Today the GSM branch of the Indian carrier Tata introduced a novel pricing strategy for text messaging. Under the brand “Diet-SMS“, Tata-DOCOMO will start billing “by-the-character”, rather than on a per message basis. The Indian mobile carrier has launched GSM services in “8 telecom circles” with nationwide roll-out slated by year’s end.

Thanks to flat-rate, per message pricing, SMS text has long been a highly-profitable offering from wireless carriers. My favorite analysis appeared two years ago in link from Slashdot pointing out if you used SMS-like pricing for music downloads, transmission of a single song would be priced at almost $6,000. The cost of such a transmission is an entirely different matter.

It can be argued that a per-character pricing scheme for text messaging is an inevitability, in that it moves the price of a message closer to the marginal cost of carrying that message. Since text messaging is a very popular commodity, competing carriers inevitably start competing on price. It could be a very attractive marketing scheme, since many wireless subscribers, almost by habit, tend to pepper their text messages with abbreviations and acronyms. IMHO, it’s as old as the early BBS postings.

The ultimate pricing battle, however, is taking place at the other end of the granular pricing spectrum. The pressue is on wireless carriers, exemplified by Sprint’s “Simply Everything” plan which debuted in January 2008, define the ultimate “flat rate” for all you can eat wireless services – voice, data, messaging.

Making a character of text the new unit of measure may not lead to radical changes in subscriber spending. Under the new plan, Tata-DOCOMO charges “one paise per character” (where 100 paise=1 Indian rupee). At today’s exchange rate (1 Indian Rupee= .02 US Dollars) the full 160 character SMS message would be priced at about $0.03. Texting “tnx” (for “thank-you”) would be about one-tenth of a penny. The “price” of a text message, under the flat-rate or bundled plans that most wireless providers offer is impossible to calculate because it depends how well individual subscribers game the system (the objective being to approach, but not exceed the number of messages purchased under the plan). Three cents per message is not a bad approximation.

While it is counter-intuitive, granular parsing of messages may be a challenge to Recombinant Telephony. Characters won’t make good building blocks for composite applications. Charging per-character for text may ultimately discourage innovation in the area of mobile speech. Dictation of text messages is a relatively large area of opportunity for mobile speech application providers. Pricing plans for dictation services is still being defined, which has made revenue forecasting for mobile speech into a researcher’s nightmare. As noted in Opus Research’s research report on Mobile Speech, revenue for these sorts of transcription services will be generated from a combination of software downloads, subscriptions and activity (most likely “per message”). One thing is for certain, service providers will not charge on a per-character basis.

Categories: Articles

Tags: mobile services, Recombinant Telephony, mobile speech, mobile messaging