17 Comments

Summary:

AT&T is doing away with its $10 tier for 1,000 text messages a month for new customers, making it a choice of between a $20 unlimited plan or 20 cents per text message. AT&T said the new text messaging pricing won’t affect existing customers.

SMSphoto (11)

AT&T is doing away with its $10 tier for 1,000 text messages a month for new customers, making it a choice between a $20 unlimited plan or 20 cents per text message. AT&T said it’s an effort to “streamline” its text messaging plans, and that it won’t affect existing customers, even those who switch handsets.

According to Engadget, which got confirmation from AT&T, the carrier insists that the vast majority of users already prefer unlimited plans. The carrier’s $30 unlimited family plan will also remain for up to five lines. The new pricing plan goes into effect on Aug. 21.

While the plan won’t affect many customers, it’s hard not to see this as an effort to wring more revenue out of text messages, which are slowing down in growth. According to CTIA, the wireless industry’s association, text messaging growth was just 8.7 percent in the second half of 2010 compared to the previous six months, a slow down that threatens the bottom line of many carriers who rely on SMS revenue. Text messages are very cheap for operators, and bring in significant profits.

Text messaging is still a big opportunity and SMS messages in the U.S. is now up to 664 messages per subscriber each month, according to analyst Chetan Sharma’s latest wireless market update. SMS messaging revenue worldwide is worth $5 billion but its share of data revenues is going down for carriers.

Increasingly, users are finding more economical alternatives to SMS, using messaging apps like GroupMe, Beluga, Fast Society, TextPlus, WhatsApp and others that utilize data plans and don’t charge per message. Also, with Apple introducing iMessage, a more robust messaging app in iOS 5, and other competition from major tech companies joining in, it’s going to put even more pressure on text messages.

It’s against this backdrop that carriers are looking to extract as much revenue as they can from SMS. But while moves like this one from AT&T may mean a little more revenue in the short term from new customers, it opens up even more opportunity for group messaging app providers, who can sell themselves better against the backdrop of higher prices for traditional SMS. And it may give a boost to services like Google Voice, which can handle text messages without an SMS plan.

SMS has been a quiet money maker for the carriers, and they’ve leveraged it for outsized revenues compared to its costs, even upping the price repeatedly to get more money out of customers. But now they have to consider a future that includes less text-related money coming in. Carriers could have looked at being more realistic about these plans and made them more affordable, but that’s apparently not how they operate.

  1. Once again At&t are showing why they should not be allowed to buy Tmobile.

    Share
  2. Travis Henning Thursday, August 18, 2011

    “AT&T said it’s an effort to “streamline” its text messaging plans” – I call shenanigans. Its nothing more than an effort to get more money from the consumer by forcing them into a plan they don’t need for a service that has virtually 0 incremental costs for AT&T. Sure a lot of users like unlimited texting, but I imagine a lot also use less than 1000/month. Whatever happened to giving consumers options that best fit their need? I’m particularly surprised that they are doing this right now while trying to get the T-Mobile merger approved. If this isn’t a reason for smart phone users to install the Google Voice app and use it’s free texting, I don’t know what is. The only negative to that is it can’t do MMS yet.

    Share
    1. iOS 5 will have an instant messenger too for iOS users.

      Share
      1. Travis Henning Thursday, August 18, 2011

        True, but that’s only iOS users. Google Voice can send/receive texts from any device. Its not as pretty as the built in SMS app, but its useable.

        Share
    2. Google Voice has a few HUGE negatives.
      1. Uses a different number. A different number for calling vs texting to the same person? Confusing.
      2. It requires a data plan and data has to be working (which can be a problem in congested areas like a concert or festival) or it won’t work at all.
      3. No MMS.

      Share
      1. Confusing? Compared to using a home number, work number and cell number? Seriously?

        Doesn’t AT&T plan require a data plan to send MMS?

        Share
    3. I’m really surprised that google hasn’t done MMS yet, some of the other texting applications let you do MMS (photos, not sure about video/audio), so I know it’s feasible…

      Share
  3. If the T-Mobile merger goes through leaving us with either AT&T or Verizon you can expect a lot more of this from both companies.

    Share
  4. i truly hate AT&T. so afraid of iMessage and FB Message, rather than stay competitive they screw us even more.

    ih8tt.com

    Share
  5. “Increasingly, users are finding more economical alternatives to SMS, using messaging apps like GroupMe, Beluga, Fast Society, TextPlus, WhatsApp and others”

    Aren’t we forgetting the 800lbs Gorilla here – BBM and Google Voice/Talk ?!?

    Share
  6. Absolutely incredible. Just more gouging the customer.

    Share
  7. Next up: unlimited texting plans become throttled. Yes, send as many text messages as you want, but only one word will be sent at a time.

    Share
  8. To me this is totally NOT gouging customers. Current customers can keep what they have. This is preventing customers from joining AT&T…

    Share
  9. joshua konowe Friday, August 19, 2011

    We all have choices. If you don’t want to spend an extra $20 per month then don’t. Its not like you have to pay for email. Deal with it people, its a FOR PROFIT COMPANY!

    Share

Comments have been disabled for this post