Free texting apps hurt carriers’ bottom line

October 10, 2011 By Andrew Couts

This just in: People would rather send each other messages for free than pay exorbitant prices for SMS messaging plans, and wireless carriers are beginning to feel the heat.

An increasing number of apps that allow users to send messages to one another for free are whittling away at the profits of wireless carriers, reports The New York Times. And the problem is only expected to get worse with this week’s release of iMessage, Apple’s new free iOS-to-iOS messaging service.

Last year, the wireless industry as a whole made $20 billion off of more than 2 trillion text messages. Verizon Wireless alone brings in $7 billion a year in revenue, about 12 percent of its business, according to Stanford C. Bernstein analyst Craig Moffett.

“There’s a huge amount at stake here,” said Moffett. “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.”

If you ask us, that “core business model” is more like a “giant rip off.” SMS text messages, which are a very small amount of data, cost wirless carriers about one third of a penny to send, according to University of Waterloo professor Srinivasan Keshav, who studies mobile technology. Compare that to the 10 to 20 cents carriers charge customers for text messages and you have a serious case of price gouging on your hands – a markup of more than 4,000 percent.

The proliferation of free texting services, which includes everything from apps like WhatsApp Messenger to Facebook Messenger to BlackBerry Messenger and even Twitter, will eventually force the wireless industry to change their ways – and, in a small way, they already are. AT&T, for example, will soon off customers a $20-per-month messaging plan, or the option to send messages for 20 cents apiece, sent and received. The company will no longer offer 1,000 text messages per month for $10.

Verizon, on the other hand, seems undeterred by increased competition, telling the Times that it sees free messaging services as merely “complimentary” to text messaging plans.

Showing 15 comments

Brent R Jones at 10:05pm 10th October 2011 VirginMobile $25 per month. 300 minutes talk. Unlimited data and text. I'd don't think that this can be beat. Optimus V phone
Brent R Jones at 10:02pm 10th October 2011 So give me a 5 second commercial for Coke or Pepsi or McDonalds as I type my 5 second message.
Mzz Tbaby at 6:40pm 10th October 2011 They over charge their customers. People are tired of getting the short end of the stick.
Jasper Walker at 5:46pm 10th October 2011 Fuck the carriers.
hpizzy at 10:29am 10th October 2011 Though there may be many options for FREE texting or messaging solutions the problem is not everyone knows about or uses them, while texting is available on every device in some sort of stock form. Thus most ignorant minded users still stick to and use text messaging provided by carrier. Carriers will never adopt a free messaging solution as "bloat-ware" as this would be direct competition. I currently run every free messaging app on my smart phone just cause many of my contacts use various solutions but I have still come to the realization most will revert back to texting as primary method no matter the cost due to the fact its readily available and highly used on their device.
smparmenter at 10:11am 10th October 2011 I was beginning to wonder why on earth people are paying EXTRA for SMS, when they are already paying SO MUCH for DATA?! I was ready to start a movement! Now it seems I don't have to....
Sean Wilson at 4:37pm 10th October 2011 I pay AT&T $30 a month for family unlimited data. Only reason i still do is because they packaged unlimited cell to cell calls
bclark at 9:28am 10th October 2011 People prefer free stuff over paying. News at 11. The Telecoms are just mad because people are working around their SMS collusion. I couldn't squeeze out a tear for them even if you held an onion under my nose.
David Nakamura at 4:11pm 10th October 2011 #shocker
Aerobat at 9:09am 10th October 2011 Texting started before Internet capabilities were available on the phones so now they charge for Internet service instead (Which is how SMS is sent). There's no tangible loss here, just a replacement technology ... and Internet service costs more. But perhaps we should give the cell phone companies a $20 Billion bailout to help them keep their profits up. (I shouldn't even joke about things like that ... someone might take it seriously)
Shelley Christie Tucker at 4:05pm 10th October 2011 they should have a very low unlimited texting fee, say 5 bucks a month. simple as that.
Chris Johnson at 4:00pm 10th October 2011 What I don't get is that text messaging plans are built into the unlimited data plan: I have two lines, each with unlimited data and a basic minutes plan, this includes texting. I call that out because most carriers require you to get a data plan when you buy a smart phone and when's the last time you saw someone without a smart phone? I know these people exist but it's pretty rare to see one.I could be missing a key element but if pay for $29.99 for text/data and use both, how are they losing money if I use a different text service? Is there a Data Plan without texting (there could be; I haven't checked) because if so, I haven't seen one.
Lorne Hammond at 3:56pm 10th October 2011 Oh right, sure it does.. Its cheaper to get 1.5mb of data from the space station to ground control than it does to get 1.5mb of texts on at&t - they RAPE people for texting costs.
James Phillips at 3:54pm 10th October 2011 Oh dear me what a pity bwahaha
Nick Aaland at 3:43pm 10th October 2011 And nothing of value was lost.