SMS operates via the SS7 protocol; SS7 protocol-based signaling occurs in a separate (side-band) channel of the voice-based public switched telephone network. It is used for call routing (setup and tear down) of a switched PTP connection, billing, other administrative purposes, and for the transmission of SMS messages. It existed long before (1970's) there was such a thing as SMS (developed in early 990's). Consequently, it is essentially free (from the marginal cost perspective that governs economic decision making in telecoms) to the carriers. I speak as a former RBOC and ISP executive who was heavily involved in financial decision making.