Carriers Worry iMessage Will Destroy Their SMS Texting Business

Carriers Worry iMessage Will Destroy Their SMS Texting Business

As the number of voice calls have dwindled, mobile carriers now rely on text messaging as a profit center. Now that source of revenue is under attack as Apple prepares to release iOS 5 and iMessage, a feature allowing free messaging between iPhone, iPad and iPod touch users.

The service, to be unveiled Wednesday as part of the iOS update, allows Apple users to text one another, including sending video, photos and contacts in an encrypted format. While the service would still require a data plan to contact friends that don’t own an iOS device, the introduction of iMessage could upset carriers’ very lucrative apple cart.

Although texts cost carriers about a third of one cent, according to an expert who talked with the New York Times, they charge up to 20 cents for each text message sent or received. With 2 trillion texts sent each year in the U.S. alone, it is a $20 billion cash cow for carrier, Sanford C. Bernstein analyst Craig Moffett says. Texts virtually ‘ride free’ on carriers’ networks, using the same signal needed to just keep lines open for voice calls. One University of Waterloo professor estimated there is a “4,090 percent markup” on texts.

Little wonder iMessage has some carriers shaking in their boots. If you sent 1MB of texts each at 20 cents, you’d rack up $1,500 in charges. However, iMessage could drop that to a fraction — about $1.25 — even after paying $25 per month for a 2GB data plan, the newspaper reports.

If you need to know where this all might be going, check out what’s happening in the Netherlands. There, the combination of free messaging and social networking has “shrunk texting traffic and eroded profits,” the Times says. Hoping to keep some of their texting profits, carriers are offering deals on unlimited texting – even throwing in free voice calls if you sign up for texting. In the case of AT&T, you can now pay $20 per month for unlimited texting. The past $10 per month for 1,000 texts is history.

At Verizon, which rakes in $7 billion a year from texts, they are embracing iMessage, knowing iOS devices account for just 5 percent of the devices sending texts each year. “From a business perspective, customers still need a data plan to connect to a device. They are only making a choice on how they are using the data,” a carrier spokeman told the Times.

  • Cybjorg

    I hope iMessage screws over the carriers big time.  They’ve been cheating us with their overpriced markups for too long.

  • Paul Evans

    Surely carriers no longer see SMS as a profit center? Sure, the cost per kilobyte is enormous, but here in the UK it’s fairly standard to see 1000’s of texts included in your monthly call plan and the same for pre-paid. Unlimited packages are not uncommon.

  • Bluelou65

    another reason they can have my unlimited data plan when they pry it from my cold dead hands.  i doubt i’ll even upgrade to LTE if i lose unlimited data.

  • J Kimber

    Haha i love this its about time the phone companies started to worry a little they did forget a long time ago the the customer comes first.

  • bge20

    Actually, MNOs don’t look at iMessage (or BBM) as an existential problem but as a tariff balancing issue. Bundle SMS w/ data and the problem vanishes

  • Ed_Kel

    Can someone please inform me on if ALL text messages sent and received from an iPhone are now transferred over data? Or will non iOS devices still charge to my messaging plan? I wonder if a messaging plan is still needed… 

  • prof_peabody

    If you use iMessage it doesn’t charge the carrier.  If you use it to contact someone who is on regular text messages, they will still pay but you won’t.  If they have an iPhone, it will automatically switch to non-paying for them also.  That’s AFAIK. 

  • jimmyjame

    I love this!!!! It’s about time something like this come along… This is going to I really hope slap them in the face.. Too long have we been getting ripped off.

    It would not surprise me if Telco’s find a way of blocking iMessage or charge more for data packs which would not surprise me..

  • Tony C

    The fee for text messaging is pure profit and just one more item to build a bill. Now that Sprint is on the iPhone bandwagon perhaps we’ll start seeing a little competition and boost performance and lower our bills.

  • dcborn61

    The VZW spokesperson is ignoring the issue. Yes, you need a data plan to use iMessage. If you have an iPhone, you are already buying one. But you don’t need a text message plan (or you can use a cheaper one).

  • justin_horn

    AT&T isn’t worried. It’s either $20 for unlimited or text by text for 20 cents, which comes out to $20 for 100 text and then the 20 cents for each one over that.  I will probably go way down below my current 2000 total (in/out) text, but not sure it will be less than 100.

  • justin_horn

    Almost right, but if you send to a non iOS device then it will automatically go over regular SMS.  If you send to another iOS device it will auto dectect and send it over iMessage first (unless it fails, then it will use SMS as a backup).

  • ElWeroOjiverde

    Unfortunately in places like México, this is not yet an advantage to users. A huge amount of people still uses SMS because they can’t pay a 3G service, which is very expensive here. Also, the phone companies are very smart, they charge a lot in other ghost services so they keep doing money either if you use all of the services or not.

  • MacHead

    From my understanding you can only contact someone with iMessage who has iMessage. If they have another device that does not support iMessage it counts as a text message for you and them. Same concept as BBM

  • MacHead

    You couldnt send enough iMessages in a month to affect your data plan one way or another. Each message uses like 2kB Youd need to send 200 Thousand in a month to have any real data usage from iMessage

  • Papito

    Ohhhh, that’s so sad for all the greedy carriers… 

    Texting should be free. I hope all carriers business suffers as a result and drives down exorbitant/criminal mobile plan charges everywhere.

  • Gundark

    I think they’ve already figured out a way to continue to rip us off.  AT&T eliminating the lower-level texting plans and forcing us to higher $$ plans is one way.

  • FriarNurgle

    They will find another way to obtain this lost revenue.

  • MacHead

    If you coupled iMessage with Google Voice app tho you could get rid of Text plans….Have all your friends add a call number and a text (google voice) number for you which then youd only need SMS to send a MMS to a non iMessage device since Google Voice texting does not support MMS

  • Noyz_PT

    I only pay 5€/month and I have unlimited texting, voice/video calls and even free access to Messenger services…

    (Sincerely,
    Cookie Monster publicist)

  • FriarNurgle

    As other’s have mentioned iMessage only works with other people who have iMessage… it does however revert to sending a regular text if there is some sort of data network issue. I’ve had that happen a couple of times. 

    Guess you would have to drop your texting plan and ensure all regular texting is blocked and use iMessage and a supplemental texting app like Google Voice, Google +, FB, Email, etc… but you lose the convenience of having it all on one app. 

    I think the bigger story is that other iOS devices will now be able to text. My kids with their iPods and my Mom with her iPad will have their first introduction into texting (wifi only though… which is why I was really hoping for a 3G capable iPod touch).

  • FriarNurgle

    Sending video and pics could add up. 

  • JasonA

    Forget iMessage. Use Google Voice. It can send texts to anyone, regardless of OS.

  • Darrius Taylor

    Jailbreak and use SMS GV Extension. I have unlimited text messaging for free pushed strait to the official SMS app through Google Voice. I no longer have a texting plan and if you set up google voice to push your calls to your official number you can just give out the GV number instead and you are in business.

  • dagamer34

    This is Apple saying “F*** you carriers” for increasing the price of a text message from 5 cents to 20 cents for no apparent reason during the last decade.

  • Larry Miller

    Damaging for the network operators but a potentially fatal blow to RIMM.  “Free” BBM’s are the last frontier tethering most BB users to their withering platform. 

  • Shaunathan Sprocket

    you mean like how Cisco, Belkin and Netgear raised the price of a router from 30 bucks to the 75-100 dollar range in the past 11 years?  Supply and Demand, it is a killer isn’t it :)

    Of course in this case, we’re just talking demand… There’s plenty of supply.

  • crateish

    Not right away. A small minority of iPhone users will have iOS 5 for the first year or so. And it only works between iOS 5 users. In a couple of years or so? Yeah, then let’s talk.

  • crateish

    Only between iOS 5 users. Expect to still pay for most of your texts for a long while.

  • Shaunathan Sprocket

    Now if only apple could make a data only wireless plan, with things like skype, fring, facetime, and now apple texting.  do we really NEED a phone company?

  • Fitz

    I love the concept of iMessage!  It’s long overdue on iDevices.  I agree with carriers charging customers with dumb phones for using texts because they generally aren’t required to get a data plan.  However,for  those of us with iPhones and other smart devices, we ARE required to have a data plan, but it doesn’t include texts!  It’s a scam that the carriers have gotten away with for years and it’s ’bout time it came to an end!

  • Ed_Kel

    Provided that the recipient also uses Google Voice, right?

  • Gene

    The Verizon spokesperson says, “From a business perspective, customers still need a data plan to connect to a device. They are only making a choice on how they are using the data.”  Funny, that’s not their attitude when they make me pay for a separate bucket of data to use for tethering.

  • tekunoloji

    They didn’t worry when BlackBerry’s BBM ruled the waves. Why should they now? 

  • Tom Rooney

    No. Works exactly like any SMS client except that you need data (E, 3G or WiFi).

  • MacHead

    Nope its legit, requires  depending on push notifications tho. So not as reliable as stock messaging app. But rarely does push fail now a days

  • Sam Parmenter

    Exactly. Is this an issue in America then? What on earth do you get with your phone contracts if not a ridiculous amount on text messages.

    Carriers and users alike have known text messages to have a huge mark up for years now. Thats why we get thousands if not infinite messages on all plans beyond the most basic.

    Its not a $20 billion industry if everyone pretty much gets them free is it….

  • Xavier

    There is no such thing as “screws over the carriers big time”.  I understand (and even agree) with the sentiment, but they are going to make their $$$ one way or another.

    If this revenue stream falls below a certain level, they will simply charge us more in another area

  • MacHead

    How many pics/vid are sent in comparison to text….1 to 100? if that, unless youre a 14 year old girl sexting her bf in 4th period who texts photos n videos more than a couple times a month

  • RyanKessler

    This is the most common misconception about any company is that “the customers come first”. Any company that operates that way will go out of business in no time. The shareholders truly are the ones who come.

  • warrengonline

    I get unlimited messaging + 1000  anytime minutes a month with Free nights (after 9 p.m.) and weekends.  I do not have a data plan – no more mobile web browsing.  So all together my cellphone bill a month is $74 whether I use it or not.  Grandfathered in.  Sweet.

  • Mike Rathjen

    PREDICTION:

    Big carriers will forcibly bundle a $10 unlimited SMS plan with the smartphone data plan. Then a spokesman will tell us how customers are actually saving money because it used to be $20 for unlimited SMS.

    Then T-Mobile will tell all 72 of their customers that T-Mobile isn’t forcibly bundling an SMS plan, and so would you all pretty please not leave for a carrier that has iPhones?

  • csman

    This is unlikely to happen. SMS is the most simple tool of communication in the cellular network. It works in one and every single mobile telephone on the planet, and in every single carrier. Is there anything better than that? No.

  • Joel Balderas

    ????

  • Honey Badger

    iMessage only works with other iMessage users.

    We all text with non iOS people as well, so we’ll still be needing a regular sms texting package. Am I missing something, what’s the big deal?

  • Punkxinxdrublic

    You pay 74 bucks and have limited minutes and no data? You’re nuts. You should go with a prepaid phone plan if not already on one.. You’re getting shafted hardcore dude!

  • CharliK

    The Carriers are looking at this the same way that the Studios and TV Networks look at online. They refuse to consider change. The Studios won’t counter lower box office with VOD rentals, the networks won’t count online (especially buys like iTunes) in the budget make good. 

    instead of thinking of those as destroying their business, they should look at it as changing the game to a new way of playing. Okay so folks want to use data rather than texts or even calls. Embrace it. Given how much that really costs the carriers (as evidenced by the whole ‘free nights’ etc stuff) fine, let them switch. Drop text plans done to unlimited for half the price and you still make bank, but folks are also more likely to pay rather than just ditch SMS plans all together. Change up the data plans to be more reasonable and useful. a 200MB plan really should be more like $5 with $15 being more like 1GB. Add a 3GB or even 5GB into the mix and many will bite. Remember, most smart phones will favor wifi over 3g and many apps are blocked from using 3g. 

    And while I personally have no issue with speed throttling for high users it needs to be more fair. Base it on usage and not some “if you are in an area that is having high use issues” and scale it. Every X amount you hit your speed goes down a level. And only for that period. At the end of the billing cycle, reset the system. It’s not fair to punish folks with ‘that month plus the next one’ when that month might have been a fluke. 

  • CharliK

    The big deal is that all the carriers are seeing is the millions of iPhones being sold this week and the millions more that can run iOS 5 that were sold the last two years. These days there are a lot of folks for whom 99% of their world is on an iPhone. So they will drop their $20 unlimited package and just pay the $2-3 dollars for the random not iPhone message they might get. So the carriers go from guaranteed money to perhaps getting a little something, maybe

  • CharliK

    Apple is no more likely to start a cell phone company as a cable company at this point. If they were going to they would have done it with the first iPhone. 

  • CharliK

    Considering that iOS 5 runs on the 3gs and the 4 as well as the 4s, it won’t be that small of a minority. But  yes, I agree that waiting to see if it has a real effect is the better course than going for the doom and gloom over a really big ‘it might’

  • CharliK

    What this iMessage thing is doing is more like iChat or AIM on a phone. But it only works to another iOS 5 device. If it knows that you are trying to contact an iOS 5 device it goes AIM. If it knows it’s not, then it goes SMS. If it isn’t sure, it tries AIM, then offers SMS if that fails. 

    So the answer to your question is that it depends on where it is going rather than what you have. And yes if you know a lot of folks that use non iPhone phones you probably should still have a text plan. just perhaps not as high as one. 

  • CharliK

    In the US you better believe they do. The actual cost to transmit a text is like 1/1000th of a cent. Most folks are probably in the range of only 2-3 messages a day so perhaps 100 messages a month. Even if we go with 200 to cover a message and a reply that’s still not even a full penny of costs. But at 20 cents a message that’s a lot of money to the user. Which is how they get you to pay them the guaranteed $20 a month. Even ‘big’ users only send like $1-2 in texts a month

  • John Mozelewski

    I use Google voice on my droid incredible/og droid and on my ipad 2/ipad for the past 2 and half years this might make masses change but tech savy should of changed this 10 dollar a month saver a long time ago

  • Wayne_Luke

    SMS is sent using basically unused back channels. It really isn’t a data issue. They are big profit for cell companies. Even at a penny per text, they are big money.

  • Matthew Urgo

    Yea not everyone knows it but they rob the shit out of us with the SMS texting business so cry me a river. 

  • justin_horn

    I use my GV number as a business line, so that wouldn’t work for me.  90% of my friends have iPhones, and trying to get the other 10% to put a different number to text than my number I’ve had for 15 years is easier said than done.

  • ctt1wbw

    Seeing as how they charge about 1000% more per text message size compared to data size, oh fucking well.  Actually, it doesn’t cost anything for carriers to send text messages.  How can these companies charge that much for a few bytes of text and not get sued for fraud is beyond me.

  • ctt1wbw

    All 72!!!  lmao!!!  I think they have 80 now.

  • Ed_Kel

    Adding to the statistic, I send maybe 4 pictures a month equaling out to 4-5mb tops. I’m sure regardless of which way you slice it, iMessage will never threaten your data usage.

  • Ed_Kel

    I don’t think I’ll ever get why the hell you people bitch and moan about “carriers cheating the little guys”… If you think that all these carriers are doing is ripping you off, then don’t use their service. Geez..

    The irony of it all is that you are just as greedy as the carriers, though in a different way; always wanting shit for free or at least cheaper.

  • Daniel

    let’s hope it does.  SMS is a huge scam.  AT&T is charging me $20/month for a service that AOL started offering for free 14 years ago.

  • Ed_Kel

    Too long have you been ripping yourself off.. Why do you have a smartphone if all you think is that you’re getting ripped off?

    Some people’s kids.

  • synthmeister

    Please make it so.

  • Zesty_T

    Does anyone know about international iMessage? 

  • BrianVoll

    I haven’t used a real text message in a long time. Thank you, SMS GV Extension!

  • Joel Tague

    You forget that the mass majority of iphone users are what i lovingly refer to as “DUMB”!
    I have customers come in every day and say “what’s syncing, what’s itunes, why would i plug my phone into my computer”?

    The mass majority of the market are not tech savvy. Unlike most of the people that read this blog. I have so many people that have come in the last week saying “whens the IPONE 5 coming out”?

    In other words, crateish is correct, a good number of iphone 4 and especially 3gs customers will take a LONG time to update to ios 5 due to this fact.

  • Joel Tague

    Dont you have to use your google voice number?  Its kinda a pain to have 2 numbers texting people.

  • Joel Angert

    Because the iPhone right now is A LOT more popular the Blackberries were 5 years ago.

  • SulaymanF

    People typically only text friends and family; many of whom are likely to also have iPhones in their circle.

    One analyst said that this could cut SMS texting by 13% nationwide. That’s hundreds of millions of dollars.

  • Thomas G B

    Sued for fraud? What is fraudulent about selling a service? If you don’t like the service then don’t use it and you don’t pay for it. Everyone is too sue happy wanting money for nothing.

  • Jakescanlan

    yeh it works, im from uk and i was using iMessage to chat to some1 in the US

  • oddfuturekillthem_all

    This article obviously fucked up, and made a pretty big typo. You say iMessage can be used to transmit SMS and MMS, between iOS 5 users; iPhone, iPod, and iPad. That said, this article says shortly after: “While the service would still require a data plan to contact friends
    that don’t own an iOS device, the introduction of iMessage could upset
    carriers’ very lucrative apple cart.” lol. Yeah, I guess you could say that I’m just being a smart ass, but typo’s like that just make the website/blog look very uneducated in the subject they are covering. I’m not saying you cultofmac.com is uneducated, but I’m simply just saying the truth. Obviously this is MY opinion, and everyone else is entitled to their own opinion. So don’t get all hyped up about it and attack me for it. Just in case someone that isn’t familiar with iOS 5 or any iOS device, this is what cultofmac.com MENT to say in this article. Sending SMS/MMS using iMessage is only available between Apple products running iOS 5. So that limits only iPhone 3GS, iPhone 4, iPhone 4S, iPad, iPad 2, and iPod Touch 3rd/4th Gen. So what does this mean? Well, obviously someone without an iOS 5 device is. Well, to be nice. They’re shit out of luck, or are they? As cultofmac.com mentioned, iMessage uses your data plan to send messages between your fancy iOS 5 buddies. This is not such a great thing, and a lot of iOS 5 users actually hate it, and simply don’t use iMessage. Why is iMessage using my data plan bad, you might ask? Let’s say, one of your iOS 5 buddies decides to send a video of another iOS buddy at Starbucks drinking his coffee, on his MacBook supposedly “writing a book”. That sounds great right? Well, just don’t get too excited yet! That very long and entertaining video your buddy sent you via iMessage? Just imagine how much of your data plan it’s going to suck up. Along with all your other drunk iOS 5 buddies sending pictures of party fouls they made. Well, lucky for your iOS 5 buddy that spends most of his day/life at his local Starbucks, whom is most likely on WiFi, thus not getting charged a single microscopic byte out of his data plan. Oh very smug of him, yes. So to end this boring long comment that non of your are probably going to read, or at least read all the way. iMessage was over hyped amongst iOS fans. A lot of iOS fans were struck with disappointment after realizing iMessage was almost just as expensive to use. As most people these days have unlimited texting/picture messaging, using iMessage would just be a waste of money paying for unlimited text. Ugh, my grammar is slowly getting sloppy. This means I need to get off this thing, and get on my Xbox 360 and play some damn video games. Probably going to pass out with the controller in my hand. Good night. Happy Holidays. <3 you cultofmac.com. Please don’t get offended by what I just said here. You know you were wrong. You know I was right. You know this was boring yet, entertaining to read because you have nothing else to do sitting at Starbucks drinking your coffee acting like you’re writing a book. hehehehehehehe. I love making fun of stereotypes. Isn’t it just funny how people label a group with a stereotype?

  • YouLiealot

    assh***..why would you insult someone who is stating a very well known and agreed upon FACT..AMerican Corps are greedy little theives who steal your PERSONAL info and make YOU pay for the oinsult..THey know more about YOU than you do !! Keep insulting those who try!

About the author

Ed SutherlandEd Sutherland is a veteran technology journalist who first heard of Apple when they grew on trees, Yahoo was run out of a Stanford dorm and Google was an unknown upstart. Since then, Sutherland has covered the whole technology landscape, concentrating on tracking the trends and figuring out the finances of large (and small) technology companies.

(sorry, you need Javascript to see this e-mail address)| Read more posts by .

Posted in News | Tagged: , , , |