Can mobile messaging survive in the smartphone era?

Alan Pascoe, Tekelec
29 Jan 2010

Weighed against any measure – impact on the industry, number of users, or revenue – SMS has been a huge success. Since its introduction more than 15 years ago, the 160-character message has revolutionized the way people communicate and use their mobile devices. With more than three billion active users, it has become the industry’s most widely used data application. SMS generates as much revenue as the combined returns from five major Internet sources - e-mail, instant messaging, social networks and chat, content, and advertising.

But, the game is changing, and operators can’t afford to be complacent. The messaging monopoly held by MNOs is in jeopardy, forcing traditional providers to rethink their business models, technology choices and the future of messaging.
The rise in mobile data services is one of the biggest forces impacting the messaging world. Analysts have been predicting for years that data services like mobile instant messaging and Web browsing will take off and become a significant piece of the mobile operator’s service portfolio. Thanks largely to Apple, those predictions are being realized.
Apple rocked the handset world in 2007 with the launch of the iPhone, becoming a catalyst for changes across the industry. But the iPhone’s greatest impact is most evident in the surge in mobile data usage it has generated. T-Mobile CEO René Obermann reported in 2008 that the average iPhone user consumes 30 times more mobile data than subscribers using other types of phones.
As more handset manufacturers move into the smartphone space, this data usage trend will increase. In a 2009 report, Investment Bank Piper Jaffray stated that the new handset market share for smartphones is set to increase from 19 to 35 percent by 2013. However, the growing popularity and usage of data-based services is creating new challenges for mobile operators.
As the competition heats up, MNOs are moving away from usage/time-based billing to unlimited voice and SMS plans. As subscriber data usage increases, the “all you can eat” model is being applied to data service as well. But, there’s a problem with flat-rate billing: as data usage increases, revenues flatten.


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