It doesn't.

The practice of sending someone a message and having it charge them would be illegal as you cant be charged for the actions of someone else where you don't have a choice (not in the uk anyway) this is why we cant be charged for incoming calls, why a person roaming abroad had to pay the international part of the call and why you always have to text FIRST to 80708 to get a kak ringtone. If someone texts you and it costs you 10p and you had no choice in that matter then it would be unlawful.

Some networks used to charge YOU for a delivery reports but the handling of message delivery is handled by the SMSC. When the sms is delivered to the phone it sends an acknowledge back as part of the communication. The centre then relays if its been delivered (the report message is not sent by the phone). This is why text messages don't really cost the operator anything as its all part of the GSM system. I still remember when Text messages used to be free. Back then you could only send so many a day and it was only when the networks saw a nice money earner that the charging factor came into play. I remember my brother getting a shiny letter from Orange saying "Hey guess what. We have removed the sending restrictions on Text Messages. Each message will cost 5p...." or words to that affect

Text messages actually use the same system as every other GSM message. Their is a Data Header which contains the message type (voicemail notification, sim update, flash message etc) and their is scope for thousands of different "types". In reality only a few dozen are reserved GSM types but some phone providers look for custom ones so they can do things like send settings, logos, ringtones etc over the air (or they did back in the day) Some of us old bastards will remeber downloading programs for our pcs that let you send out nice messages to your friends that turned their voice-mail indicators on (very annoying/amusing)

As well as a header they also have a payload. In the case of a SMS the payload is a 160 character ASCII message as well as supporting data such as reciever, message center number, messageid etc.

Wether you get a delivery report or not is simply one bit in the header that's either 1 for yes or zero for no. 02 simply looks at the header of all messages and sets the delivery flag to zero regardless. This change was actually made back when they were BT Cellnet and it was apparantly because their network was struggling under the load of all the text messages and then subsequent delivery reports (most phones have delivery reports turned on by default). Before this delivery reports worked on their network (I remember owning a BT cell-net phone and getting rid of it not long after for at the time pastures new )

Whether you believe their reason or not is up to you. Either way their SMS centre looks for a string at the start of the message and if its present it generates a delivery TEXT (not report) and sends it to the asker. This forces people to ASK for delivery confirmation rather than just having their phones do it anyway for lolz or cba to turn it off.

Their were plans of charging people 2p for delivery reports around the time they did it and I think they feared the customer backlash when everyone with it turned on suddenly got raped 20% for text messaging costs (this was before free messages became mainstream either way I never found out as I went to Orange not long after.