SMS Hits 1B Mark in US

InphoMatch Inc., the startup that deals with a good bit of the intercarrier SMS traffic in the U.S., says it is now handling around 1 billion text messages a month. However, the company's CEO Colin Matthews says it will be 2004 before SMS's putative replacement, multimedia messaging (MMS), gets popular in the U.S.

InphoMatch's InphoXchange software allows carriers to pass SMPP (Short Message Peer to Peer) traffic onto their rivals' networks without having to actually (eeew!) deal with the other operators. SMPP is a protocol used by short message entities (SMEs) to communicate with Short Message Service Centers (SMSCs, or just SCs) for sending and receiving messages.

InphoMatch's major customers include Verizon Wireless, AT&T Wireless Services Inc. (NYSE: AWE), and VoiceStream Wireless Corp. The company also has a brace of smaller carriers on its books. Matthews says it will announce two more customers over the next few weeks.

Matthews says InphoMatch has seen a dramatic increase in traffic since AT&T started the interoperability ball rolling last November: "My back-of-the-envelope calculations say we're doing about 1 billion messages a month in the U.S."

However, he says there is still plenty room for growth, as only about 50 percent of the handsets in the field today can handle two-way messaging. That will change, Matthews reckons, as every new handset now sold is SMS-capable.

Also, few of InphoMatch's U.S. carrier customers have implemented systems -- or signed the roaming agreements -- that enable them to route SMS globally. "They've got enough trouble trying to provision for the U.S.," Matthews comments.

Only VoiceStream (which is owned by Deutsche Telekom AG [NYSE: DT]) has the roaming agreements and systems in place through its parent company.

Matthews says Voicestream (soon to be re-branded as T-Mobile) is the U.S. carrier most experienced in two-way SMS. "Obviously, Voicestream is the best because it has had SMS for longest, it has [only] GSM networks [and not a mixture of technologies], and 100 percent two-way capable handsets."

However, as far as Matthews is concerned, at least the ball is rolling. As it stands, only two of the major carriers don't have two-way SMS capability -- Sprint PCS (NYSE: PCS) and Nextel Communications Inc. (Nasdaq: NXTL).

Sprint users can receive SMS messages from other networks -- if they have a compatible handset -- but to reply they have to fire up a WAP browser (see Sprint: No SMS for You!). "Have you ever tried to use it? It is awful," says Matthews. "You get five airtime warnings just to pick up a message.

"The interesting thing about Sprint is whether or not Virgin Mobile will twist their arm to get a proper SMS system." (Virgin Mobile has just started to run a service in the U.S. over Sprint's network.)

InphoMatch also has a peering agreement with VeriSign Telecommunication Services (formerly Illuminet), which provides SMS services to Cingular Wireless, the other major wireless carrier in the U.S.

Matthews considers it crucial that U.S. carriers implement SMS before going to its flashier sibling MMS. "People need to get used to using something that's easy to do," he argues. Also, carriers just flat-out make more revenues from SMS (see US Wireless Data Needs to Be Cheaper). "I think MMS handsets will arrive in the U.S in 2003 or 2004. I don't think we'll see services much before 2004.

InphoMatch, which was founded two and a half years ago, has its roots in European SMS software provider IC3S. The German firm holds a 15 percent stake in InphoMatch.

"We are profitable, and we are cash-flow positive from SMS and other services," Matthews claims.

He says the firm also has "significant investment funding," although he will not disclose how much. Some of this money will be used to fund acquisitions, as InphoMatch buys in technology to help cater for MMS interoperability, when services eventually arrive in the U.S.

— Dan Jones, Senior Editor, Unstrung
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