Apple's iMessage texting service takes aim at wireless carriers

Oct 14, 2011 By Shan Li and Nathan Olivarez-Giles

With its latest operating system update, Apple Inc. is poised to strike a blow to wireless carriers by making free texting more ubiquitous.

The iMessage service, part of the iOS 5 update released Wednesday, lets users send messages with text, photos and video to other iPhone, or users - for free.

For , that spells trouble.

"There's a big potential issue here," said Craig Moffett, an analyst at Sanford C. Bernstein. "The wireless industry makes most of its money from high-priced but low-bandwidth services like voice and text."

Texting is hugely lucrative for the wireless industry. It generated about $21 billion in revenue last year and is estimated to grow to $23 billion this year, according to the Consumer Federation of America. Moffett estimated that , for example, generates about $7 billion, or 12 percent of its total annual revenue, from text messaging.

Every year, more than 2 trillion text messages are sent over in the U.S. alone. A message costs carriers a fraction of a penny to send, but they usually charge consumers 10 to 20 cents per text or a flat monthly fee for unlimited usage.

In contrast, iMessage uses the carrier's data network or the Internet via a Wi-Fi connection to transmit the text like email. When users send a text to a friend with iMessage turned on, it shows up as a blue chat bubble and doesn't count as a text message in their phone plan. Texting someone with an Android or other non-Apple phone will count as a and show up as a green chat bubble.

Free downloadable apps that offer free texting, such as textPlus, WhatsApp and Pinger, have attracted millions of people who are looking for ways to chat with friends on the cheap. Voice and Facebook also offer free alternatives to traditional, paid texting plans.

But analysts say that Apple's clout in the could prompt others to follow in its footsteps with easy-to-use texting alternatives.

"I wouldn't be surprised if Microsoft imitated the feature with its operating system," said Roger Entner, an analyst with Recon Analytics.

Analysts say that over time, such moves could erode the amount of money carriers make from each customer, prompting a seismic shift that the industry is already preparing for.

AT&T, for example, recently pared its texting options for new customers down to two: $20 for unlimited messaging or 20 cents for each text sent or received. The company apparently aims to nudge customers into the unlimited plan even if they are not heavy texters.

AT&T declined to comment. Verizon, Sprint and T-Mobile could not be reached for comment.

Because iMessage works only between Apple devices, at least for now, it will probably not persuade people to abandon their texting plans immediately, analysts say.

Instead, Apple probably created iMessage to make it more difficult for iPhone users to switch to another cellphone maker, much like Research in Motion did with BlackBerry Messenger, its free messaging service.

"Apple is building more hooks for people to stay on the platform, since we are rotating out phones every two years," said Colin Gillis, an analyst at BGC Partners. "Everyone is trying to lock you into their ecosystem."

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User comments : 10

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Drumsk8
1 / 5 (1) Oct 14, 2011
And this equates to about $120 million in lost revenue out of $7billion because apple only have about 16% market share. I am sure there going to feel the pinch!! Also unless there using wifi this can be made up again via data services used form the carrier which usually is even more expensive then text messages. Unless there on monthly plans, in which case text or data wont matter.
Yellowdart
not rated yet Oct 14, 2011
Nobody says they have to carry the iPhone...
dbsi
3 / 5 (2) Oct 14, 2011
So there is Kakao, WhatsApp and others way ahead of Apple. Even available on the iPhone. What is iNew here and who is iMitating whom?
Is it an iCopycat working for the iCashCow to milk iUsers?

stun-dexim
5 / 5 (1) Oct 14, 2011
This article is bunk. In reality... most individuals running an iphone are paying for premium packaged plans by default which have texting included as an unlimited feature. If anything, the i-os upgrade is doing these carriers a favor by decreasing pre-paid traffic.
Au-Pu
1 / 5 (2) Oct 14, 2011
I would hardly call a telephone system an ecosystem, it is difficult to think of anything more alien to an ecosystem than an electronic communication system.
Someone should buy Mr Olivarez-Giles a dictionary.
Deesky
5 / 5 (4) Oct 14, 2011
I would hardly call a telephone system an ecosystem, it is difficult to think of anything more alien to an ecosystem than an electronic communication system.
Someone should buy Mr Olivarez-Giles a dictionary.

Before acting all high and mighty about word usage, I suggest you inform yourself better to common vernacular and metaphor. Ecosystem is often used in reference to a web of interdependent entities and systems other than the natural.
Milou
not rated yet Oct 15, 2011
Why not just use email back and forth for text? Perhaps, it is slightly slower but still efficient. Just wondering!
sherriffwoody
not rated yet Oct 15, 2011
I would hardly call a telephone system an ecosystem, it is difficult to think of anything more alien to an ecosystem than an electronic communication system.
Someone should buy Mr Olivarez-Giles a dictionary.

Before acting all high and mighty about word usage, I suggest you inform yourself better to common vernacular and metaphor. Ecosystem is often used in reference to a web of interdependent entities and systems other than the natural.

then how about calling it a - system, which it is, the eco is misleading and trying to infer something it isn't.
joe007
not rated yet Oct 15, 2011
Just like google voice, that I have been using for a year now?
Deesky
not rated yet Oct 15, 2011
then how about calling it a - system, which it is, the eco is misleading and trying to infer something it isn't.

Because people will use whatever terms they wish to convey an idea. Some forms of usage will catch on, others will not.

That's how language use changes over time.