Messaging Apps, VoIP Already Eating Into Carrier Revenue

An anonymous reader writes "A new breed of messaging services and mobile Voice over IP clients like Skype are already eating into carrier revenues according to a new study. '... one-third of carriers are already seeing voice traffic and SMS revenue decline as a result of the increased popularity of third-party solutions. ... For years, Research In Motion’s BlackBerry Messenger service has been one of the top features consumers and enterprise users loved about BlackBerry devices. It took much longer than some expected, but other vendors and third-party developers have finally come out in full force with competing services that provide SMS-like messaging over data networks at little or no cost to the user."

Comments

The funny part

[0123456]

Is that the data messaging probably costs the carrier more than SMS...

Re:The funny part

[Captain Splendid]

Won't somebody please think of the free market?

Not gonna happen. Libs fear it, Conservatives abuse it, and the Corporations want to get rid of it.

Best of luck.

Re:The funny part

[TWX]

The Free Market is a myth and always has been. Like the Laffer Curve and the trickle-down theory of wealth distribution.

Re:The funny part

[roc97007]

Right. And by charging extortionate prices for what is essentially a free service, the carriers have made it financially viable for competitors to flourish, even if they are ostensibly more expensive to run. Which is fine, that's how capitalism is supposed to work. The carriers could shut down these other services by significantly lowering the price of SMS services, but it's such a cash cow I think they'll try something else... maybe legislation?

Re:The funny part

[Anonymous Coward]

Right. So, in other words, it doesn't cost the carrier any extra than it would otherwise, therefore it's free. QED.

Did someone enable your -verbose and -idiot flags when you booted up this morning, or what?

Re:The funny part

[teg]

SMS is technically free. The only cost is counting/bill.

Carriers don't charge SMS usage fees because of the big variable costs... they charge because they can, because it has a value to the customer.

A large part of the cost for a carrier is fixed cost - the various priced services is just how to they believe they can recoup most of it and make their profit. If noone pays for SMS anymore, they'll instead have higher costs for talk or data than they do now. They know how much money they need to earn per handset on average, and that's what they'll get one way or the other.

Re:The funny part

[EdIII]

But the messages have to be routed, handed off to other carriers, stored and forwarded, etc. This has a real cost, even if the last mile imposes no additional burden on the cell tower.

I agree with you, but it important to point out that routing, including "peering and transit" is already established and not part of the cost calculations for SMS. SMS is just a different type of communication, and does not require its own special hardware or communication protocols specifically. At least not to my knowledge.

Routing the SMS message internally does not add significant cost or complexity. The OP is actually correct in a sense. The billing and reporting on SMS messages actually costs more than sending the SMS, at least internally.

There is already a TON of traffic in between carriers. Validating roaming status, call set up and teardown, etc. The costs, that the carriers created, was the massive gateways and complicated short code system to sell SMS to businesses.

As you said, even considering the costs of the gateways themselves and the bureaucracy of SMS shortcodes and premium charges, they are still making 6 figure profit margins, at a minimum.

The cost of SMS is completely artificial. It has never made sense to me, other than greed and avarice, to sell SMS at all. It should be a completely free service intended to be "added value" to the services already being charged for. Considering people's penchant for using it so damn much, it actually lowers their costs and increases how much service they can sell. If a typical SMS exchange is 1/1,000,000th (or less) of the data passed during a conversation then it is to the advantage of the carrier to encourage it. Such egregious charges do the opposite.

Now they are fucked.

Skype and persistent IM solutions using their data connections represent a HUGE increase in actual traffic passing from the tower to the handset, where it is most expensive.

Not to mention the solutions that allow you to send recorded messages back and forth. No charges for SMS. No charges for cellular minutes usage. Nothing but data, which they still make unlimited on the handset.

Not smart. They deserve what they have coming to them because it was so easy to stop. Longer SMS messages and a completely free service would have provided a heck of lot less incentives to find solutions around their crazy pricing.

Prices go up, usage goes down?

[jandrese]

So shortly after all of the major carriers dropped the even slightly reasonable SMS plans, people started using the hacky but free alternatives? What a shocker. This seems like a classic example of what happens when you price yourself right out of the market.

Re:iMessage

[Nerdfest]

Proprietary solutions are not helping anybody but the people who create them, be it Apple or RIM.

Re:Welcome to dumb pipes.

[TWX]

Keep in mind that for everyone who wants a dumb pipe, there's someone who wants America Online, even if they have no idea why they want it.

That's how all of these "features" that cell phone companies concoct manage to keep customers coming in.

Re:iMessage

[icebike]

Yup, but the protocols for their own video calling system are open and published. You are welcome to implement your own alternative. Which no one did so far, AFAIK.

If you are bothered by it, did you do something?

Published, maybe, Free, not.

With a zillion protocols to choose from why did apple invent their own.

XMPP (Jabber) was there all along, and its under active development and enhancement, its free, cross platform and is being extended to handle video, voice, and multimedia with the formalization of LibJingle. In addition to a world wide network of free servers, it can now work with no server at all.

Google uses it. Microsoft uses it. Why did Apple have to invent their own?

Could it be that XMPP could reach out beyond the garden walls?

Dear Carriers:

[IGnatius T Foobar]

Dear Carriers:

What you want the least, is what your customers want you to be the most: a dumb pipe.

Please get out of our way.

Sincerely,

Your Customers