Daily Dose of iQ: Why Do We Still Pay for Texting?

Oct 11, 2011 — Allan Pulga

Two days ago (Oct. 9) Jenna Wortham of the New York Times made me consider something I take for granted every day: paying to send and receive text messages.

I communicate via e-mail, Facebook and Twitter regularly for free. I even use WhatsApp on my iPhone to send text messages internationally, for free.

Meanwhile, "wireless carrriers are still charging as much as 20 cents to send a text message to a phone, and another 20 cents to receive it," writes Wortham. "Paying so much to transmit a handful of words is starting to look as antiquated as buying stamps."

Wortham reports that tomorrow (Oct. 12), Apple will introduce a new service called iMessage, which could feasibly eliminate third-party free texting apps like WhatsApp.

“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.”

Texting, by the numbers (Source: NY Times)

  • 2 trillion: The number text messages are sent each year in the U.S.
  • $20 billion: The annual revenue generated by texting for the U.S. wireless industry.
  • $7 billion: The revenue Verizon Wireless generates annually from texting (12 percent of total revenue; about a third of operating income).
  • 1/3 of a penny: The amount it costs carriers to send a text message.
  • 10-20 cents: The amount carriers charge to send and receive a text message. "It's something like a 4,090 percent markup," says Srinivasan Keshav a mobile computing professor at the University of Waterloo.

Analysts say Apple is trying to duplicate the success of BlackBerry Messenger (BBM), which is essentially what has sustained BlackBerry from falling even further behind Apple and Android than it already has.

Carriers, on the other hand, are readying themselves for a shift in usage. AT&T recently announced a requirement for new subscribers to choose between two texting plans: pay $20 a month for unlimited texting or pay 20 cents per message sent or received.

"This is apparently aimed at pushing customers toward a pricier plan even if they are not heavy texters, shoring up AT&T texting revenue for now," writes Wortham.

Well that's fine. For now.

Topics: Retail Operations, Wireless Trends, Mobile Industry

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