Carriers Tweak Plans in Wake of Free Messaging Services

Carriers Tweak Plans in Wake of Free Messaging Services

Carriers are tweaking plans to stay profitable after free messaging and video chat services siphon revenue from texting.

Wireless operators are tweaking texting, voice and data pricing and cutting unlimited plans in an attempt to recoup revenue lost to free messaging apps that allow users to instant message at no extra cost over data networks.

For example, AT&T now offers two texting plans, one unlimited and one pay-per-text, in an effort to give customers cost-effective choices and defend its lucrative texting business from free messaging services.

Consumers increasingly see little point in paying for text messaging and video chatting. As alternative options grow in number and popularity, carriers will likely continue to adjust plans, pricing and services in an effort to maintain a steady revenue stream.

A study, commissioned by mobile LTE infrastructure provider Mavenir Systems, interviewed more than 30 wireless carriers worldwide to find one-third experienced a decline in voice traffic and SMS revenue.

Third-party messaging, video and voice services such as Apple’s iMessage, Facebook Messenger, Google Voice and Skype increasingly provide free ways for people to communicate on mobile devices, and carriers are finding themselves hard-pressed to compete. Some mobile operators expect their services’ usage to drop by more than a third over the next decade as free messaging continues to rise in popularity.

Free messaging and VoiP services transmit instant messages and voice calls over data networks and the Internet, rather than over the cellular networks carriers use for these services.

Even though carriers dramatically mark up the price of text messages and are charging more for data plans, free messaging poses a potential threat to their revenue stream. More than two trillion text messages are sent in the U.S. each year, generating more than $20 billion in revenue for wireless carriers.

Texting has been on the increase, but its margin of growth has declined over the past couple years as more people opt to message using free services, saving themselves the per-text or flat monthly fee charged by wireless carriers for SMS messages.

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