Alternatives to SMS cut into carriers' revenue36
While those using alternative messaging services still must pay for internet access on their mobile device, the cost for each message is less than if the user signed up for a monthly SMS plan, or paid for each message sent. The carriers in the U.S. are missing out on buckets of money since they charge both the sender and recipient of a text message. European carriers already have seen their financials hurt by lower use of SMS. For example, Dutch carrier KPN blames the increased use of the messaging service offered by Facebook and Twitter for the drop in text messaging revenue the carrier had last year.
To show how wide spread the use of alternative messaging services is overseas, South Korea's Kakaotalk handles 30 billion messages monthly. And there is no reason not to expect this from happening to the same degree in the U.S.; Verizon CEO Lowell McAdam told an Investor's Conference last month that he expects SMS messaging to be under attack in the States. And there is a reason for carriers to be worried. Craig Moffett, an analyst for Sanford Bernstein, called text messaging "the most profitable service known to man." According to the analyst, SMS messaging brings in $1,000 for every MB of data transmitted compared with 2 to 13 cents per MB that comes in from a wireless Internet data plan.
AT&T and Verizon have responded by eliminating some cheaper rate plans for text messaging. AT&T in August eliminated a $10 monthly rate for 1,000 text messages and now offers a $20 per month unlimited plan, or a pay-as-you-go service for 20 cents a message. In November, Verizon removed a $5 monthly plan for 250 texts and is left with a $10 rate for 1,000 texts a month, or a $20 unlimited rate plan.
It was the agreement among rival carriers to carry each others text messages that made that form of communication popular. The CTIA says that the number of texts rose from 930 million in June 2002 to 1.5 billion one year later after the carriers reached an agreement on interoperability.
Despite all of the alternatives to SMS, according to Reuters, text messaging currently accounts for 12% of the annual revenue of a U.S. mobile carrier.