Text messaging dying? Sharply slowing growth worries carriers

“Growth in the volume of text messaging is slowing sharply, just as new threats emerge to that lucrative source of wireless carrier profits,” Anton Troianovski reports for The Wall Street Journal.

“While U.S. cellphone users sent and received more than 1 trillion texts in the second half of 2010, according to CTIA, a wireless industry trade group, that was just an 8.7% increase from the prior six months. It was the slimmest gain since texting exploded last decade,” Troianovski reports. “Text traffic will come under more pressure in the months ahead. This week, Apple Inc. showed off an application [iMessage] that will allow iPhone and iPad owners to bypass carriers and send text messages over the Internet to other people with Apple devices.”

“Carriers, such as AT&T Inc. and Verizon Wireless, charge fees ranging from 20 cents per text to $20 a month for unlimited texting. The texting business has low costs and high margins. A dollar of texting revenue produces at least 80 cents of profit compared with about 35 cents of profit from $1 in wireless data or voice services, according to analysts at UBS,” Troianovski reports. “‘It’s not cool anymore to SMS,’ Eelco Blok, chief executive of Dutch telecommunications company Royal KPN NV, acknowledged on an April earnings call.”

Troianovski reports, “In the U.S., carriers are contending with subscribers like Hadi Mulhem, a 27-year-old New York City beer vendor and iPhone owner who says he texts more than he talks and would welcome the chance to lower his bill by using Apple’s iMessage. ‘If I’m able to use it and not pay $20 a month, then of course I will,’ Mr. Mulhem said.”

Read more in the full article here.

49 Comments

    1. The only thing slowing the growth of text messaging IS the carriers THEMSELVES!!! $0.20/message is criminal! Fuck them! Hope Apple’s iMessage, Textie & the like take the f*ckers down!

  1. Text SMS messaging is too expensive. It’s a cash cow, like soda pop or inkjet ink. Way over priced because there was no competition. It’s about time someone integrated a free way to send texts.

    Texting should have been free all along. The excuse that service providers have or need special expesive resouces to make it work, is the same as a water company saying they need to use reverse osmosis and conversion of water into itls elemental components and recombining it back into H2O before delivering it to you and that’s why it costs so much.

    Totally stupid.

  2. True we have been ripped and it’s a welcome and long overdue shift, but the consumer will more than likely still be picking up the tab. One example could be when LTE goes mainstream they may just end up charging even more for it to make up for their losses. As well as the end of unlimited data. We are still paying for it.

    1. 3 year old article..
      read the above:
      “The texting business has low costs and high margins. A dollar of texting revenue produces at least 80 cents of profit compared with about 35 cents of profit from $1 in wireless data or voice services”

      not standing up for carrier fees on sms here.. i agree it’s overpriced. but dead? hardly..
      I personally get a 25% discount on my “service” so my unlimited plan is only $15, but still it should be less.

      1. I haven’t paid for texting in about 3 years. I got sick of being charged for incoming and outgoing texts, so I blocked them completely. Now I use TextFree on my iPhone to completely avoid texting charges, but still be able to text on occasion.

  3. I’m sure they will survive. I remember when long distance phone calls were around a dollar a minute. The carriers somehow managed to carry on as the per minute cost decreased tremendously over the years. Whether it’s bundling services or something else, they will get their revenues.

    1. Al, I remember that well myself. Long distance calls were a big costly deal. Then along came the first cellphones. Another big costly deal. Several bucks per call. Long distant calls were made only if it was important. Cellphone calls were similar, kept short and only when used rarely. But today I have 4 iPhones on my account and our monthly bill is north of $8 a day. Nearly $250 a month. How did we get from worrying about paying for a few $5 calls rarely to paying the equivalent of 50 long distance calls monthly. And just thinking it is a necessity.

  4. I still cannot understand one thing. An average price, with one of the big four carriers in the US (VZ, Sprint, AT&T, T-mobile) for the least expensive smartphone plan is around $55, plus taxes, surcharges and fees, which ends up around $65. Let us assume that some $15 of that represents the phone subsidy. This means that their basic, cheapest monthly plan (approx. some 500 minutes, 200 MB of data an NO TEXT) costs over $50 per month. How can carriers like Virgin Mobile offer their services for $250 (with 300 minutes and UNLIMITED text and data)???

    I keep trying to figure this one out; first, how do they do it and still stay in business, second, how come people are happy to pay twice as much for the same (even worse) level of service?

  5. Damn that typo…! Virgin Mobile plan is $25 per month (unlimited data/text, 300 minutes). No contract, no subsidy, cheap (rather crappy) smartphone (LG Optimus — android).

    1. Not sure if this is related, but Virgin Mobile is also the carrier for a big public service “free cell phones for low income folks” program known as Assurance Wireless. I’m guessing they are collecting a big slice of government pork for that.

  6. A smart carrier would look at this trend, and do what they can to get out ahead of it. Perhaps just $5/month more for unlimited texting? Imagine the killing they’d make with people switching from other carriers for a deal like that.

    Eventually, of course, texting will be included for “free” with a data plan, as it should be. In the meantime, a smart carrier could still make money on a cheap “unlimited texting” plan, while the money’s still there to be made.

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