Old School

Old School

Tim Kridel

In less than 90 days, NTT DoCoMo will launch its next-generation, high-speed wireless-data network, called Freedom for Mobile multimedia Access, or FOMA. (I use the adjectives “next-generation” and “high-speed” rather than just “3G” because the data rates at launch will fall far short of the International Telecommunications Union’s 3G benchmark.) Virtually every carrier, vendor and investor will be watching FOMA to see if NTT DoCoMo, admired industrywide for its ability to make wireless data profitable, can find a market for high-speed data, too.

With all due respect to NTT DoCoMo, it’s a shame that the industry will have its back turned to Europe, where SMS is enjoying its golden years. They’re golden partly because the technology is, well, old, although like Mick Jagger and Tina Turner, SMS just keeps attracting fans long after conventional wisdom said it should have pooped out.

SMS is golden in another sense: It’s actually a money-maker. Why? People use it, which is more than can be said for newcomers like WAP. U.K. wireless users sent 929 million SMS messages in January alone, according to the Mobile Data Association. That’s nearly triple the number sent in January 2000. Granted, January and February see an unusually large number of messages because of the New Year’s and Valentine’s Day holidays, but the growth curve remains strong even when you factor out those anomalies.

In Denmark, SMS provides about 4 percent of service providers’ revenues, according to Strand Consult. In Sweden, it’s about 8 percent; in Norway, where Telenor Mobile made about 85 million Euros on SMS alone last year, it’s 12 percent. There’s so much SMS traffic that OFTEL, the U.K. equivalent of the FCC, reportedly is investigating whether wireless subscribers are using messaging to avoid voice calls, which cost more.

People are using SMS for the darndest things, from asking for dates to firing employees. SMS’ 160-character limit has even spawned its own shorthand, including “HHOJ” for “Ha ha, only joking,” “PCM” for “Please call me” and “BTDT” for “Been there, done that.” We laugh and shake our heads at such follies, but it’s easy to forget that SMS is just another form of communication, one that lends itself well to certain situations. That goes back to the old telecom maxim that if you give people more ways to communicate, they’ll communicate more.

Analysts expect the next big SMS trend to be premium services, such as ads and e-commerce, that ride on top of SMS. It’s anyone’s guess whether those markets will materialize as forecast. For now, users are interested mainly in content generated by each other instead of content generated by third parties, such as Web sites. That preference helps carriers because they don’t have to share SMS revenue with content providers, who also might be skeptical about the return on investment from making their content available via SMS. Even i-Mode would have floundered if content providers hadn’t made their sites i-Mode ready.

I’m not knocking WAP. It’s relatively inexpensive for a carrier to deploy, and it probably has its place, although it remains to be seen where and how big that place is. SMS has been around a lot longer, so its penetration in Europe is near 100 percent, because it’s built into GSM, the de facto European wireless standard. It’s also possible to run WAP over SMS, so a North American carrier could hedge its bets by deploying both services over the same infrastructure.

The rap against SMS is that it’s limited to 160 characters and that consumers and businesspeople want a high-bandwidth connection of the sort that FOMA will provide. Perhaps. But SMS is cheap. Carriers are still figuring out how much to charge for next-generation services such as GSM’s GPRS and CDMA’s 1XRTT, but it’s safe to assume that users will be expected to pay a premium for throughput faster than today’s 14.4 kbps.

That seems like an iffy bet when you consider that wireless devices have to be small enough to be portable, which limits the types of information that they’re suited to convey. Within those constraints, SMS will remain a good fit for a long time to come.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.