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How Greed Killed Lucrative Text Message Fees for Cellular Carriers

By Patrick Nelson – Feb 24, 2014 at 9:55AM

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Viber, an OTT messaging operator with 300 million users globally, has just been purchased by Japanese Rakuten for $900 million. Why?

Viber, an OTT messaging operator with 300 million users globally has just been purchased by Japanese Rakuten for $900 million. Why?

There was a time, not so long ago, that if you'd asked me what words come to mind to describe MNO, or Mobile Network Operator-provided SMS, or Short Message Service text messaging, I'd have replied with the simple term: "price gouging."

SMS is the traditional 160-character mobile technology behind the text, as in texting, sexting, and so on.

About SMS and its Downfall

SMS technology has been one of the most remarkable strokes of luck to have befallen an industry. It costs virtually nothing to provide—it has historically utilized signaling paths, which are unused most of the time; and for a time, cell phone customers appear to have been quite happy to pay for it—it's a super-efficient way to communicate. One discounted SMS a la carte on an MVNO can cost the consumer $0.05 today.

Parallels can be drawn to charcoal company Kingsford. Automobile maker Henry Ford and relative EG Kingsford started Kingsford as a way to get rid of and profit from scrap wood used in the Model T manufacturing process. Bags of Kingsford's charcoal briquetes line supermarket shelves today.

SMS

However, classic over-MNO SMS numbers don't look good for the future. North American SMS use is expected to peak this year according to ITU, or International Telecommunications Union, quoting Portio Research figures:

ITU projects a decline in classic SMS use from 2015 to 2017 within mature markets globally, as users move to OTT, or Over-the-Top Internet messaging apps and social networks—like Viber.

The reason: too little too late from the mobile network industry, plus newer, superior technology--the mobile Internet coupled with smartphone. Result: profitable pay-as-you-go a la carte texts have been replaced by non-optional, blanket all-you-can-eat SMS texting plans included in a user's monthly phone bill. An MNO giveaway in other words.

Even MVNOs, or Mobile Virtual Network Operators, are dumping all-you-can-eat SMS on their customers.

What's happened is that often free-to-message OTT Internet-driven messaging from apps like WhatsApp, BBM, Skype, and Viber, has crept up and has swiped the telco's SMS revenue from underneath its nose.

Viber, and other OTTs, can bypass mobile phone lines and run on Internet. If the telcos had been a little less greedy with its almost free-to-supply SMS, the outcome may have been different.

Viber and Rakuten

A Viber App Screenshot-Google's Play Store

Viber, an OTT messaging operator with 300 million users globally has just been purchased by Japanese giant Rakuten (Tokyo Stock Exchange 1st Section: 4755) for $900 million. Rakuten calls itself an Internet Services Company. Businesses include e-commerce; travel; banking, sports and telecommunications.

The consumer loves texting and ICT, in August 2013, reckoned SMS generates $15.3 million per hour for MNOs globally. Comparatively MNOs make only $2.6 million per hour from OTT—and that's in data, or Internet charges to the consumer.

If you were to ask your average mobile network operator what he thinks about SMS's likely disappearing revenue, he'll tell you he doesn't care because he's making it up on the data side. Viber and its brethren need Internet to work. Good answer, or he would say that, wouldn't he?

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