Great Expectations: Capitalizing on SMS

The unforeseen popularity of ringtones may be synonymous with “windfall” for mobile operators, but text messaging is really the one to watch. That’s why industry bigwigs at last week’s 3GSM World Congress were plotting ways to upgrade the unglamorous, yet ubiquitous, texting with new IP capabilities in hopes of capturing even more revenue from what is already a cash cow.

Global SMS revenue is expected to grow to a whopping $67 billion by 2012, according to Portio Research. That makes it the most lucrative data service for carriers, and the second biggest application, by revenue, after voice. The most immediate way to bump that figure up is by coaxing existing SMS users into trying — and loving – mobile IM. While mobile presence and chat isn’t new, what’s held it back is a lack of interoperability between operator communities and the need to have special handsets, software, complex configurations or expensive data packages.

The new thinking around mobile IM is that the industry needs to create a service that is as easy to use as texting; takes advantage of existing phone capabilities and phone books, with a standard interface; and is guaranteed to work, regardless of which operator the addressee is using or whether the user is sitting at a PC or using a mobile device. Billing models may be more akin to the text-messaging model than the mobile Internet model, with either a low incremental charge or a low flat-rate monthly subscription for unlimited messaging.

“[The goal is to use] IM as an upgrade to the $60 billion market for SMS,” says NeuStar CEO Jeff Ganek. “And this is all about bringing together disparate user communities, whether it’s walled garden services or Internet-based. That will be critical for this to take off.”

To that end, NeuStar announced it will interconnect and support mobile instant messaging for Telefonica in Spain, and for Vodafone plc throughout Europe. Users also will be able to access their PC-based Internet IM services. This is the first commercial fruit of the GSM Association’s 2006 technical and commercial framework for global, fully-interoperable personal IM, and Ganek says he expects to see the service explode around the world.

NeuStar’s efforts will create an open environment based on SIP that is positioned as a natural upgrade to SMS. Where IM is not supported, messages will be delivered as text and can be replied to as such. There is no special client necessary. “This is backwards-compatible with SMS and doesn’t require a smartphone to use,” says Ganek. “And we’ve found that having a QWERTY keyboard doesn’t really matter for adoption. Young people IM, they don’t e-mail. And as they get older and into the workforce, that will become the norm. The key to all of this is interoperability.”

The GSMA says that about 40 mobile operators are “participating” in its mobile IM initiative with more commercial launches expected throughout the world in 2007.

If successful, operators could be looking at a tremendous amount of incremental revenue, as mobile IM is cheaper to deliver than texting, thanks to SIP, and operators could charge a bit more for the upgrade. As a snapshot of what’s at stake, consider that research firm Gartner Inc. shows that an estimated 936 billion SMS messages were sent worldwide in 2005; that will increase to trillions by 2010, with 318 billion sent in 2010 in North America alone. Even a small pricing increase would translate to an immense amount of money.

The vision for upgrading SMS does not of course stop at mobile IM. From a behind-the-scenes perspective, video mail, voice-text integration and other advanced services are a simple add-on once the SIP infrastructure and interconnects between operators are complete. If the multimedia aspect sounds familiar, you may be thinking about MMS and photo messaging, both of which have failed to reach the levels expected for them (except in Japan), despite interoperability and ease of use. But those are additional services requiring user education, and can be expensive; the new wave of VoIP-enabled multimedia will be positioned as applications that simply give subscribers mobile access to the things they use already. Think wireless unified messaging.

Gartner says that carriers should create a central repository for SMS, voice mail, e-mail and video traffic, with one portal to access many forms of interaction — critical in mobile considering the difficulty of navigating between screens.

Movement is already under way to explore this long tail, although the interoperability and business model questions have yet to be addressed.

At 3GSM, PCTEL Inc. announced it had enhanced its Roaming Client-Voice Enabled (VE) product to be a fully integrated, native voice application for Windows Mobile 5 dual-mode devices. A single phone dialpad and related applications (text messaging, voice mail, contact list) are immediately presented to the user with every incoming call. Integration with the Microsoft phone allows direct access to and integration with other related applications within a Windows Mobile 5 platform, such as phone book, call history, speed dialing, voice dialing, synchronization and picture caller-ID.

Meanwhile, BroadSoft Inc., a provider of VoIP application software, and video specialist RADVISION announced a collaborative solution at the show to offer mobile operators the capability to deliver video VoIP services over 3G networks, with fixed-mobile convergence capability.

Service providers can offer RADVISION’s video conferencing and other interactive applications with BroadSoft’s BroadWorks advanced voice features, such as user-configurable voicemail-to-email, click to dial and find-me-follow-me capabilities. RADVISION’s Interactive Video Platform enables users to combine live and stored video content from different sources of video, including wireless 3G devices, PCs, surveillance cameras and streaming content network sources.

“Nobody could have predicted the phenomenal success of SMS, and the race is on to find its successor,” says Nick Ingelbrecht, research analyst at Gartner. “Without a doubt new services are needed, but a clear leader has yet to emerge from the messaging services currently being deployed, such as mobile instant messaging, video messaging, mobile e-mail and unified and integrated messaging.”