If text messaging is lost to smartphone apps, is it a loss to mobile operators?

From Bloomberg:

"WhatsApp, Rebtel, Viber, KakaoTalk and other services use the Internet to send data instead of a cellular network, allowing users to send text, multimedia and voice messages for free, or close to it.

As free services continue to gain in popularity, U.S. text-messaging revenue will decline 3 percent to 4 percent this year from $21 billion in 2013, Sharma estimated. Globally, carriers’ texting revenues will peak by 2016 and then start to drop as well, he said."

I remember when SMS texting used to be one of the largest revenue sources for mobile operators. I worked for one of them at the time. A simple tool that has exploded through the years, especially as more and more people move from voice calls* to communication via text (be it email, text, instant messaging, etc), at the end of 2010 "SMS was the most widely used data application, with an estimated 3.5 billion active users, or about 80% of all mobile phone subscribers". It's a tool that we have all come to depend on without even appreciating it's simplicity and usefulness.

New Tools

However the Internet is now doing its utmost to encroach on this with new tools offered at much reduced prices, offering services where it's possible to message anyone worldwide for no additional charge. Additionally, it's become evident that while aged 20 and above were using the likes of Facebook extensively, data was starting to show that many younger were using these messaging apps (Whatsapp, Viber, to name one or two) and thus avoiding Facebook's sphere. Facebook has made headlines by spending $19BN dollars on Whatsapp - and if the valuation of the company doesn't give something away - and it shows it knows where the puck is skating: continued and explosive increases in the use of these services.

"Facebook, the world’s largest social network, said this week that it’s buying WhatsApp in a deal that values each of its 450 million active monthly users at $42. Free for the first year and 99 cents annually thereafter, WhatsApp is almost always cheaper than texting, especially across national borders."

Interestingly, they've also purchased one that has a revenue source, even if only 99 cents per user. However, when you're potentially talking about over a billion users, that could add up very quickly into a successful revenue stream.

Where are the mobile operators

I'm wondering where the mobile operators are in all this? Are they happy to stand by as they lose a whole revenue source?! It's been clear for several years (the Blackberry and BBM messenger were harbingers) that something like this was going to happen so why give away the keys to the kingdom? I suspect they don't fully have, and yet they actually require, the mindset of Apple who shows regular willingness to eat into an older revenue stream to bring in something new that was going to kill their old success anyway - releasing the iPhone and killing the iPod business is a great example of this. So my question is, will any operator step up to the plate, or are they happy just to take monthly recurring fees for being a data connector to the Internet? Interesting times ahead.....


*Reading 'Dogfight: How Apple and Google Went to War and Started a Revolution', I was amused to see that Google actually considered not installing any desk phones in their newer buildings until they were told it violated the fire code....

Neal McQuaid