Is social messaging costing networks SMS revenues?

February 22nd, 2012

Facebook MessengerA report released yesterday by London consultancy Ovum states that mobile networks globally lost $13.9bn US in revenues from SMS messaging due to the rise in “social messaging”.

The issue at hand is whether the use of various apps on phones that allow for messaging via mobile data, instead of SMS and MMS, is hurting the revenues of mobile phone networks.

The actual report from Ovum costs $1500, so we (probably like most of the websites commenting on it) didn’t actually read it. But the principle is simple, more messaging via data, less messaging via SMS, less SMS charges on mobile phone bills.

However, in particular with the UK and US markets, how many people actually pay for each SMS they send? Have Ovum just assigned a revenue loss to each SMS message sent when it’s possible that networks are in fact saving money if customers don’t change their tariff, but use data instead of their SMS allowance? Yes, in the pay as you go market where many networks offer free or flat amounts of data but charge per SMS, revenue will have reduced, but that’s definitely not applicable to the majority of our mobile phone market.

In truth, it doesn’t matter. What has been clear for a while, and what remains clear, is that pricing for mobile phone tariffs will need to switch to a more data focussed model. Whether or not the unlimited data tariffs from Three (the One Plan) and T-Mobile (the Full Monty plan) are sustainable is yet to be seen, as smartphone data usage is only going to increase as the data speeds and smartphone hardware improve. We may reach a stage where most contracts have unlimited call minutes and text messages because they’re just promotional extras, but the data is what people spend variable amounts on depending on their usage.

Source: Bloomberg