Operators Face SMS Revenue Dip Due to Social Networking

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Mobile network operators are facing a decline in SMS (Short Message Service) revenue as their customers increasingly use apps for alternative messaging services such as Facebook or WhatsApp, according to a new study released on Wednesday by analyst Ovum.

Ovum estimated that operators worldwide saw a $13.9 billion decline in revenue last year due to the use of IP-based social messaging services, which amounts to about 9 percent of their total messaging revenue. In 2010, the decline was $8.7 billion, Ovum said.

SMS and MMS (Multimedia Messaging Service) are the most important non-voice revenue streams for operators right now, said Neha Dharia, a consumer analyst with Ovum based in India.

But consumers, particularly so-called early technology adopters, would rather use Blackberry Messenger than send an SMS, Dharia said.

"Messaging is a very key revenue stream that is being impacted," Dharia said. "People have begun to reduce their SMS usage."

Services such as Blackberry Messenger and WhatsApp use a device's data channel or Wi-Fi to send the message. Smartphone users frequently have inclusive data plans, which means they can potentially avoid SMS charges by using those applications to communicate.

Operators have seen the problem coming for a long time, Dharia said. One solution is for those companies to offer their own messaging services, using the Rich Communication Suite (RCS). RCS is a set of specifications for enabling IP-based features such as instant messaging, video, file transfer and presence capabilities on mobile devices.

Efforts have been under way for years by operators to implement RCS, and it is starting to appear in the market, Dharia said. Operators need to introduce the technology quickly, she said. Operators will also look to replace lost SMS revenue from other growing sources, such as mobile broadband services, she said.

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