MG Siegler has a nice rant this morning about how wireless carriers are making a killing from SMS (aka text messaging). It includes this bit of sweetness:
“Look, SMS is great in that it connects so many people around the world. But the fees associated with it are an absolute joke. It’s a very small amount of data yet carriers seem to think it’s okay to charge an arm and a leg for it.”
Welcome to the ARPU-driven economics of the wireless industry where it’s all about squeezing as many dollars as you can from consumers. The wireless business is not about launching cool and innovative services, although there are lots of them available. It’s about selling as many of these services as possible at the highest possible price so a consumers’ bill keeps getting bigger.
I’m not naive about the realities of business but we’re talking about an industry with only a small amount of competition in which the players are, at best, modestly competitive with each other. It’s not like anyone is battling it out using low prices as a competitive weapon.
SMS is a perfect example of how the wireless industry is so good at the “Honey Pot” sales model. They lure in consumers with a sweet service such as SMS, get you hooked on its usefulness, and then slowly start to charge more for it.
By the time you realize how much it’s costing, you’re already hooked. This means no one abandons a service but looks to buy a monthly bundle (aka recurring revenue for the carrier) to make the service more affordable.
Look at what Telus and Bell are doing in Canada with a new initiative to charge consumers for incoming SMS messages – a move that will affect the 5% of wireless consumers without an SMS bundle. Bell and Telus see an opportunity to bump up ARPU so they’re going for it.
MG’s rant that SMS prices are a “joke” is on the mark but as long as the carriers can continue to sell a high-margin product with little pushback, they’re going to sell, squeeze and ARPU you as much as they can.
You could extend MG’s argument to wireless data services in general. The carriers see data as another Golden Goose so the focus is on ARPU, margins and profits – as opposed to providing consumers with an affordable ways to access a tsunami of new services and devices.
It’s the way of the wireless world. Get used to it because nothing’s going to change any time soon.
More: Twitter has made some changes in how it uses SMS outside Canada, the U.S. and India. As well, Michael Geist’s column in the Toronto Star offers some good insight into some of the key issues facing Canada’s wireless industry.