Wireless carriers could face some serious trouble if emerging trends in text messaging continue, a new report from the Wall Street Journal contends.
Citing a recent study from the CTIA, the Journal pointed out that 1 trillion text messages were sent in the U.S. during the second half of 2010. That number, while impressive, was up just 8.7 percent compared to the first half of 2010, representing the smallest gain ever in SMS use.
For the top two carriers in the U.S., Verizon and AT&T, things are even more disconcerting. According to Journal, the average Verizon customer sent out 2,068 text messages in the fourth quarter of 2010. During the third quarter of last year, that figure was at 2,110. Citing a report from analysts at UBS, the Journal pointed out that text messaging was down 21 percent in the first quarter for AT&T, compared to the same period a year prior.
The importance of text messaging on a carrier's bottom line cannot be underestimated. Referencing the UBS report once again, the Journal said that the average carrier makes an 80-cent profit on every single dollar it generates in text-messaging revenue.
SMS-related issues became even more troubling for carriers this week when Apple announced a new feature in the upcoming iOS 5, called iMessage. With that feature, iPhone, iPad, and iPod Touch users will be able to message each other over Wi-Fi and 3G, and outside of the carriers' grasps. Users will be able to send text messages, as well as photos, videos, locations, and contacts, Apple said.
Apple's iMessage is somewhat similar to Research In Motion's own messaging alternative, BlackBerry Messenger. That app allows users to sent text messages, as well as share photos and videos with other BlackBerry owners. The service is also available on RIM's BlackBerry PlayBook tablet.
Though both of those platforms have limitations that standard text messaging doesn't--namely, that users can only send messages to those who own a device running the same operating system--it could be cause for concern among carriers. iPhone carriers Verizon and AT&T should be especially concerned with iMessage. At WWDC earlier this week, Apple said that it has sold over 200 million iOS-based devices since the iPhone's launch in 2007. Though all of those products are not currently in use, a large portion of them are. And if owners opt for iMessage, rather than SMS, AT&T and Verizon might see their texting numbers decline.
But that's not all. Citing an anonymous source, the Wall Street Journal reported yesterday that Google is also working on delivering a messaging platform of its own for Android-based devices. That operating system is easily outselling all others in the mobile market, and its importance to carriers, and thus carrier texting revenue, is huge.
In April, research firm Gartner said that it expects nearly 468 million smartphones to be shipped worldwide in 2011. More importantly, the research firm said that Android could own 38.5 percent of the mobile OS market by the end of 2011.
But before the the panic sets in too deep, it's worth remembering that text messaging still occurs in huge volumes.
In October, the International Telecommunication Union released a study that estimated 6.1 trillion text messages would be sent in 2010 alone, indicating 200,000 text messages were sent every second last year. In 2008, 2.8 trillion SMS messages were sent globally, while in 2009, that figure jumped to 4.3 trillion.
Though the ITU didn't share full-year estimates for text messages in 2011, the organization said that it believes over 1,000 SMS messages will be sent for every person on the planet this year. In 2009, the world's population was estimated at nearly 6.8 billion people.
Even better for carriers, teens--a major revenue-generator for SMS--continue to text message friends. In fact, last year, a study from Pew Internet and American Life Project found that 33 percent of U.S. teens send out over 100 text messages a day. Moreover, it found that over 75 percent of U.S. teens have cell phones, and 72 percent of them use text messaging to communicate with others, making it the overwhelming favorite over social networks, e-mail, and phone conversations.
But whether that will continue remains to be seen. According to the Journal, Eelco Blok, the head of Royal KPN, a Dutch telecommunications company, had a rather interesting perspective on SMS and its cultural impact.
"It's not cool anymore to SMS," he reportedly said.
Neither AT&T nor Verizon immediately respond to request for comment on the state of text messaging at their companies.