phones, Manufacturers like Samsumg, nokia, etc..provide them. what they actually do is allowing said devices ot connect to their networks.
The marginal cost of a single customer network usage is very low, it will be a bit of extra electrical usage. That is if the infrastructure is there and there is spare capacity.
The problem is building up that infrastructure, to begin with, and powering and maintaining it costs a lot of money.
At some point adding more customers will result in some parts of the network being over capacity for some locations and part of the day and you need to add more equipment to handle it.
Data caps and free call minutes limitation or just charging compared to the amount you use is a way to keep the usage down so the existing network can handle more usage.
Even for old wired phone networks, there is a capacity limitation, there might be possible that all subscribers connected to a single phone exchange can talk to each other at the same time but there will be a limitation on the number of possible phone calls between phone exchanges.
Even if it do not cost anything extra to provide the service and there is no limitation you can charge for usage. Companies’ goal is to make money. The lowest cost in general is the produce/service cost to provide. The max cost depends on what customers are willing to pay. The higher the cost the fewer customer you have. Competitor costs are also relevant here if you charge more then a competitor customer will move to the if produce/service. So ideally you set the price to what will result in the highest amount of profit.
You pick monthly fixed cost and usage cost so that the amount of money you make is maximized. A to high fixed cost and some customers that would not use the service a lot would simply not get it. A usage cost will get you more money from the customer that use it more and are prepared to pay more.
The price for a product/service is set by what customers are prepared to pay not what the cost to provide the product/service is something very important to understand.
If you go to a fast food place and purchase soda and a hamburger the soda. The cost of the soda might be 10% of what you pay and the cost of the hamburger might be 80%. They could set the price so the profit margin is the same for both, but why would they? The alternative is the cost of the soda is less than you are prepared to pay and the cost of the hamburger is more than people are prepared to pay. The better way is to change the amount customers are prepared to pay for each.
If you are using a top US carrier besides what the others said you are also paying for the brand, “subsidies” on phones, and other bloated sales expenses of your carrier. If you switch to using unlocked phones you can use resellers that typically cost less. Check out /r/NoContract If you are a low data user you can get a plan that costs $10-20 a month.
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