Carriers Sweat as Texting Cools Off
New Messaging Apps from Apple, Others May Hit Fees — Growth in the volume of text messaging is slowing sharply, just as new threats emerge to that lucrative source of wireless carrier profits. — While U.S. cellphone users sent and received …
Context & Ripple Effects
Text messaging has been one of the highest-margin lines on U.S. wireless bills, so the sharp slowdown in message-volume growth lands squarely on carrier profit statements rather than on a peripheral product. The timing compounds the damage: the threat comes from the platform layer, where Apple's newly announced iCloud service and iOS 5's system-level Twitter integration signal that messaging is being rebuilt as an OS feature rather than a metered network service.
First-order effects
- Apple's OS-level messaging push gives iPhone users an alternative that rides on data plans instead of per-text fees, hitting U.S. carriers' SMS revenue at the exact moment volume growth is cooling.
- Any carrier still pricing texting as an à-la-carte add-on faces immediate substitution risk from apps that deliver the same function at no marginal charge to the user.
Second-order effects
- Carriers are pushed to fold unlimited messaging into broader data bundles to defend the relationship, accelerating the commoditization of SMS pricing.
- Rival platform holders and app makers face pressure to match Apple's integrated-messaging move or cede the default messaging slot on their own devices.
Third-order effects
- If IP-based messaging keeps displacing SMS, messaging shifts structurally from a metered carrier service to a feature of the handset platform, eroding a core high-margin revenue line and forcing carriers to compete on data-plan economics rather than message counts.
The trend: Mobile messaging is migrating from carrier-metered SMS toward free app- and OS-based alternatives, converting a high-margin wireless fee into a commodity absorbed by data plans.