Free Texts Pose Apple iMessage could hurt mobile carriers

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There are now a growing number of ways to bypass text-message charges using an Internet connection — much as Skype allows people to make calls without relying on a traditional telephone line. The service, part of an update to Apple’s iOS mobile operating system, will automatically handle messages sent between iPhone, iPad and iPod Touch users who have upgraded to the latest software.
“There’s a huge amount at stake here,” said Craig Moffett, an analyst at Sanford C. Bernstein, who covers the telecommunications industry. “They are undermining the core business model for an industry that makes most of its money from services that are high priced and low bandwidth, like texting.”


The basic idea is the same with both old- and new-style messages: short bursts that pop up almost instantly on the recipient’s phone. But the path that they take is different. A text message is sent over cellular networks. Services like iMessage transmit messages over the carriers’ data networks and the Internet, much like e-mail.

Verizon Wireless alone generates as much as $7 billion a year in revenue from texting, or about 12 percent of the total, Mr. Moffett said, and texting brings in about a third of the operating income.

Professor Keshav estimates it costs the carriers about a third of a penny to send text messages. Considering that the major carriers charge 10 to 20 cents to send and receive them, “it’s something like a 4,090 percent markup,” he said.

Because iMessage will work only between iPhones, iPod Touches and iPads, at least at first, it is not clear whether it will inspire customers to ditch their text-messaging plans. And Apple devices account only for 5 percent of the texting traffic sent each year, said Chetan Sharma, an independent mobile analyst.

“But if Apple makes iMessage open and available on other platforms, you could see a much bigger impact,” he said.

History has shown that Apple has a way of shaking up the mobile industry by carving out a path to success that causes other hardware makers to follow in its footsteps. “Anything that Apple does, by definition, does not fly under the radar,” Mr. Entner said.

Both Samsung and Google are reportedly working on services that would allow owners of their phones to swap free messages. Analysts anticipate that Microsoft, which is acquiring Skype and GroupMe, a popular mobile messaging application, will soon incorporate both services into its new line of Windows smartphones.

“It always comes down to the economics,” said Greg Woock, the chief executive of Pinger. “Free is a compelling price point.”

“From a business perspective, customers still need a data plan to connect to a device,” Ms. Raney said. “They are only making choices on how they are using the data.”

Source : www.nytimes.com