Ovum Sees Txting Time Bomb

LONDON -- Mobile operators must revise the pricing of their new advanced mobile messaging services to prevent a potential revenue time bomb, says Ovum, the analyst and consulting company.According to Ovum’s latest research, the emergence of more sophisticated texting technologies such as Multimedia Messaging Services (MMS), wireless e-mail, and wireless Instant Messaging (IM), will boost the number of messages exchanged in mature SMS markets. This will coincide with the explosion of emerging SMS markets such as China, contributing to a surge in mobile text messaging traffic.But current pricing of these new services and specifically that of wireless IM, a model purely based on data-traffic volume, is threatening to cannibalise SMS revenues rather than adding to them.Ovum’s new text messaging forecasts show that the number of mobile text messages sent per year worldwide will grow strongly and will top the 2 trillion mark by the end of 2008. Meanwhile global revenues will slow down sharply from 2005 even decreasing in Western Europe from a peak of $14.3 billion in 2006 to $12.8 billion in 2008.“More messages, but fewer dollars - this is the nightmare scenario for mobile operators,” says John Delaney, principal analyst with Ovum and Text messaging expert. “Operators cannot afford to let this happen. To defuse this time bomb, they need to implement the event-based charging model (charging per message not by the size of the message) across their whole range of messaging services quickly.”“There are laying a trap for themselves with the current model. Wireless IM can provide all the elements of text messaging, as well as additional functionality such as presence management and multi-party dialogues. And it can do it for a fraction of the price of sending text via SMS.” In Western Europe, for instance, it costs less than 1cents to send 1 Kbyte of text at current GPRS rates. In comparison, the price of sending around 140 bytes of text via SMS is typically 10-15 cents. Text messaging, in various forms, will comprise the majority of the mobile data market for at least the next five years. Annual SMS revenues, however, look set to peak at just under $39 billion worldwide in 2006 and 2007, and to decline in 2008. On current pricing models, revenues from new text messaging services will not be enough to make up the shortfall. “Adopting the event-based pricing model may well make it more difficult to encourage early usage of wireless IM services,but it will also ensure that those services do not dry up the vital stream of revenue provided by SMS too soon,” concludes DelaneyOvum Ltd.