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Text Messaging and a $130 billion profit pool waiting to be disrupted (titocosta.tumblr.com)
34 points by titocosta on Jan 25, 2009 | hide | past | web | favorite | 59 comments

So here's the problem as I see it. It's very easy to send SMS via email because most carriers provide an email gateway for their SMS services. However, people use SMS by phone number. The use-by-number paradigm is one that is hard to break, because that is the one thing the carriers won't open up. SMS is tucked into a small portion of the cell signal, which is why the character limit is around 180 characters.

It's easy to write a 3rd party solution for smart phones, say like an IM or twitter client. But how do you open access to the hundreds of millions of people with regular phones. I think if someone can figure that out, you have a business model

There is an application called ChompSMS for the Android platform that is as close to what you are talking about as I have seen. They provide a more iPhone-like interface to text messages and optionally send SMS messages (for a fee) though their own network. That is to say, using data to send the message to their servers and eventually out into the cellular network again to the destination.

The idea is that in some circumstances, such as sending a text message internationally, their service is cheaper than sending the SMS directly.

[Edit: here is the url: http://www.chompsms.com/ ]

I am thinking about writing an app centered around SMS messages. I'm leaning towards sending out the text messages via the provided carrier email gateways (since it's free). I mainly concentrated on US based cell customers.

Will the carrier bock my domain if I start sending 5,000 emails to subscribed cell customers on their network?

Do you have any real-world experience with sending large number of text messages via the various carrier email gateways? What are some of the gotchas?

I think you might run into breach of the guidelines of the mobile marketing association. All messages application to mobile should be sent from a short code, to make it easy to opt-out. See http://www.mmaglobal.com/policies/code-of-conduct

You betcha they'll start blocking you. There are plenty of services that offer a legit API interface to SMS though. You'll get a faster response time anyway.

Some carriers open the ability to send an email to phonenumber@carrierNetwork. The trick is that it's difficult to tell which network a stranger has come from if you don't use the existing infrastructure that operators have developed (carrier-specific SMS gateways and inter-carrier SMS gateways).

Carriers have a very effective lock, but the OP is right -- this is something that is ripe for new solutions as smart-phones become more ubiquitous. This doesn't address the issue for millions of other subscribers that can only use phones (mostly Nokia) that can never have 3rd party apps installed.

I think a transition model can be envisaged where the smartphone client or mobile website interacts with the legacy SMS system. As more smartphones access the dedicated client (maybe with an open push notification technology) or the mobile website, the mobile messaging platform will slowly substitute the original proprietary SMS model. That's what happened to PayPal which started by piggy-backing on credit cards and now makes money on paypal-to-paypal money transfers.

I hope SMS dies a swift, painful death. I have gmail access on my (non-iphone/android/blackberry/etc) phone. I just wish it had SMS style notification for new messages. Maybe a notification whitelist or something would be nice. How does blackberry handle this?

The Blackberry handles this with their own proprietary, parallel push infrastructure called BEZ (sp?) servers. This is a separate data network that RIM maintains, which has allowed them to be dependent only on the basic radio and IP connectivity that carriers provide.

Bottom-line: RIM takes care of managing the higher-level application logic (i.e. event triggers) and application data, and use wireless carriers as dumb bit pipes. It's an extremely capital intensive, but so far successful model and has remained one of their competitive edges in the wireless market.

BES - Blackberry Enterprise Server (http://na.blackberry.com/eng/services/server/) typically for businesses. It requires you have your own Exchange server or similar and someone to set it up for you as it, and has $$$ monthly subscription charges.

Most individual (or very small businesses) would use...

BIS - Blackberry Internet Service (http://na.blackberry.com/eng/services/internet/) which is also generally available as a cheap (<$10 p.c.m.) bolt-on by your service provider (atleast in the UK) on most pay-as-you-go/contract phones and requires little or no setup effort.

In oligolopic canada you usually have to pay a monthly fee for the privilege of those email to sms gateways. and caller id...

isn't this why twitter is useful?

also, a nokia phone directly (with SIM card) connected to one's computer can give you a sms gateway with a regular phone number (short codes cost on the order of a few thousand US dollars a year)

frontline sms can help a lot, too.

I always thought that SMS is something that would die along with traditional mobile networks. When new standards like WiMax become fully adopted then mobile carriers become obsolete, as do arbitrary protocols like SMS. We end up with everything-over-IP and short text messages become just another way to receive data (with appropriate costs!).

Having said that I think that currently SMS is more convenient than email, and perhaps a new short message standard should be considered to replace SMS. There are tradeoffs, though - if we switch to email then I have a way of receiving messages at multiple locations, eg. indexing my conversations on my PC as well as having them pushed to my device.

SMS is definitely a stop-gap that will die out when IP reigns supreme.

The high cost of SMS has benefits, though. Shouldn't it make spam more costly to send, too?

Interesting to see how the US is a few years behind Europe (or at least Scandinavia) in the mobile space. Text messaging was all the rage here 5 or 6 years ago.

It's been 5-10 years behind in terms of technology for years. I simply could not believe the first time I went over, and people were talking about their pagers. (In the UK, pagers died out in the 80s).

As a side question, what is the current roaming situation in Europe? The last time I had a European phone (a number of years ago), it was very frustrating to have to pay very high roaming fees as I was traveling in different countries. I think I had gone with Vodafone, which at the time seemed to have the best prices and the largest network. Coming from the US, where almost any plan allows you to call coast to coast with no extra fees, it was frustrating taking a train for a couple hours and then having to pay 1.50 euro/min or similar.

The EU put the bosh on it. Roaming within the EU is much cheaper with a pan EU contract. There is a surcharge if you don't have one but it's not as bad as before. There's no rules on data though so people get screwed that way.

> There's no rules on data though so people get screwed that way.

To the max.

€7/MB when roaming is pretty average in western Europe. I havn't seen a pan-Europe flat-rate dataplan. That's not even the worst part, it that there's a minimum 50kb charge pr. connection. Ick.

Interesting thing is, they route the data via my "home" network, instead of just dumping it on the nearest internet connection.

Interesting, I was worried about that the last time I was in Europe (Sept. 2008). When I got my bill from my American provider, I had no extra charges for data. It looks like, for now things might work better as a non-European phone user in the Europe, as far as data goes. I'll see what happens on my next trip this spring.

Text messaging was all the rage here 5 or 6 years ago.

What are they using now? Or have people simply stopped texting?

No, I think I've sent ten text messages today, and I don't really use it a lot. It's become the de facto standard for conveying short information between people. Lots of sites, public services, banks and what have you also have services where you can get a text message triggered by an event like a draw on your account, a user going online, etc.

It has basically just matured and become a daily tool. My dad even uses it. And he's just turned 67.

More like it's an international price-fixing scam waiting to get slapped with an anti-trust lawsuit by the FCC under President Obama.

I'd be absolutely shocked if this continues until 2013.

I think the cost of SMS messages are a large part of their value. You can send a message to any phone yet you don't see SMS spam.

You can send a message to any phone yet you don't see SMS spam.

I definitely get SMS spam. I think part of the profit model on SMS spam is that they are high-cost, opt-in messages (that you didn't sign up for). The senders are using a rebate style model, hoping you won't expend the effort of getting your carrier to remove the charges.

And then of course I get random, wrong number SMSs, which still cost me.

You get charged for incoming SMSs?

I have unlimited free incoming sms messages. The only time you get charged is if you're on some pay as you go plans with certain carriers.

In the US at least, all of the major wireless providers (AT&T, Verizon, T-Mobile, and Sprint) charge you for receiving SMS messages (see http://joshmoles.com/2008/04/09/incoming-sms-should-be-free/ ). The only exception I can think of is if you are paying for a certain number of text messages through your plan (i.e. AT&T offers 200, 1500, and unlimited texting plans) - incoming messages are deducted from this number, though.

Wow, then I can understand Americans are keen on getting rid of SMS. Imagine being charged for every email you receive. That would screw up by budget at least.

I even get a little mad when my friends send me SMS :) You can imagine how pissed off you'd be when you receive spam. My wife once received the same spammy message about 5 days in a row. I didn't think too much of it until we got the bill and each one of those was something like $2.99 a piece from some "premium SMS" service that she had not signed up for.

That is extremely stupid, to me anyways. The argument posed when other carriers tried to do it here is that the company was double charging for the service - which stopped a lot of carriers from even attempting to implement the incoming charge.

Another thing that's crazy is the cost of your txting plans/packages. My mom and sister are on $25 plans here and get unlimited txting included for free.

Those Americans.. A carrier that charged for any incoming traffic (SMS, voice, etc) in Germany would see its customers flee in droves.

in Italy, you sometimes get credit added to your account per SMS received ! :)

In Germany, too.

We'd flee if there were anywhere to flee to. The charges are ridiculous, but all the carriers just tout all-you-can-text plans for $10/mo and people buy those.

Not if ever carrier did the same, which is the case in the US of course.

My understanding is that alot of the spam you get is spammers sending email to <phonenumber>@<carrier>.com. They don't pay a penny.

I have seen SMS spam (though it's rare), and I think it's criminal that carriers can get away with charging the receiver for unsolicited SMS messages. There needs to be a way to opt out of these.

I'd be willing to accept free messaging in return for only allowing incoming messages from numbers saved in my phone (or previously sent to, so texting a shortcode for info wouldn't require adding it to the phonebook first).

I agree with you on this. The fact that sending a message costs strictly more than 0 reduces noise of the communication channel. I think you can achieve the noise reduction with 1 or 2 cents per message, the rest is profit to telecom carriers.

Carriers love spams and scams. I get spam all the time from recruiters and promotions. Carriers also allow high cost unverified opt-in tricks to scam people and get a huge slice (I've read around 50%.) These are in the top reported consumer complaints every year in many countries.

At least one Senator (Herb Kohl D-WI), is actively looking into this. He's got some pull as the chair of the Senate Antitrust Subcommittee:


In what way is it a price fixing scam??? In the same way your electricity supply is a price fixing scam?

Please don't believe the idiotic articles claiming that sending an SMS costs the mobile companies nothing...

If all the phone carriers get together and say, "Hey Bob -- if you keep the price of your SMS at 10c, I promise to keep the price of SMS at 10c. We agree to not compete on SMS pricing. That way we can make lots of moola on something that costs both of us nothing."

That's collusion and it's illegal. They just watch each other. If verizon doesn't move, Sprint doesn't either. That's also the way airlines match prices.

that's why they raised it from 10 to 20 cents over the last few years

The base station (edge) and network-infrastructure (backhaul) equipment probably can't be purchased without SMS functionality at this point. There's no delivery commitment on SMS/MMS messages and traffic at essentially every site is cyclical. SMS gets delivered in the idle space, therefore the marginal bandwidth cost is literally zero.

That pretty much leaves the SMSC/MMSC (the dedicated hardware that processes messages in the center/edge of the mobile network). Perhaps $0.10/message was justified in 2000 when this stuff was only being used by phone geeks, but I think there's a bit of margin in it these days. :)

Some plans charge 1000 times as much per byte for text as for voice. I would say the difference between zero and non-zero is just noise.

SMS costs the carriers virtually nothing. Not exactly $0 but very close, something like $0.000000000000001.

They do not contribute to variable costs. But in theory the money made from SMS could be used to cross-subsidize calls.

Well, I guess that the fact that sending data through SMS costs four times more per byte than downloading data from the Hubble telescope sort of tells people that they're being screwed.


And sure - it costs the operator more than zero to send an SMS, but it's so close to zero that it's hard to tell the numbers apart.

SMS is a great example of "worse is better" paradigm. Several new technologies have tried to challenge it, MMS, advertising supported SMS come to mind. But none of them have really displaced it. I think its got to do with the simplicity. And its usefulness, as an "offline" notification system. Hard to beat the combination.

The only thing that could replace it is IM clients on Phones. When each and every phone is always on and when everyone is always signed on, and when operators are nothing more than bit pipes, SMS's will become pointless. Lots of if's though. :)

Similar to BlackBerry Messenger infrastructure with cross-phone functionality.

SMS takes place on the control channel and not the data channel, which has a far more limited bandwidth. This means that SMS messages have to be queued up with control messages, and that a flood of SMS messages can disrupt all cell service in a region. What a stupid design.

And how about that price collusion, eh? They've gone up by a factor of 2 in a year for no reason at all related to either CAPEX or OPEX...

I actually quite like SMS. It's cheap enough for anybody to afford yet expensive enough to prevent idiots and spammers which give it a great signal-to-noise ratio. It's ubiquitous, push and fast.

There are already alternatives, from e-mail to instant messaging to social networks, but none of them have the ubiquity, standardisation or simplicity of SMS.

SMS is convent, but won't scale as it is. It's fine when you get 1 or 2 a day, but I'm starting to get a dozen. What happens when you have dozenS of messaging coming in and no way to sort, file, etc? Also, SMS is very bad at telling you who sent the message. How many times have you gotten an text from a number that's not in your phone book.

Someone needs to create an alternative. Maybe it can be done on top of twitter.

"Twitter is not public infrastructure" as one of the posts linked to on here yesterday pointed out. Building it into next-gen mobile messaging is a terrible idea.

Some sort of open standard based on microblogging might be an idea, though.

Built-in Google Chat on my G1 has completely replaced text messaging for anyone else with a G1 (or anyone who is sitting in front of gmail).

Not only is it free (with unlimited data plans), it's better than SMS because it adds presence, away messages, and the ability to instantly take a PC-based IM chat on the road, or vice versa.

I think something like Facebook might be in a good position to do an SMS replacement app and put some muscle behind it. Most people I know are on there already, and others would probably join if they could send SMS's for less money.

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