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UCS-2 is a character encoding standard in which characters are represented by a fixed-length 16 bits (2 bytes). It is used as a fallback on many GSM networks when a message cannot be encoded using GSM-7 or when a language requires more than 128 characters to be rendered.
UCS-2 and the other UCS standards are defined by the International Organization for Standardization (ISO) in ISO 10646. UCS-2 represents a possible maximum of 65,536 characters, or in hexadecimals from 0000h - FFFFh (2 bytes). The characters in UCS-2 are synchronized to the Basic Multilingual Plane in Unicode.
Character is an overloaded term, so it is actually more correct to refer to code points. Code points allow abstraction from the character term, and are the atomic unit of storage of information in an encoding.
UCS-2 is a fixed-width encoding; each encoded code point will take exactly 2 bytes. As a SMS message is transmitted in 140 octets, a message which is encoded in UCS-2 has a maximum of 70 characters (really, code points): (140*8) / (2*8) = 70.
When sending SMS messages with localmail, we'll automatically send messages in the most compact encoding possible. If you include any non GSM-7 characters in your message body, we will automatically fall back to UCS-2 encoding (which will limit message bodies to 70 characters each). Additionally, localmail prepends a User Data Header of 6 Bytes (this instructs the receiving device on how to assemble messages), leaving 153 GSM-7 characters or 67 UCS-2 characters for your message.
Note that this may cause more messages to be sent than you expect - a body with 152 GSM-7-compatible characters and a single unicode character will be split into 3 messages when encoded in UCS-2. This will incur charges for 3 outgoing messages against your account.
Unfortunately, GSM-7 is not a supported character encoding in many text editors. Even setting encoding to ASCII (or US_ASCII) will not guarantee that text you write will be limited to GSM-7. You can use the above linked tool to quickly check the number of segments - that is, total messages - some text will be divided into.
If you are writing in an editor with Unicode support you'll need to be particularly careful. Text editors designed for writing might automatically add angled smart quotes, non-standard spaces, or punctuation which looks similar to GSM-7 but is a different Unicode character.
In some languages, more than 128 symbols are commonly used, so a larger universe of potential characters is needed. UCS-2 has been implemented in many GSM networks and on many mobile devices, and is considered the defacto standard fallback.
By the Unicode standard, UCS-2 is an obsolete encoding because it wasn't designed to allow characters in the so-called supplementary or 'astral' planes in Unicode. Plane 0, the Basic Multilingual Plane, contains character encodings for what are believed to be the most commonly used characters in modern languages. UCS-2 is limited to FFFFh code points, or 65,536 possible characters.
UTF-16 is the successor to UCS-2. and has the ability to address Base and 16 Supplementary planes, for a total maximum number of characters of 10FFFFh, or 1,114,112 code points.