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Free Alternatives for Texting!

Free alternatives may cut into text messaging profits

August 21, 2011|By Salvador Rodriguez, Los Angeles Times

Apple’s upcoming iMessage service, Facebook’s new Messenger app and other no-cost options could diminish a revenue stream for the wireless industry that totaled about $21 billion last year

Koshal Singh, left, checks Facebook on her iPhone while waiting in line.… (Irfan Khan, Los Angeles Times)
Ben Chinn likes to text as much as the next guy — he just doesn’t like to pay for it.

Chinn, 37, sends most of his text messages free of charge with Google Voice and a smartphone application. He also pays $5 a month for up to 200 messages on his AT&T mobile phone plan.

“With everything with the mobile carriers, I feel I’m getting nickeled and dimed,” said Chinn, of San Francisco. “I resent paying so much for text messaging, and I feel that it’s not a reasonable price to pay for something that costs the carriers next to nothing.”

It’s customers like Chinn who are worrying the big telecommunication companies. Text messaging has been a huge profit center for AT&T, Verizon, Sprint and T-Mobile, but that money could trickle away as free alternatives gain popularity.

Facebook Inc., for example, recently launched a smartphone app called Messenger that enables users to communicate with anyone who is a Facebook friend or has a cellphone number. And this fall, Apple Inc. will roll out iMessage, enabling the millions of iPhone and iPad owners to send messages to one another over the Internet at no cost.

In addition to free apps, the growing popularity of smartphones — which can handle both email and texting apps — are dimming text messaging’s future as a profit center.

“There is a change coming, and it will have a serious impact on messaging traffic in mature markets, starting with the U.S.,” said John White, a business development director at Portio Research. “We see iMessage and Facebook messaging as the biggest players [and] this will start to impact right away.”

Juniper Research has predicted that global revenue for text messaging will peak this year and begin to drift down. And in a recent report, UBS Investment Research warned that “customers could elect not to pay for texting as smartphones and third-party applications become pervasive.”

Text messaging’s popularity exploded around 2005, driven by teenagers and young adults who adopted the format as an easy way to communicate on the go, similar to the instant messaging function on their computers.

And text messaging is still a big business, accounting for an estimated $21 billion in U.S. revenue for telecom companies last year and an estimated $23 billion this year, according to the Consumer Federation of America.

But growth in message traffic slowed for the first time to single digits — 8.7% — in the last half of last year compared with the previous six months, according to U.S. wireless trade group CTIA.

Typically, wireless carriers have charged separately for text messaging, multimedia messaging and data plans, which provide Internet access. Though they have offered unlimited plans for each category, carriers have been pulling back recently, limiting particularly how much a customer can use the Internet.

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