Text Messaging Remains Essential to Wireless Carriers’ Business

by Istvan Fekete on February 8, 2013

The emergence of free messaging apps has led to a drop in wireless carriers’ text-messaging revenue in the past few years, but texting continues to be the key to their business plans, an analyst says.

Indeed, mobile subscribers had to pay up to 20 cents to send a text message or were required to pay for a monthly package. But that was before instant messaging apps for smartphones became available. Now, the wireless players have changed their strategy: Since November, incumbent carriers Telus, Bell, and Rogers have included unlimited text messaging in their basic wireless plans.

As you may imagine, this came as a response to the rise of free instant-messaging apps and services such as Apple’s iMessage, BlackBerry Messenger (BBM), WhatsApp and textPlus. As a study by the media and telecom consultancy Lemay-Yates Associates highlights, more than 50% of iPhone and BlackBerry owners use the pre-installed native messaging app.

WhatsApp has become one of the world’s top five most downloaded mobile apps, and since it is available on all platforms, the owners say the app facilitates the transmission of over a billion messages per day. In fact, its ability to send unlimited free messages locally and internationally pushed it to No. 1 best-selling app in Spain.

In Canada, things seem to work differently. According to data released last month by the Canadian Wireless Telecommunications Association (CWTA), consumers’ use of paid texting services is continuing to rise. The data reveals that Canadians sent an average of 274 million text messages on a daily basis at the end of September 2012, up from about 240 million messages a day recorded a year previously.

The big three’s answer to market demand — free texting — does underline that fact that texting services have been an important revenue source for them, as the margins are extremely high.

The “free unlimited texting” message their marketing team sends you doesn’t quite mean texting has become totally free; instead, the costs are hidden, and consumers will notice a push towards more expensive data plans.

“Those messages, obviously do not require a lot of data, even though you make thousands and thousands of them in a year,” Johanne Lemay, co-president of media and telecom consultancy Lemay-Yates Associates said.

According to the CRTC Communications Monitoring Report issued in September, standard mobile broadband services accounted for about 57% of the industry’s $19.1 billion in revenues in 2011. On monthly data plans, wireless players on average collect $39 for a 500 MB plan, $58 for 1GB plan and $75 for more than 2GB per month.

Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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