Apple's free iMessage expected to undermine carriers' high-profit SMS business

Posted:
in iPhone edited January 2014
Apple?s upcoming free messaging application iMessage in iOS 5 will likely disrupt wireless carriers? thriving SMS texting business when it arrives on Tuesday, according to multiple analysts.



iMessage, a new app launching as part of iOS 5, will offer iPhone, iPad and iPod touch owners unlimited free messaging over Wi-Fi and 3G networks.



The New York Times reports that the forthcoming service is being perceived as a threat to mobile operators. iMessage and other similar services will allow smartphone users to rely on existing data plans and Internet service for text messaging functionality, thereby avoiding having to pay for high-margin SMS plans from wireless operators.



SMS ? A multi-billion-dollar business in the U.S.



An SMS message offers the user the ability of sending short bursts of text of up to 160 characters. Report author Jenna Wortham noted that, at rates as high as 20 cents per sent and received message, a user would end up paying $1,500 to send 1MB of text data. The same amount of data costs just 1.25 cents on a $25 per month 2GB data plan.



Two trillion text messages are sent in the U.S. each year, according to Sanford C. Bernstein analyst Craig Moffett. That translates into $20 billion in revenue each year, with $7 billion a year taken in by Verizon alone.



One expert estimates that a single text message costs carriers just a third of a penny. University of Waterloo professor Srinivasan Keshav told the publication that SMS messages use the same network carriers employ for voice calls, piggybacking ?on the phone railway,? with as much as "4,090 percent markup" for the service.



In the Netherlands, free messaging apps and social networks have already ?shrunk texting traffic and eroded profits,? Wortham said. However, the report noted that some carriers are adapting to the imminent potential threat coming from Apple?s iMessage.







AT&T now offer its subscribers two choices, a $20 per month unlimited text plan or a flat 20-cent fee per sent and received message. The carrier's previous plan of $10 per month for 1,000 text messages is no longer available.



For its part, Verizon sees iMessage as a complementary feature to other communication standards. ?From a business perspective, customers still need a data plan to connect to a device. They are only making choices on how they are using the data,? a company spokesman was reported as saying.



However, Apple devices only account for 5 percent of texting traffic each year, mobile analyst Chetan Sharma told the publication. Considering that iMessage is an iOS-only application right now, users will still require a texting plan to connect to mobile subscribers that do not own a supported iOS device.







iMessage ? How it works



The application is part of iOS 5, the company?s latest mobile platform version which will be released on Oct. 12. iOS 5 will be compatible with various iOS devices: iPhone 3GS, iPhone 4, iPhone 4S, iPad, iPad 2 and third-generation and newer iPod touch models.



iMessage was unveiled at this year?s Worldwide Developer Conference in June at what turned out to be the last keynote the late Steve Jobs delivered. One report suggested that Apple?s carrier partners were unaware of the development of such an app, reportedly finding out about it at the same time as the general public.



The app will make instant text-messaging between iOS devices substantially cheaper, even free in some cases, as it only requires a wireless network or a 3G data plan to work. The service should draw special appreciation from users that send a significant amount of SMS messages to friends and family that live in other countries and also happen to own recent models of Apple's mobile offerings.



Unlike SMS messages, iMessage texts are not limited to 160 characters per message. In addition to text, the application lets users share photos, videos, locations and contacts. Also, all sent and received iMessages are securely encrypted.



The app supports multi-device use, so users can pick up chatting with their contacts across any of the iOS devices they own. iMessage features single and group messaging and offers text delivery notifications.



A recent code discovery in Apple?s iChat application suggests the company may be interested in bringing iMessage support to its OS X Lion chatting platform.









Similar solutions from Apple rivals



iMessage has been seen as Apple?s answer to Research in Motion?s popular BBM messaging application that lets BlackBerry users instant message each other. Until the introduction of iMessage, BBM was considered an exclusive major smartphone feature that would draw some mobile consumers to BlackBerry devices and turn them into loyal brand followers.



Samsung and Google are also reportedly working on similar services that would allow Android users to communicate via free messages instead of pricier SMS texts. Meanwhile, Microsoft is said to be readying its own instant messaging system for the Windows Phone platform.



Other third parties offer free instant messaging clients for most smartphone platforms including iOS, but they are not natively integrated into the operating system and need to be downloaded from the appropriate application store.

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Comments

  • Reply 1 of 138
    mactelmactel Posts: 1,275member
    They already have eliminated the data plan so I don't believe any of them will be hurting by this.
  • Reply 2 of 138
    I like iMessage very much, but it has one disadvantage: its not cross platform.

    Thats why i will stick to Whatsapp which is cross platform compatible.

    So I can send my messages to (almost) everybody.

    BTW: iMessage is really a feature copy of Whatsapp. So no innovation on Apples side here....

    I fear iMessage will be like iChat: great app but not really mainstream due to the fact its bound to the Apple platform only.
  • Reply 3 of 138
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by AppleInsider View Post


    Report author Jenna Wortham noted that, at rates as high as 20 cents per sent and received message, a user would end up paying $1,500 to send 1MB of text data. The same amount of data costs just $1.25 on a $25 per month 2GB data plan.



    2GB = 2048MB ÷ $25.00 = $0.0122 or 1.2¢ per 1MB data.
  • Reply 4 of 138
    apple ][apple ][ Posts: 8,360member
    A lot of Blackberry users are running away from RIM. They know that they're on a dead end platform with no future, so they have to make a choice and quite a few of them are ending up on iOS. And especially since Apple has their own message system now, it will be yet another incentive for these people to finally make the jump, because their ship is sinking fast, and they know it too.
  • Reply 5 of 138
    Quote:
    Originally Posted by lordoftheflatbush View Post


    I like iMessage very much, but it has one disadvantage: its not cross platform.

    Thats why i will stick to Whatsapp which is cross platform compatible.

    So I can send my messages to (almost) everybody.

    BTW: iMessage is really a feature copy of Whatsapp. So no innovation on Apples side here....

    I fear iMessage will be like iChat: great app but not really mainstream due to the fact its bound to the Apple platform only.



    You'll still be able to send SMS messages to non-iPhone users.



    And given that over 250 million iOS devices have been sold (not shipped) I'm sure you'll find a person or two you know who have one.



    Unless of course you don't have one...



    But you do



    And Whatsapp is probably a copy of Blackberry messaging so no innovation on Whatsapp's side there either.



  • Reply 6 of 138
    Quote:
    Originally Posted by solipsism View Post


    2GB = 2048MB ÷ $25.00 = $0.0122 or 1.2¢ per 1MB data.



    Fixed. Thanks for catching that.
  • Reply 7 of 138
    Everyone but two persons in my loop has an iOS Device.
  • Reply 8 of 138
    nagrommenagromme Posts: 2,834member
    Quote:
    Originally Posted by lordoftheflatbush View Post


    I fear iMessage will be like iChat: great app but not really mainstream due to the fact its bound to the Apple platform only.



    iChat is completely mainstream: my friends using AIM, Google Talk, etc. all message me on it and vice versa. They have no idea whether I’m using iChat or some other client, and I have no idea what client they’re using. It’s seamless, open, and not Apple-bound at all.



    Similarly, iMessage isn’t an app at all—it’s an automatic capability of the iPhone’s built-in SMS app (“Messages.”) Like iChat, it's seamless: you don’t have to remember who has an iOS device—just send your texts! When you text with an iOS friend, the message is blue and free. When you text with a non-iOS friend, the message is green (for the money you lose) and you get gouged.



    I refuse to pay for a texting plan. It’s archaic, and it’s greedy, when I’m already paying for data and the SMS service costs the carrier close to nothing!



    So if it’s not some emergency, my non-iOS friends can learn to use their voices Or email/IM me (I like Meebo as an iChat substitute). Or they can even text to my AIM/iChat account (comes to me through Meebo) and I can reply for free! That has always worked, even if it’s awkward.
  • Reply 9 of 138
    Quote:
    Originally Posted by AppleInsider View Post


    In the Netherlands, free messaging apps and social networks have already ?shrunk texting traffic and eroded profits,? Wortham said. However, the report noted that some carriers are adapting to the imminent potential threat coming from Apple?s iMessage.



    Well, I live in the Netherlands, and I can tell you: the vast majority of my friends use Whatsapp, instead of text messaging. My bundle consists of 500 SMS p/m, but I hardly get to 25-30 a month.
  • Reply 10 of 138
    gwlaw99gwlaw99 Posts: 134member
    I hear AOL, Yahoo, Google and others are already about to copy apple with "instant messengers" of their own. Apple needs to sue them quickly before someone steals their idea again.
  • Reply 11 of 138
    ... but there is only one thing I want to know that I have not been able to find:



    Will there be. A god**mn. Individual timestamp. For messages.



    This is my chief, top, primary, first complaint about the current messaging.



    I do not care what Apple thinks about how people converse.



    I should not have to jailbreak an Apple device in 2011 to have this feature.
  • Reply 12 of 138
    orlandoorlando Posts: 601member
    SMS is more expensive per message sent but data plans costs a lot more per month so average phone bills are going up; I therefore doubt carriers are complaining that much.
  • Reply 13 of 138
    How does this work? Let say I have an iPhone without text plan but with data plan. Will iMessage be smart enough to use the data connectivity by default?
  • Reply 14 of 138
    Our family has 5 lines on AT&T. We lowered the plan to 700 min. Between 5 lines, i know that sounds too little, but we also added $30 unlimited texting which covers all 5 lines ($6 per line for unlimited texting), but the kicker is that you get unlimited mobile minutes from ANY carriers.

    Most people use mobile phones now days, so I thought this would be a good plan. What do you guys think?



    I guess this is one way for carriers (in this case AT&T) to lure customer to texting plan.
  • Reply 15 of 138
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by pika2000 View Post


    How does this work? Let say I have an iPhone without text plan but with data plan. Will iMessage be smart enough to use the data connectivity by default?



    In Settings » Messages there is an option to disable iMessages, MMS, and other options, but no blanket disabling of iMessages.



    However, in the Messages app if you have iMessages enabled it will be the default option and clarly labeled as iMessages and have a blue Send button. If that fails for whatever reason you will then get an option to send via SMS and it will say Text Message and have a green Send button.



    I don't think you'll have trouble keeping yourself SMS free.
  • Reply 16 of 138
    My wife and I only use Whatsapp and KakaoTalk nowadays. I even cancelled our AT&T texting plan and requested an sms block so we would not be charged for spam texts and texts that other people send. You know, the ones who refuse to use free apps like KakaoTalk to txt from their smartphones... That's how we communicate with friends and family here in the US and abroad, and we're glad the carriers are sucking a little less of our money every month
  • Reply 17 of 138
    Quote:
    Originally Posted by Sarcasmo48 View Post


    ... but there is only one thing I want to know that I have not been able to find:



    Will there be. A god**mn. Individual timestamp. For messages.



    This is my chief, top, primary, first complaint about the current messaging.



    I do not care what Apple thinks about how people converse.



    I should not have to jailbreak an Apple device in 2011 to have this feature.



    Nope, I have the iOS 5 GM installed, and no, it doesn't, I would really like this feature too, but we're gonna have to keep waiting unless you want to JB.
  • Reply 18 of 138
    Quote:
    Originally Posted by pika2000 View Post


    How does this work? Let say I have an iPhone without text plan but with data plan. Will iMessage be smart enough to use the data connectivity by default?



    Quote:
    Originally Posted by solipsism View Post


    In Settings » Messages there is an option to disable iMessages, MMS, and other options, but no blanket disabling of iMessages.



    However, in the Messages app if you have iMessages enabled it will be the default option and clarly labeled as iMessages and have a blue Send button. If that fails for whatever reason you will then get an option to send via SMS and it will say Text Message and have a green Send button.



    I don't think you'll have trouble keeping yourself SMS free.



    Actually there is an option in the settings that says "Send As SMS" you can disable it, and it won't even try to send as an SMS.
  • Reply 19 of 138
    nvidia2008nvidia2008 Posts: 9,262member
    Quote:
    Originally Posted by lordoftheflatbush View Post


    I like iMessage very much, but it has one disadvantage: its not cross platform.

    Thats why i will stick to Whatsapp which is cross platform compatible.

    So I can send my messages to (almost) everybody.

    BTW: iMessage is really a feature copy of Whatsapp. So no innovation on Apples side here....

    I fear iMessage will be like iChat: great app but not really mainstream due to the fact its bound to the Apple platform only.



    It's all good mate. WhatsApp and iMessage away. Texting is so last century LOL.
  • Reply 20 of 138
    Quote:
    Originally Posted by AppleInsider View Post


    Samsung and Google are also reportedly working on similar services that would allow Android users to communicate via free messages instead of pricier SMS texts. Meanwhile, Microsoft is said to be readying its own instant messaging system for the Windows Phone platform.



    Does Android already have Google Chat built-in?





    I don't know about Microsoft "readying its own instant messaging system". Windows Live Messenger is already available on multiple platforms and Windows Phone already has Windows Live Messenger and Facebook built into the messaging hub.



    It doesn't look like Skype is there yet though.





    I'm waiting for the inevitable buyout of WhatsApp. I wouldn't be surprised if a bidding war between Microsoft, Google and maybe even Amazon pushed the price into the many hundreds of millions.
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