Mobile Carriers Don't Want To Give Up SMS Without A Fight

from the what-a-racket dept

Apparently there was some tension at the Mobile World Congress—the world's largest mobile phone trade show—as the growing battle over text messaging took center stage. As you may know, SMS text-messaging is a rip-off, and a huge cash-cow for the mobile telecoms, who charge premium rates for a service that has an effective cost of zero (SMS messages are encoded into regular signals that cell towers have to send anyway). But they are losing a growing chunk of that income to data-based messaging services like BBM, iMessage, WhatsApp, Facebook Messenger and more. Naturally, they aren't happy, and they try to frame it as an unfair disruption of their business model:

Needless to say, mobile companies are not happy at the flood of free messaging services piggybacking on their networks. Telecom Italia chief executive Franco Bernabe told MWC that free messaging services are undercutting the ability of phone companies to invest in their networks. Paid texting, or SMS, has been a cash cow for phone companies which uses minimal network capacity.

The new players "have based their innovation in the mobile domain, without a deep understanding of the complex technical environment of our industry. This is increasingly creating significant problems to the overall service offered to the end user and driving additional investments for mobile operators," Bernabe said.

None of that makes a lick of sense. Bernabe is basically saying that everyone else has a responsibility to not build data apps that compete with telecom services, but unfortunately for him that's not how free markets work. Rather than seeing the huge opportunity that is the growing demand for wireless data access, the telecoms have decided to focus on the one thing that has stopped SMS from being completely replaced already: the lack of a single standard alternative. GMSA, a mobile industry group, has built a new cross-platform messaging service that they hope to get pre-installed on all cellphones and have become the standard for all text, photo and video messaging—though they haven't announced how much they plan to charge for the service. They claim that nine out of ten major device makers have signed up, with all eyes falling on Apple as the probable holdout: Apple is on a crusade to kill SMS messaging, and they likely would have succeeded by now if they weren't committed to their own walled-garden approach that pushes everyone towards iOS.

Of course, the same conference was also attended by the companies that have the telecoms so frightened. Joe Stipher, co-founder of messaging service Pinger, had a wiser perspective on the direction things are headed:

"Text messaging is free, and calling is going to be free," said Stipher, wearing jeans that contrasted with the dark suits favoured by thousands of mobile phone company executives attending the four-day 2012 Mobile World Congress that ended Thursday. "Data is going to be like electricity or water, not totally free, but do you worry about giving someone a glass of water at your home or letting them plug in? No."

I actually think that could be slightly better worded: in the future, there will be no more distinctions like "text" and "voice". Everything is just data anyway. But Stipher is absolutely right that bandwidth is becoming a generic utility, and that's something the telecoms have to accept. For some reason, they are terrified of becoming "dumb pipes"—they want to be "smart pipes" that charge premiums for different "kinds" of data, even though that's basically an imaginary concept. It's an odd attitude, because being a dumb pipe for something that everybody wants is a pretty good position, and if you accept it then you stand to make more money by letting people build whatever they want on top of what you provide. Truly, this would be the smart thing for a pipe to do, and Stipher has some fun with this by co-opting the term for himself. The carriers play along, using their own definition, and what results is an amusing portrayal of the mental disconnect that exists:

[Stipher] explained that "The carriers should be smart, reliable pipes" providing internet data access like utilities give reliable water and electricity, he said. "They need to focus on being good network operators."

[Rene] Obermann [chief executive of Germany's Deutsche Telekom] said carriers are at a crucial point at which they must "develop our own, innovative product suites" through cooperation with the smaller messaging companies. "The smart pipe will be one of the areas where (telecommunications companies) will show their innovation," he said.

Of course, Obermann's own company has a venture capital division that invested $7.5-million in Pinger, so maybe on some level he knows which way the winds are turning.

Filed Under: competition, data, smart pipes, sms, text messaging