Wireless

Worldwide mobile messaging grew nearly 10 percent in the third quarter compared to the second quarter of the year, fueled by new trends in the messaging market, according to VeriSign, which provides Internet infrastructure services and delivers messages on behalf of carriers and content providers.

The company reported Tuesday that VeriSign enabled more than 58.3 billion messages per day during the third quarter of 2008. This was up from about 52 billion messages sent during the second quarter of 2008.

On average, this means that VeriSign facilitated the delivery of about 634 million messages per day during the third quarter, compared to 572 million messages a day in the second quarter. In the third quarter of 2007, the company helped move 280 million messages per day across its systems. VeriSign said it expects to enable nearly 200 billion messages during 2008.

The company attributed a lot of this growth in mobile messaging to new uses of the technology, which include messaging for social and political change and marketing. One of the most notable examples of this is how U.S. President-elect Barack Obama used SMS text messaging to send messages to supporters during the campaign, even using the medium to distribute some of the campaign's biggest news like the selection of his vice presidential runningmate Joe Biden.

Other groups used text messaging to solicit charitable donations. And several businesses and financial institutions also used mobile. In fact, messaging volume from businesses skyrocketed about 115 percent in the third quarter of 2008 compared to the same period a year ago, the company said. Messaging on VeriSign's Mobile Banking platform also saw a 35 percent bump in volume from the second quarter of 2008 to the third quarter.

VeriSigns figures, which include text messaging as well as other forms of messaging like multimedia messaging, is in line with growth other groups have observed. In September, the U.S. wireless association CTIA noted the explosion in text messaging among U.S. consumers. The group reported that for the month of June, American cell phone subscribers sent about 75 billion SMS text messages, averaging about 2.5 billion messages per day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

The blogosphere has been up in arms over the past 24 hours as news spread that Verizon Wireless is planning to increase the per-message fee it charges companies that send text alerts.

On Thursday RCR WirelessN News published a story citing a letter that OpenMarket, a direct to consumer messaging service that sends alerts for companies like Google or Orbitz, was sending to its clients explaining that it would have to tack on an additional three cents for every text message that is terminated on Verizon Wireless network.

"Effective Nov. 1, 2008, Verizon will assess a transaction fee of $0.03 for every MT message processed on its network," the letter said. "Please note that these message fees will apply to standard rate and premium programs. Transaction fees will not apply to Free-2-End-User, Mobile Giving or Non-Profit organizational programs."

OpenMarket went on to say in its letter that it planned to pass on the charges to its clients.

"Pursuant to your Commercial Services Agreement with OpenMarket (including former Simplewire Agreements) concerning Third-Party/Operator Fees, in the event message fees are assessed by Verizon for any of your programs, these fees will be passed on to your company at cost."

The letter ignited a firestorm of criticism from bloggers all over the Web who complained that this steep fee hike would kill services like ChaCha, which allows anyone to text a question to a number from their cell phone and receive an answer relatively quickly.

Others said it would likely discourage brands like ESPN from using SMS text messaging.

"Three cents may not sound like a lot, but think about how much profit ESPN generates for sending you the latest Red Sox score," Brennon Slattery of PC World writes. "Nothing. Raising the fee may eventually discourage companies from participating in the convenient service."

My colleague Sam Diaz at ZDNet said he'd stop using Twitter if the charge was passed along to him.

"Certainly, as someone who updates my own Twitter account somewhat regularly, I'm not inclined to start paying for users to receive my notifications via SMS. If that were the case, I'd just stop using Twitter."

But Jeffrey Nelson, a Verizon Wireless spokesman, said the price hike has not been finalized. Still, he acknowledged that Verizon Wireless has been discussing ways to offset increased costs associated with heavy volumes of SMS text messaging on its network.

"We are currently assessing how to best address the changing messaging marketplace, and are communicating with messaging aggregators, our valued content partners, our technology business partners and, importantly, our friends in the nonprofit and public policy arenas," he said in an e-mail. "To that end, we recently notified text messaging aggregators--those for-profit companies that provide services to content providers to aggregate and bill for their text messaging programs--that we are exploring ways to offset significantly increased costs for delivering billions upon billions of text messages each month."

Even the mere thought that Verizon is considering upping rates on text messaging is enough to get people worked up, especially since Verizon and the other three major wireless operators in the U.S. have increased the price of sending and receiving texts for consumers by 100 percent over the past two years. Rates have gone from 10 cents a message to 20 cents per message.

These price hikes come as the volume of text messages has also increased. Last month, the wireless industry association CTIA reported that 75 billion SMS text messages were sent in June, averaging about 2.5 billion messages a day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

Even though text volumes have increased, I'm still not sure why Verizon would have to increase rates to cover the cost of delivering the service. SMS text messages cost carriers very little to transmit. In fact, SMS uses a pathway or control channel that already exists in cellular networks to establish communications between cell towers and handsets. Devices are constantly in communication with cell towers to let them know where they are, and the SMS messages are simply delivered along with this normal course of communication.

Given that the carriers haven't had to do anything extra to enable SMS, I'm not sure why increased volumes would necessitate raising rates to cover increased costs. Right now it seems like SMS is nearly 100 percent profit. So Verizon could use some of those existing profits to invest in some kind of expansion of the service.

That said, Verizon notes it hasn't increased per-message costs to aggregators since the messaging service began in 2003. Nelson made it clear that nonprofits and political organizations would not be charged extra to send text. And he emphasized that Verizon is still reviewing all its alternatives.

"Specific information in one proposal, which would impose a small per-message fee on for-profit content aggregators for commercial messages, has been mistakenly characterized as a final decision to implement," he said. "That draft was intended to stimulate internal business discussions and in no way should have been released to the public and represented as a final document."

American cell phone users are sending more text messages than they are making phone calls, according to a Nielsen Mobile survey released Monday.

For the second quarter of 2008, U.S. mobile subscribers sent and received on average 357 text messages per month, compared with making and receiving 204 phone calls a month, according to Nielsen. The new statistic is a clear indication that Americans have jumped onto the SMS text bandwagon.

On average, American teens send and receive 1,742 text messages a month.

(Credit: Marguerite Reardon/CBS Interactive)

In the first quarter of 2006, Americans sent and received 65 text messages per month. The number of messages sent and received today has increased 450 percent. But even though people are texting more, it doesn't mean that they've stopped talking on the phone. According to Nielsen, the number of phone calls that people make and receive each month has remained relatively flat over the past two years.

The wireless industry's trade association, CTIA, recently noted the explosion in texting in its own report. It recently reported that for the month of June, American cell phone subscribers sent about 75 billion SMS text messages, averaging about 2.5 billion messages per day. This represents an increase of 160 percent over the 28.8 billion messages reported in June 2007.

Short Message Service, or SMS, text messaging first became popular in Europe and Asia, because it was much cheaper to send short text messages than make an actual phone call. In countries such as the Philippines, the cost of sending one text is less than a penny. And in Europe where cell phone users are still penalized with high roaming charges between countries, texting is still a more economical form of communication.

But in the U.S. texting is proving to be a cash cow for carriers. Over the past two years, the cost of sending and receiving individual text messages without a special text message package has gone up 100 percent with individual text messages costing 20 cents per message. Carriers are now offering unlimited cell phone texting plans that cost an additional $20 a month, which makes sending texts more affordable for heavy texters.

The surge in text messaging is being driven by teens 13 to 17 years old, who on average send and receive about 1,742 text messages a month. Teens also talk on the phone, but at a much lower rate, only making and receiving about 231 calls per month. The report even suggests that tweens or kids under the age of 12 are also heavy text users, averaging about 428 messages per month.

If you thought gas prices were rising too quickly, check out what's been happening to text messaging.

Since 2005, rates to send and receive text messages on all four major carrier networks have doubled from 10 cents to 20 cents per message. This percentage of increase is on par with similar price hikes at the gas pump as crude oil prices skyrocket. In 2005, Americans paid on average about $2.27 per gallon for gas compared with more than $4 a gallon today.

Last October, Sprint Nextel was the first to introduce the new price of 20 cents per text message. AT&T and Verizon Wireless soon followed with their price hikes going into effect this spring. And this week Engadget reported that T-Mobile USA will match the other big three wireless operators in jacking up SMS texting rates to 20 cents per message. The price increase goes into effect August 29.

On Tuesday, AT&T announced that texting will cost new iPhone users more than it had previously. The old iPhone plan included 200 text messages in the $59.99 voice and data plan. But plans for the new iPhone 3G that hits store shelves next week will cost $5 extra for 200 text messages, bringing the total price of a comparable voice and data plan on the new iPhone 3G to $74.99 a month. (This is with the $69.99 "Nation 450" bundle plus $5 for the 200 text messages.)

The new wave of price hikes comes just one year after all the major carriers raised individual text messaging rates from 10 cents a message to 15 cents per message.

So what's with the 100 percent price hike in two years? Well, there's nothing that has changed in terms of the cost associated with delivering this service. In fact, text messages cost carriers very little to transmit. And when compared with what carriers charge for transmitting other data services, such as music downloads or surfing the Web, the text messaging rates seem exorbitant.

Carriers limit the number of characters that can be transmitted in a text message to 160 characters. Each character is about 7 bits, which works out to a maximum of about 140 bytes of data per text message. This is peanuts compared with the size of sending or receiving an e-mail or downloading an MP3 song over a cellular network.

One blogger has done the math. If the same pricing was applied on a per-byte basis to downloading one 4MB song it would cost the user almost $6,000 to download a single song via SMS texting.

One can easily assume that the mark-up on a text message is several thousands times what it actually costs carriers to transmit this little bit of data, considering that mobile operators are only charging $30 to $40 a month extra for mobile data plans that offer 5MB worth of data per month.

The reason that carriers are charging so much for text messages is because they can. Even at 15 cents and 20 cents a pop, people are willing to pay for it. The carriers are also trying to get consumers to sign up for text messaging packages and unlimited plans that vary in price from $5 a month extra for 200 messages to $20 a month extra for unlimited texting on AT&T's network, for example.

The massive price markup on texting and the growing popularity of texting have resulted in huge profits for mobile operators. Verizon reported that for the first quarter of 2008, its wireless customers spent $11.94 a month on data services, an increase of about 33 percent from a year earlier. The carrier didn't break out what percentage was spent on text messaging versus other services, but there's a good guess that a lot of the additional revenue from data came from texting. In total, mobile data accounted for about 20 percent of all wireless sales for Verizon's first quarter.

Unfortunately, it doesn't look like consumers have much legal recourse for getting carriers to adjust their pricing to a more reasonable rate. There's nothing illegal about charging as much as the market will bear for any service.

But that doesn't mean that consumers like it. What do you think about the high cost of texting? Are you feeling the pinch in your wallet yet? I'd love to hear your thoughts in the "Talk Back" section below.