AT&T tries to wring every last cent from SMS

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.

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