With prices of up to 20 cents to send and another 20 cents to receive text messages, free texting apps could be poised to take business away from cellular carriers charging customers to send their 160 characters of thoughts to friends and family.
The New York Times cites the popularity of BlackBerry messenger, the soon-to-be introduced iMessage on Apple devices and free downloadable apps like Kik and Pinger as big temptations for customers sick of paying out of pocket for texts or unlimited text plans. If free texting apps, which operate over Wi-Fi or data connections instead of through cellular networks, really take off, carriers will be crying over the loss of revenue.
Even though texting on Apple devices only accounts for 5 percent of the total messages sent in the U.S., the iMessage’s impending arrival will likely cause others to try and follow in its footsteps. As all other companies are wont to do when Apple sets the technological “gotta have it” bar.
“There’s a huge amount at stake here,” said Craig Moffett, an analyst at Sanford C. Bernstein, who covers the telecommunications industry. “They are undermining the core business model for an industry that makes most of its money from services that are high priced and low bandwidth, like texting.”
When compared side-to-side, the price difference is staggering. It’s estimate that it costs a third of a cent for carriers to send texts, but they charge from 10 to 20 cents for each one. That’s a 4,090 percent markup, says one expert. And at 160 characters per message, consumers are paying about $1,500 to send a megabye of text traffic through the cell network, compared to using a $25/month data plan, which would work out to 1.25 cents for that same amount of data.
One problem we foresee is the ability to use a texting app that lets consumers send messages to friends or family on different networks, so one wouldn’t be restricted to onlyt texting within the same carrier.
To cope with the loss of revenue these messaging options could incur, companies like AT&T are preparing themselves by getting rid of certain text packages. For example, right now I have the $10/month, 1,000 text message plan. But the NYT says now, AT&T is no longer offering that plan, and instead has new subscribers choose between the $20/month unlimited plan or pay 20 cents per text message in or out.
Free Texting Apps Are Threat to Wireless Carriers [New York Times]