SMS: The dying cash cow for wireless carriers? August 18, 2011 — 8:06am ET By Sandhya Raman FierceMobile Over 6.1 trillion text messages were sent last year worldwide, according to a report from the International Telecommunications Union. This number has climbed steadily since the advent of text messaging, but some analysts and industry insiders predict that carrier revenues associated with SMS are going to decrease dramatically in the next few years. Why would a once booming source of revenue suddenly decline? Two factors are pulling at the market for SMS. First, the way carriers charge for SMS has simply made the 10-cents-per-text model less reasonable for consumers. Users are texting more and are thus buying text messaging plans that bundle hundreds or thousands of text messages per month for relatively per-message inexpensive prices. Second, the rise of smartphones has paved the way for Internet-based communications that don't rely on wireless carriers' SMS channels. Apps like Facebook, Twitter, Research In Motion's BlackBerry Messenger, Apple's forthcoming iMessage and WhatsApp allow users to send unlimited messages to recipients on the same service, all via their smartphone data plan. "We do see more people texting, it's just we don't know if people will do that with the regular text, SMS, or with the IP, with a push-based notification," said Julie Ask, an analyst with Forrester Research who is currently researching how push-based notifications will affect SMS, from a business perspective. SMS revenues slowing 
Indeed, AT&T Mobility announced it will discontinue a number of its text messaging plans, including its $10 per month plan for 1,000 text messages, and will instead only offer a $20 unlimited messaging plan per month for a single line or a $30 unlimited messaging plan per month for families. The carrier's only other option will be per-message billing at 20 cents for each text message and 30 cents for each picture/video message. As carriers phase out unlimited data plans, users will either invest more money in buying larger data plans or use their data more carefully, opting to use other messaging options than traditional SMS. Either way, the carriers should not see a revenue loss, White said. Forrester Research's Ask doesn't see SMS drastically decreasing in the near future either. Texting and chatting apps like Facebook often require both users to have the same messaging system, she pointed out, while text messaging works across virtually every mobile phone in the world. Chetan Sharma, from Chetan Sharm Consulting, said in a new report that the United States unseated Philippines as the king of text messaging with almost 664 messages per subscriber per month, compared with the Philippines which is seeing a sharp decline in per user messaging due to IP messaging. He said some of the European operators are also experiencing the pain of declining SMS usage. However, Charma noted that while the percentage share of the data revenues is declining for messaging, revenue growth is staying strong with almost $5 billion in revenues in the United States in the second quarter. 
The alternatives to SMS SMS (Short Message Service) and MMS (Multimedia Message Service) travel through wireless carriers' messaging gateways, and are billed separately from standard data transmissions. Most mobile phones across the world can send and receive SMS and MMS messages. But, thanks to the rise of smartphones and third-party apps, there are a range of alternatives to the carrier-controlled SMS channel. Here is a selection: Name | Features | Platform | Icon | BeejiveIM | cross-platform instant messaging | BlackBerry, iOS, Android | | WhatsApp | group chatting, SMS and MMS capabilities, push notifications | BlackBerry, iOS, Nokia, Android | | Google Voice | text messaging, voicemail transcription | BlackBerry, Android, iOS | | Skype | video
chatting, instant
messaging | BlackBerry, Android, iOS, Symbian | | Kik Messenger | real-time texting | iOS, Windows Mobile, Android | | LiveProfile | real-time messaging | BlackBerry, iOS, Android | | TextNow | unlimited texting and video messaging | iOS | |
For users interested in alternatives to traditional texting, there are a variety of chatting options. Some companies, like Enflick, offer a variety of mobile messaging apps with different features. Enflick offers TextNow for free texting on iOS and PingChat for cross-platform instant messaging for devices running iOS. Enflick's CTO, Jon Lerner, said the company plans to expand TextNow to other platforms in September. "Our focus is to allow our products to reach the widest audience globally while keeping development efforts feasible for us. We are always on the lookout in terms of what's emerging in popularity (e.g. Windows Phone), and depending on the adoption trends we will be adding more platforms in the future. We haven't decided on the specific platform and timeline yet," Lerner added. Companies like Enflick offer some services for free — TextNow is a free app and unlimited texting is also free — and
charge
for add-ons
like call
forwarding
or ad-free
texting.
Kik Messenger,
another
application
that provides
free mobile
messaging,
does not
charge
for its
app but
simply
relies
on ad revenue.
Sharma, from Chetan Sharm Consulting, sees social networking factoring into the mobile messaging market. Sharma predicts "shifting messaging behavior to Facebook and Twitter." Apps like Facebook's Messenger allow users to text pre-existing contacts. Twitter itself is built on the premise of sending short messages between two or more users. A tweet can serve the same purpose as a group text. Facebook's new messaging app, similarly, works like other instant messaging systems but connecting users in a faster method than traditional SMS. Facebook's Messenger has an advantage over handset-specific messaging systems in that it can be used on phones running Android or iOS. In addition, users without smartphones can still reply to messages sent using Facebook Messenger after confirming their mobile number on Facebook. Sharma predicts a larger shift in mobile messaging behaviors. He said it is "easy to expect that within 5-10 years a good portion [of users] will have shifted to Internet messaging as opposed to traditional SMS messaging." At the same time, he cautions that this shift will not be the result of any one program or app. "The messaging is in trillions so even if somebody has millions of messages [being sent via his app] going on a daily basis, it is still a tiny fraction [of the market]," he warned. The future of texting: Unified communications? The concept of mobile messaging isn't likely to die anytime soon. What is likely to change is the way in which these messages are transferred between users. As for what users can expect in the future, Charles Golvin, a principal analyst with Forrester Research, has an idea. He sees texting as a part of a larger unified communications effort. Regardless of the method of delivery, the end result will be messages synced together from instant messaging, texting or even voice platforms. J. Gerry Purdy of Mobiletrax also sees a future in a universal messaging system.
"Universal
messaging allows you to see the different kinds
of messages that go between you and that person,
so you can see the e-mail, you can see the texting,
you can see the Facebook posting, and as a result,
all the messages between you and somebody will
show up in one place. I think that is going to
continue," Purdy said. As for text messaging overall, the market, as Golvin sees it, is getting saturated. "We are going to start to see a decline, there isn't a huge number of subscribers waiting to take up text messaging. Grandma and grandpa aren't going to become adopters," Golvin said. |