Texting Profits at Risk as Users Look Elsewhere

IMAGE: DI

SMS — short message service — is no longer all the rage, but it still generates an estimated 12 percent of service revenue for U.S. operators.

Now, with many consumers turning to low-cost alternatives like iMessenger, BlackBerry Messenger and Facebook’s mobile messaging service, operators like Verizon Wireless, AT&T Inc and Sprint Nextel risk losing a steady, superbly profitable source of income.

Customers using the new crop of messaging services must still pay for mobile Internet access, but the cost per message is much smaller than a monthly SMS service plan or per text charges, particularly as U.S. carriers charge both the recipient and sender.

U.S. operators still carry a lot of text messages on their networks, but they are seeing warning signs ahead…

Craig Moffett, an analyst for Sanford Bernstein, said carriers have a huge cause for concern as he described text messaging as “the most profitable service known to man.” 

At current rates SMS brings in $1,000 for every megabyte of data transmitted compared with the 2 cents to 13 cents per megabyte generated by a typical wireless Internet data plan, according to Moffett, who notes that this revenue is virtually “100 percent profit.”

AT&T and Verizon Wireless have moved to stem a texting revenue decline by eliminating cheaper options for smaller buckets of texts. AT&T eliminated a $10/month plan for 1,000 texts in August and now offers only a $20 unlimited plan or pay-as-you-go texts for 20 cents each. 

Verizon Wireless followed suit in November by dropping a $5 per month plan for 250 texts. It offers a $10 plan for 1,000 texts a year on top of its $20 unlimited plan. 

The push toward higher service fees may end up backfiring and hastening a move to alternatives, as consumers have become particularly vocal in their rejection of fee increases. Verizon Wireless ended up abandoning a new $2 payment fee last week after a consumer uproar.

“They risk alienating a certain portion of their subscriber base by forcing them to pay for higher-priced unlimited tariffs particularly if they don’t provider a more affordable option,” said Informa analyst Pamela Clark-Dickson…Continue at Reuters

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