Future of SMS: Free services and the Whole Market

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SMS has been the most successful non-voice service for mobile operators in the history of telecommunications and, as such, has been a key revenue generator. Every year stories of the demise of this 160-character service are thick in the air, and every year SMS usage continues to grow as more uses are found for this once ignored service. The key to the success of SMS has been its simplicity, reach, price and reliability. All other messaging based applications launched since SMS have struggled to meet the lofty expectations set by the service and pale in comparison to its success.
Industry-related reports point to a future in which SMS volumes and revenue will continue to grow on a global basis for at least the next three years. So what is going to drive this level of growth? In short, several trends will drive the continued expansion of the service.
Machine-to-machine Applications. Recently businesses have started to utilize SMS as tool for sending telemetry
data and updates from places that are constantly in motion or from which a fixed data connection is not practical. A case in point is the new global positioning system ( GPS ) device being used in German trucks for tracking applications. A GPS located in the truck sends regular updates via SMS to the parent company. This SMS-enabled capability allows companies to better track truck movements and plan logistics based on up-to-date location information.

SMS Spam . Unfortunately, fraudulent SMS is on the rise and poses a serious threat to operators' networks, customer satisfaction and revenues. The reach of SMS has proven to be a key driver in its growth. However, its reach is also attractive to unscrupulous advertisers and fraudsters who see the potential to launch unwanted and unauthorized messages from across countries and networks. And, the advent of smartphones, which act more like miniature computers, has caused a tremendous increase in the number of viruses and malware. These threats infect handsets, causing them to generate messages without the knowledge of the handset owner. Operators are now starting to deploy SMS Firewalls to stop spam, spoofing attacks and other SMS-related scams.
Flat-rate Billing Plans. SMS is slowly turning into a commodity service just like voice. Operators have started to launch flat-rate billing plans that allow consumers to send as many messages as they like in a fixed period, normally one month. When this charging model was introduced in the United States , it caused a huge explosion in SMS traffic. As more operators adopt flat rate billing plans, the volume of text messages is expected to accelerate.

While the volumes of SMS are still growing, operator revenue per message is falling. This is increasing the pressure to either find new services to increase revenues or improve the network delivery architecture to drive down costs. What can operators do in the near term to help maintain SMS margins?
First Delivery Attempt . FDA, also known as SMS routing , flips the legacy short message service center ( SMSC ) store-andforward approach on its head. With this delivery method, the SMS router attempts to deliver the message first before storing it. Since most people are 'always on' and geographic coverage in most parts of the world is extremely high, messages can be delivered successfully in the majority of cases (80-95%) on the first attempt. Using the FDA model cuts down on SMS storage requirements and allows operators to effectively cap their investment in legacy SMSCs and grow SMS routing in a costeffective manner.
Personalized Services. SMS has become extremely reliable and consumers now consider it a real-time service. As such, it is being used for business-critical communication. New opportunities exist for services that subscribers can configure for personal usage such as copying, forwarding, auto reply and white/black listing. Business users likely will be willing to pay subscription fees for these types of services.
Mobile Advertising . Based on industry reports, this will be a huge revenue generator for operators across a number of media such as multimedia messaging ( MMS ), wireless application protocol (WAP) and SMS. Due to its ubiquity, SMS is a perfect starting point for operators to enter this new market and realize high response rates and revenues on campaigns.Instead of getting the consumer to pay for messaging, why not get large, third-party organizations or companies to pay foradvertising on mobile devices?
No other messaging-based service has matched the simplicity, reach, price and reliability of SMS. Mobile instant messaging (MIM) , with its popularity on the fixed side, is the next service that is predicted to cannibalize SMS. However, recent reports from operators show that SMS usage actually increases along with voice when people start to use MIM. MIM, inherently a chatty service, leads to an increase in SMS usage when a consumer
tries to chat with a buddy who is not available and uses SMS to communicate instead. MIM will continue to lag behind SMS in terms of reach until an increased level of interoperability is achieved between the large, existing IM communities.
Consumers care little about the inner workings of the network and how messages are transported between them and their social groups. They only care about a few things that are not related to the price - that the message will turn up in a timely manner and the man-machine interface is simple and easy to use. However, operators see infrastructure consolidation as a key component of tomorrow's networks. All messaging services have common functions such as storage, routing and interfaces. New standards are evolving, such as session initiation protocol
(SIP), that promise the operator the possibility of collapsing all of their current messaging-based services onto a single platform --eliminating multiple applications which use a myriad of protocols and networks.
So it seems the fifteen-year-old service that initially struggled to gain popularity will continue to flourish and remain a key component of mobile communication around the world for the foreseeable future.

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