Facebook Is Killing Text Messaging, Report Says
Apple's iMessage, the free, Internet-based text-messaging service, isn't the only thing AT&T's chief executive should lose sleep over. Facebook is also eating into text-messaging revenues for carriers, according to a report.
Context & Ripple Effects
The wireless industry has been bracing for this since mid-2011, when the Wall Street Journal reported carriers sweating as texting growth cooled, and the New York Times followed in October with a look at how free texting apps are threatening wireless carriers'. This report adds Facebook to that roster of over-the-top threats, alongside Apple's confirmed iMessage erosion of SMS revenue that has already rattled AT&T's chief executive.
One caveat matters for how hard to lean on it: while the iMessage impact is confirmed, the claim that Facebook specifically is cutting into carrier text-messaging revenue is a rumored, unconfirmed report — though its pickup by CNET and BGR shows the carrier-SMS-erosion narrative now travels well beyond one outlet. The timing lands just as Facebook begins sending three billion notices about proposed privacy policy changes ahead of a Monday Q&A, meaning the company's mobile ambitions are under scrutiny on more than one front.
First-order effects
- AT&T and other carriers face direct pressure on their highest-margin line item: text-messaging revenue, which Apple's iMessage is already confirmed to be cannibalizing and which Facebook messaging is now reported to be eroding as well.
- Facebook's messaging traffic rides on data plans customers already pay for, so each message shifted off SMS converts carrier billable events into unmetered platform usage.
Second-order effects
- Carriers' likely countermove is repricing — bundling unlimited messaging into plans or pushing value toward tiered data — accepting SMS commoditization to defend the data pipe they still control.
- Apple and Facebook are pushed into an explicit contest for default messaging status on smartphones, with handset makers' built-in apps becoming the distribution battleground carriers can no longer tax.
Third-order effects
- If the pattern holds, messaging detaches entirely from per-message billing and consolidates around platform owners who hold the social graph and the OS, leaving carriers as commodity data pipes — a structural inversion of the SMS cash cow that funded wireless economics for a decade.
- Regulators and privacy advocates gain a new focal point as messaging concentrates in a handful of platforms whose policies — like the changes Facebook is notifying users about this week — govern communications at population scale.
The trend: Carrier-controlled SMS is being unbundled into free Internet-based messaging owned by platform companies, with Apple attacking from the operating system and Facebook from the social graph.