Social messaging to cost telcos billions

Ovum reports social messaging services – like WhatsApp – will cost telecommunications carriers US$86 billion a year by 2020.

Ovem analyst Neha Dharia talks about the changing relationships between network operators and the so-called over-the-top OTT companies that duplicate telecoms services like calling and messaging.

Social messaging services are often free or come as part of cheap packages, making them attractive to users. They reduce a carrier’s ability to charge for services making them less profitable.

When a user sends a Facebook message or makes a Skype call there’s a small data use cost, but carriers don’t earn SMS or call revenue.

We’re already seeing falling SMS use. Another research outfit, Informa, says internet message traffic went past SMS traffic.

Texting – which had its 20th birthday in December – was a cash cow for carriers. It costs them almost nothing to provide the service – until recently a simple message of a few characters could cost as much as NZ 25 cents for 128 bytes of data – that equates to tens of thousands of dollars per GB of data.

Carriers offset the loss from messaging by selling data bundles – the price per mobile data GB is still high when compared to data delivered over copper or fibre. However, OTT services can bypass mobile data and send messages using much cheaper Wi-Fi connections.

4 thoughts on “Social messaging to cost telcos billions

  1. The main issue these messaging apps have is compatibility. If I want to txt someone I can just txt them, other than that I have Steam, GTalk, facebook messaging, email, Skype, et al to try and communicate and mobile phone is by far the most common factor people have.

    There are issues about privacy, but most people don’t understand that at all. I doubt every business who communicates over Skype know Microsoft is always listening and recording or that Apple keeps your audio from Siri for an undetermined amount of time. Sure txt is recorded too, but at least the telcos are bound by NZ law with what they can do with that info.

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    • Interesting. What you call privacy, I’d call security. :-)

      Let’s put it this way, I trust Telecom NZ when I get a private text message from my bank – or when I use text for two factor authentication.

      I’d hate to know that kind of stuff was being fed into Facebook’s big data machine.

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  2. I know txt costs very little to actually send/receive but I give them the benefit of the doubt with maintenance costs and keeping people employed. If they had done their pricing right it could’ve been like landlines where you pay a mobile monthly fee for costs and then smaller prices on actual calls/data/txt.

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    • Quite. I have lord knows how many texts per month included in my mobile account – whatever the number, I doubt I’ve ever used more than 10% of the allocation. To me the texts are effectively free.

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