Americans don't get the message
iht.com
John Markoff
The New York Times
Tuesday, September 3, 2002
Cell-phone communication with text fails to take off
SAN FRANCISCO Since April, it has been possible for customers of any major U.S. cell phone carrier to send one another short text messages, but most customers still have no idea that the service exists. The service, known as short message service, is already wildly popular in Asia and Europe, but it has been delayed in the United States - partly because it had been impossible to send messages among carriers and partly because it has not been marketed well by the cell phone companies.
"It's partly a cultural issue, but the blame also falls on the U.S. cellular companies," said Alan Reiter, a telecommunications-industry analyst in Maryland who publishes the newsletter Wireless Internet Mobile Computing.
Because electronic-messaging standards are now compatible, some analysts now say they believe that short message service is ready to take off in the United States. But critics say it is already being overtaken by less expensive and more powerful alternatives.
The text-messaging difference in the United States from the rest of the world could not be more striking. Last year, more than 19 billion communications by short message service were sent globally, according to the Global System for Mobile Communications Association. Almost all of them were outside the United States. That is starting to change. Two companies that handle message exchanges among carriers - InphoMatch, based in Virginia, and MobileSpring, of New York, in partnership with VeriSign - said their traffic volume in the United States was increasing. The amount is still tiny compared with the rest of the world.
The failure of the cell phone companies to market short message service until now is puzzling, analysts say, because the service has been a huge financial success for European and Asia telecommunications companies.
But conditions there are different: SMS is popular in other parts of the world partly because sending a text message has been less expensive than making a phone call, and because Europe and Asia have lagged behind the United States in Internet e-mail and the use of instant messaging on computers.
In Europe, which has long had a single standardized cellular network and where text messaging is routine, short message service is responsible for 15 percent of all revenue at cell-phone companies and, more significantly, for 40 percent of overall industry profit margins, said Colin Matthews, president and chief executive of InphoMatch.
"This should be a no-brainer for the carriers," he said. "From a business perspective, all of the traffic and revenue is based on their existing infrastructure."
Matthews estimated that short message service could deliver $750 to $1,000 per megabyte of data transmitted - a far higher return than any of the other digital services the cellular companies are beginning to offer in an effort to increase the profitability of their new wireless digital networks. Still, there are numerous reasons the U.S. market has lagged behind.
"Cell phone handsets are just not good for data," said Paul Mercer, the president of a Iventor, a small wireless start-up company in Palo Alto, California. "Moreover, short message service isn't good for data, either, because the business model is based on locking customers in to an inferior proprietary data network."
Instead, Mercer predicted that there would be a range of new datacentric handsets coming from Handspring, Microsoft, Palm, Research in Motion, Danger and others that would use standard Internet protocols and incorporate miniature keyboards or handwriting recognition to make sending text easier.
For example, the Danger Hiptop communicator, which is to be introduced by T-Mobile this autumn, includes an AOL Instant Messaging application. That means it will be possible to send unlimited messages to other instant messaging users, all for the flat-rate price of the service.
Other analysts, such as Donald Longueuil, a researcher at In-stat/MDR, an electronics market research firm in Newton, Massachusetts, say they think that because instant messaging services provide "presence," making it easy to tell whether friends or business associates are available for messages, they will quickly begin to cannibalize the more rudimentary short message service systems. "I'm very pessimistic about the U.S.," Longueuil said.Devices such as the Danger Hiptop, which also includes a voice telephone, tend to be based on the Internet communications model, where all services flow over a single network and are priced at a flat rate.
In contrast, using short message service in the United States costs about 5 cents to 10 cents per message, and several of the carriers charge both the receiving and the sending parties. The price is lower in Asia, where a message generally costs 2 cents, and higher in Europe, where messages are about 11 cents. Despite the expense in the United States, backers of short message service are hopeful that the service will find a niche based on a series of new applications that will be introduced later this year.
One popular use abroad has been to permit TV viewers to vote in game shows, and a telecommunications executive said that the first trial of this in the United States would be later this year on the Fox Network show "American Idol."
The backers of short message service said they are also hoping a service known as multimedia messaging, which is just now being rolled out by cellular phone companies in the United States and in Europe will catch on by allowing cell phone users to send small images.
Also next year, the short message service network will begin to be used for financial transactions, like purchases from point-of-sale terminals and vending machines.
Advocates of short message service said that such services will be eagerly adopted by cell phone users. But critics deride the services as "kludges," a computer hacker's term for poorly designed systems.
"You have to dial a phone number to pay for something," Mercer of Iventor said. "It's just a stupid way of offering the service, and it's not what the Internet's about." |
