6 ms·

Operators will lose $54 billion by 2016 due to SMS replacement apps

28 points by esolyt 14y ago

leoedin 14y ago
Do people in the US tend to pay for individual text messages? Almost everyone in the UK has an unlimited or close to unlimited texting plan (3000+ texts). Given that everyone's paying for it anyway, the actual revenue gained by someone sending a text is 0. In fact, because a text will use some tiny amount of infrastructure, they'll potentially lose more money the more texts people send. Most people I know who use whatsapp use it more like an IM client for group messages rather than for one-to-one messaging. As everyone has more or less unlimited texting available to them, nobody uses whatsapp for financial reasons because there's no savings made. This will only be an issue once people start to realise that they're not using as many texts and demand to pay less. I can't see that happening in the UK.
- DrJokepu 14y ago
  "Almost everyone" is basically almost everyone you know. It's difficult to find data on the market share of pay as you go plans in the UK but I'm sure it's a significant portion of the market. These plans typically charge for individual text messages unless you get a special plan or meet some criteria (e.g. top up at least £10 a month).
  - objclxt 14y ago
    It's huge. The most recent OFCOM market report[1] reckons just over half of all mobile customers in the UK are on PAYGO. Don't under-estimate the UK pre-pay (PAYGO) market. It's quite easy to, because most people reading this are probably on contract themselves. Not only is pre-pay half the market in the UK, it's by far the hardest to retain. Pre-pay customers aren't loyal (partly because they're not locked in to contracts, partly because they tend to be price conscious), and because they skew young they tend to be the customers more likely to both a) use SMS, and b) switch to things like WhatsApp. [1]: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12/CMR_UK_2012.pdf http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12...
    - gabemart 14y ago
      I find that really surprising because phone service is now just so damn cheap in the UK. After a cashback offer, I'm effectively paying £5 a month for more minutes, texts and data than I can hope to consume. I guess my needs are relatively modest, but so (I imagine) are most non-business customers'.
  - makomk 14y ago
    Pay as you go plans also typically charge a fairly significant amount for mobile data too, though. In fact, on giffgaff (a PAYG-only operator which seems to be insanely popular with young people here in the UK), the most sensible way of paying for mobile data comes bundled with unlimited texts anyway.
- mikeash 14y ago
  I could have an unlimited texting plan if I felt like paying an additional $20-30/month. As I did not feel like it, I used to avoid texting for the most part. Now that iMessage is available, I text freely with other iOS users, and still try to avoid texting for others.
- joelhaasnoot 14y ago
  The reason unlimited texting has come about her in the Netherlands seems to be Whatsapp and its friends - providers add an "unlimited texting" bundle to most plans to "remain competitive".
- objclxt 14y ago
  The PR here is hiding the larger issue. It's not end-users that carriers need to worry about - as you say, most are on near unlimited texting plans, and it's rather unlikely monthly plans will drop in price. No, the problem is the general rise of IP/push messaging across all sectors. Carriers do make significant amounts of money from direct connection billing and bulk SMS. As more brands develop mobile presences the need to contact customers through SMS versus alternative methods will decrease. Push messaging is considerably cheaper, and from the end user's perspective often less annoying and more convenient. Fortunately (for the carriers), most operate globally, and certain developing markets offer vast SMS revenue potential, more than the West ever did. India alone is a massive user of SMS, considerably more so than the US (partly due to the lack of regulation: a lot of those SMS messages being sent in India are spam).
keithpeter 14y ago
UK: sms messaging here provides me with a uniform and universal way of contacting any mobile phone owner who want to be contacted, e.g. students I need to tell about a classroom change. I just use a Web service like bulksms. In the UK and I believe Europe, receiving an sms message does not cost the recipient any money. I don't have to track who uses facebook and who uses twitter, they don't have to 'follow' or 'like' some institutional account.
- UnoriginalGuy 14y ago
  Use RSS, e-mail, or as you said Twitter. There are a lot of alternative solutions to this problem. I grant that lack of uniformity is a problem.
  - keithpeter 14y ago
    That was the point I was making but didn't communicate effectively. There are a lot of different alternatives. Most of these alternatives are not 'push' but depend on the recipient monitoring something. In the Further Education college I teach in, 98% of students have a mobile phone. Many of those are basic pay as you go dumb phones. Some feature phones, Blackberry phones are popular in UK with teenagers. A few have iPhones and Samsung and the LG slabby things. Not all have Web access on the phone (or have it but don't want to turn it on). A result that surprised me was that teenagers don't access the Web that much on laptops or desktops. The common denominator here is sms. I get 98% access. It costs a little money, but not huge. I hope it does not go away as we have brand (phone, carrier) dependent messaging.
    - mertd 14y ago
      SMS is great and should not go away. Charging a non trivial amount per message is ridiculous. US carriers are the worst offenders on this. They charge up to 20c to the sender AND the recipient.
- macspoofing 14y ago
  SMS isn't going away, if anything it'll get cheaper as it's forced to compete with messaging apps. But if it goes away, e-mail can easily replace it for your needs (especially since most students have e-mail capable phones).
stephen_g 14y ago
I wonder how long until we see legislation popping up to try and stop this?
ronyeh 14y ago
Good riddance.
- neotek 14y ago
  I don't understand this sentiment. Good riddance to what, exactly? A simple and universal method of quick communication between literally every cellphone in the world?
  - thedrbrian 14y ago
    Probably the rediculious fees for sending and receiving text messages. As a British person I can't believe the American networks charge to receive text messages.
    - mitchty 14y ago
      Well its more bs than just getting charged for getting a text. You basically get 2 choices: * pay per text (which is totally lame I agree) * pay ~$20/mo for unlimited Most people just opt for the latter because if you ever send more texts a month than $20 it "pays" off in the end. Both options suck, the phone companies not being able to gouge for texts is no love lost in my opinion.
      - ronyeh 14y ago
        The third option is to cancel your text plan, which I have done. If my friends send me a text, it disappears into the ether (no error message). I'm trying to get folks used to contacting me through any other means (email, fb, g+, gchat, call me...maybe?).
        mitchty 14y ago
        True, I don't consider that much of an option personally as I rather prefer texts to the rest. But thats just like, my opinion man. How has dropping texting entirely worked out? I've often wondered what the impact would be myself. Not that I have the balls to do it.
mtgx 14y ago
Money they weren't supposed to make in the first place. This is just market correction.
- yen223 14y ago
  Exactly. The headline should read "Consumers set to save $54(?) billion by 2016".
confluence 14y ago
No - consumers will save $54 billion by 2016. They'll then spend those savings on other things. It's a good thing. But I'm afraid it's not the only industry about to get absolutely crushed by progress. This story reminds me of the time Steve Jurvetson (a VC of DFJ fame) discussed the amusing interactions he had with a large engine oil company. He clearly illustrated to them them how, and why, their synthetic engine oil business ($10 billion a year) was about to get absolutely decimated by the introduction of essentially maintenance-free electric vehicles. He then told them that they had better diversify their synthetic oil cash cow, before electric vehicles came in and ate them for breakfast. Did they bother heading his warning? No. Instead, they laughed in his face. Everyone that services cars is next on this list - outside of brake pads and body panel beaters. I wonder how long it will be before there's an article that states: "World to lose $15 trillion as AI and automation replace most humans."
- euroclydon 14y ago
  It's hilarious that you write this anecdote in the past tense like your talking about a wagon axle greese company or something!
  - confluence 14y ago
    What's past is prologue.
- manaskarekar 14y ago
  "World to lose $15 trillion as AI and automation replace most humans." Interesting and often discussed thought and more or less and inevitability. I was hunting for some discussions on this and came across this blog post. http://marshalljonesjr.com/what-happens-when-no-one-needs-to-work/ http://marshalljonesjr.com/what-happens-when-no-one-needs-to... Exactly what I was wondering. Anyone know any resources where questions like these are discussed? Maybe Econ 101? Another article that popped up. http://deoxy.org/endwork.htm http://deoxy.org/endwork.htm The only ability that humans seemingly have over robots is creativity.
  - 14y ago
deleted 14y ago
[deleted]
coryl 14y ago
They'll make it back by ripping you off on your data plans. (Canada)
- vincentkriek 14y ago
  Same in NL
- dkd903 14y ago
  In India, Data Plans are cheap like $1.65 for 2GB data per month.
- joezydeco 14y ago
  Exactly. The carriers still own the transport layer, so they'll just reshift their plans to cover the loss. Some carriers in the US have introduced these "shared data" plans which pretty much accomplish the task.
dkd903 14y ago
Has Whatsapp caused a major dent in Operator revenues? I do not think so.
pi18n 14y ago
Those poor operators will have to find something else to overcharge for.
macspoofing 14y ago
>Ovum highlights the rapid increase in the number of OTT (over-the-top) players, and demonstrates that social messaging is not a short-term trend, but a shift in communication patterns. Who would have thought that SMS is not the future of communication.
pcurve 14y ago
I'm afraid consumers won't pocket that $54 billion either as long as the carrier cartel maintain iron grip. Just look at what Verizon is doing. You can't even unbundle "unlimited text and talk" from their non-prepaid plans anymore. 1GB smartphone plan will set you back $90/month, which is only a deal if you fall under a small percentage that actually go over 500 minutes per month AND send thousands of SMS. Just keep buying ATT and Verizon stocks guys.
Maven911 14y ago
Since i know about RCS and the aricle talks about it: It is mostly a pipe dream for operators, these services (file shharing, video calls, IM) already exist for much cheaper then what the telcos plan to charge. This is all part of the IMS technologies that have not been taken up by the market for approx 7 years now...its a sad tale of too little, too late
lo_fye 14y ago
They can't lose what they never earned.

28 points by esolyt 14y ago

Do people in the US tend to pay for individual text messages? Almost everyone in the UK has an unlimited or close to unlimited texting plan (3000+ texts). Given that everyone's paying for it anyway, the actual revenue gained by someone sending a text is 0. In fact, because a text will use some tiny amount of infrastructure, they'll potentially lose more money the more texts people send. Most people I know who use whatsapp use it more like an IM client for group messages rather than for one-to-one messaging. As everyone has more or less unlimited texting available to them, nobody uses whatsapp for financial reasons because there's no savings made. This will only be an issue once people start to realise that they're not using as many texts and demand to pay less. I can't see that happening in the UK.

DrJokepu 14y ago
"Almost everyone" is basically almost everyone you know. It's difficult to find data on the market share of pay as you go plans in the UK but I'm sure it's a significant portion of the market. These plans typically charge for individual text messages unless you get a special plan or meet some criteria (e.g. top up at least £10 a month).
- objclxt 14y ago
  It's huge. The most recent OFCOM market report[1] reckons just over half of all mobile customers in the UK are on PAYGO. Don't under-estimate the UK pre-pay (PAYGO) market. It's quite easy to, because most people reading this are probably on contract themselves. Not only is pre-pay half the market in the UK, it's by far the hardest to retain. Pre-pay customers aren't loyal (partly because they're not locked in to contracts, partly because they tend to be price conscious), and because they skew young they tend to be the customers more likely to both a) use SMS, and b) switch to things like WhatsApp. [1]: http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12/CMR_UK_2012.pdf http://stakeholders.ofcom.org.uk/binaries/research/cmr/cmr12...
  - gabemart 14y ago
    I find that really surprising because phone service is now just so damn cheap in the UK. After a cashback offer, I'm effectively paying £5 a month for more minutes, texts and data than I can hope to consume. I guess my needs are relatively modest, but so (I imagine) are most non-business customers'.
- makomk 14y ago
  Pay as you go plans also typically charge a fairly significant amount for mobile data too, though. In fact, on giffgaff (a PAYG-only operator which seems to be insanely popular with young people here in the UK), the most sensible way of paying for mobile data comes bundled with unlimited texts anyway.
mikeash 14y ago
I could have an unlimited texting plan if I felt like paying an additional $20-30/month. As I did not feel like it, I used to avoid texting for the most part. Now that iMessage is available, I text freely with other iOS users, and still try to avoid texting for others.
joelhaasnoot 14y ago
The reason unlimited texting has come about her in the Netherlands seems to be Whatsapp and its friends - providers add an "unlimited texting" bundle to most plans to "remain competitive".
objclxt 14y ago
The PR here is hiding the larger issue. It's not end-users that carriers need to worry about - as you say, most are on near unlimited texting plans, and it's rather unlikely monthly plans will drop in price. No, the problem is the general rise of IP/push messaging across all sectors. Carriers do make significant amounts of money from direct connection billing and bulk SMS. As more brands develop mobile presences the need to contact customers through SMS versus alternative methods will decrease. Push messaging is considerably cheaper, and from the end user's perspective often less annoying and more convenient. Fortunately (for the carriers), most operate globally, and certain developing markets offer vast SMS revenue potential, more than the West ever did. India alone is a massive user of SMS, considerably more so than the US (partly due to the lack of regulation: a lot of those SMS messages being sent in India are spam).

keithpeter 14y ago

UK: sms messaging here provides me with a uniform and universal way of contacting any mobile phone owner who want to be contacted, e.g. students I need to tell about a classroom change. I just use a Web service like bulksms. In the UK and I believe Europe, receiving an sms message does not cost the recipient any money. I don't have to track who uses facebook and who uses twitter, they don't have to 'follow' or 'like' some institutional account.

UnoriginalGuy 14y ago
Use RSS, e-mail, or as you said Twitter. There are a lot of alternative solutions to this problem. I grant that lack of uniformity is a problem.
- keithpeter 14y ago
  That was the point I was making but didn't communicate effectively. There are a lot of different alternatives. Most of these alternatives are not 'push' but depend on the recipient monitoring something. In the Further Education college I teach in, 98% of students have a mobile phone. Many of those are basic pay as you go dumb phones. Some feature phones, Blackberry phones are popular in UK with teenagers. A few have iPhones and Samsung and the LG slabby things. Not all have Web access on the phone (or have it but don't want to turn it on). A result that surprised me was that teenagers don't access the Web that much on laptops or desktops. The common denominator here is sms. I get 98% access. It costs a little money, but not huge. I hope it does not go away as we have brand (phone, carrier) dependent messaging.
  - mertd 14y ago
    SMS is great and should not go away. Charging a non trivial amount per message is ridiculous. US carriers are the worst offenders on this. They charge up to 20c to the sender AND the recipient.
macspoofing 14y ago
SMS isn't going away, if anything it'll get cheaper as it's forced to compete with messaging apps. But if it goes away, e-mail can easily replace it for your needs (especially since most students have e-mail capable phones).

stephen_g 14y ago

I wonder how long until we see legislation popping up to try and stop this?

ronyeh 14y ago

Good riddance.

neotek 14y ago
I don't understand this sentiment. Good riddance to what, exactly? A simple and universal method of quick communication between literally every cellphone in the world?
- thedrbrian 14y ago
  Probably the rediculious fees for sending and receiving text messages. As a British person I can't believe the American networks charge to receive text messages.
  - mitchty 14y ago
    Well its more bs than just getting charged for getting a text. You basically get 2 choices: * pay per text (which is totally lame I agree) * pay ~$20/mo for unlimited Most people just opt for the latter because if you ever send more texts a month than $20 it "pays" off in the end. Both options suck, the phone companies not being able to gouge for texts is no love lost in my opinion.
    - ronyeh 14y ago
      The third option is to cancel your text plan, which I have done. If my friends send me a text, it disappears into the ether (no error message). I'm trying to get folks used to contacting me through any other means (email, fb, g+, gchat, call me...maybe?).
      - mitchty 14y ago
        True, I don't consider that much of an option personally as I rather prefer texts to the rest. But thats just like, my opinion man. How has dropping texting entirely worked out? I've often wondered what the impact would be myself. Not that I have the balls to do it.

mtgx 14y ago

Money they weren't supposed to make in the first place. This is just market correction.

yen223 14y ago
Exactly. The headline should read "Consumers set to save $54(?) billion by 2016".

confluence 14y ago

No - consumers will save $54 billion by 2016. They'll then spend those savings on other things. It's a good thing. But I'm afraid it's not the only industry about to get absolutely crushed by progress. This story reminds me of the time Steve Jurvetson (a VC of DFJ fame) discussed the amusing interactions he had with a large engine oil company. He clearly illustrated to them them how, and why, their synthetic engine oil business ($10 billion a year) was about to get absolutely decimated by the introduction of essentially maintenance-free electric vehicles. He then told them that they had better diversify their synthetic oil cash cow, before electric vehicles came in and ate them for breakfast. Did they bother heading his warning? No. Instead, they laughed in his face. Everyone that services cars is next on this list - outside of brake pads and body panel beaters. I wonder how long it will be before there's an article that states: "World to lose $15 trillion as AI and automation replace most humans."

euroclydon 14y ago
It's hilarious that you write this anecdote in the past tense like your talking about a wagon axle greese company or something!
- confluence 14y ago
  What's past is prologue.
manaskarekar 14y ago
"World to lose $15 trillion as AI and automation replace most humans." Interesting and often discussed thought and more or less and inevitability. I was hunting for some discussions on this and came across this blog post. http://marshalljonesjr.com/what-happens-when-no-one-needs-to-work/ http://marshalljonesjr.com/what-happens-when-no-one-needs-to... Exactly what I was wondering. Anyone know any resources where questions like these are discussed? Maybe Econ 101? Another article that popped up. http://deoxy.org/endwork.htm http://deoxy.org/endwork.htm The only ability that humans seemingly have over robots is creativity.
- 14y ago

deleted 14y ago

[deleted]

coryl 14y ago

They'll make it back by ripping you off on your data plans. (Canada)

vincentkriek 14y ago
Same in NL
dkd903 14y ago
In India, Data Plans are cheap like $1.65 for 2GB data per month.
joezydeco 14y ago
Exactly. The carriers still own the transport layer, so they'll just reshift their plans to cover the loss. Some carriers in the US have introduced these "shared data" plans which pretty much accomplish the task.

dkd903 14y ago

Has Whatsapp caused a major dent in Operator revenues? I do not think so.

pi18n 14y ago

Those poor operators will have to find something else to overcharge for.

macspoofing 14y ago

>Ovum highlights the rapid increase in the number of OTT (over-the-top) players, and demonstrates that social messaging is not a short-term trend, but a shift in communication patterns. Who would have thought that SMS is not the future of communication.

pcurve 14y ago

I'm afraid consumers won't pocket that $54 billion either as long as the carrier cartel maintain iron grip. Just look at what Verizon is doing. You can't even unbundle "unlimited text and talk" from their non-prepaid plans anymore. 1GB smartphone plan will set you back $90/month, which is only a deal if you fall under a small percentage that actually go over 500 minutes per month AND send thousands of SMS. Just keep buying ATT and Verizon stocks guys.

Maven911 14y ago

Since i know about RCS and the aricle talks about it: It is mostly a pipe dream for operators, these services (file shharing, video calls, IM) already exist for much cheaper then what the telcos plan to charge. This is all part of the IMS technologies that have not been taken up by the market for approx 7 years now...its a sad tale of too little, too late

lo_fye 14y ago

They can't lose what they never earned.