Is the SMS stronghold being crumbled by slick upstarts?

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Text messaging, that strange and unwieldy service that is used by billions of consumers around the world, appears to be facing threats from IP-based services that could lead to its eventual demise. Given that SMS has been around for 30 years, and now generates operator revenues well in excess of $100 billion each year, perhaps we shouldn't be surprised that it has come under attack from alternative technologies.

For example, South Korea is in the grip of KakaoTalk, a mobile messenger app that almost every smartphone user in the country has downloaded. The service now boasts 42 million users exchanging 1.3 billion messages daily, and unsurprisingly is said to be the leading mobile app in South Korea.

In response, South Korea's three leading operators--SK Telecom, KT Corp and LG Uplus--have announced their intentions to deploy Rich Communication Services (RCS) starting in July based upon the GSMA's Joyn initiative.

But operators in Taiwan might already be losing the battle to preserve their SMS revenues, with a 12 per cent decline in text messaging reported in 2011, according to a recent blog posting from Coleago Consulting, a drop the consulting firm attributes directly to users switching to WhatsApp.

Closer to home, WhatsApp is reporting particularly strong growth in the Netherlands and Spain in Europe, and in Saudi Arabia and Kuwait in the Middle East. WhatsApp is especially popular with iPhone users in the Netherlands, according to Telecom Paper, with 80 per cent having downloaded the app and over 70 per cent saying they use the service daily.

WhatsApp, which is not overly forthcoming on its business numbers, recently admitted to Reuters that it handled 1 billion messages a day last October, two years after its launch as a messaging service. In February of this year the number of messages had surpassed 2 billion a day.

That is surely enough to unleash panic among even the largest operators, which have been happy to let the gigantic profit margin associated with text messaging drift ever onwards (not forgetting the efforts of the European Union to push SMS price plans lower).

The ambitions of WhatsApp seem clear: domination of the messaging sector by supporting both feature phones and smartphones using low-cost IP for transport. The company recently added Microsoft's Windows Phone and even the earlier 13-year old S40 Symbian platform to its portfolio of supported operating systems. Its business model is also unusual by not relying on advertising to generate revenues, and only charging users for the app after the first year of use. Brian Acton, WhatsApp's co-founder, told Reuters the company has been profitable since late 2009.

While some operators are pushing ahead with plans to deploy RCS-based Joyn, there is a hint of a rushed attempt to close a door that has already been pushed wide open by the like of WhatsApp and KakaoTalk. --Paul