Dean Bubley

Are Text Messaging Prices the Biggest Wireless Issue?

Mobile operators around the world are trying to maintain their overall SMS revenues by playing with bundling, pricing elasticity and so forth. Volumes are going up, but (on average) prices are coming down. They are trying to encourage users to adopt large bundles (with a cheap "per message" rate but better revenue visibility) by increasing one-off message prices.

That said, some of the US carriers' pricing seems egregiously high when compared to prices of 1c or less in some countries in Asia which use essentially the same type of infrastructure.

There is a fine line between "value-based pricing", where the user willingly pays a premium for a service they really like - and "resentment-based pricing", where the user feels extorted, but pays anyway as it's a "must have" service. Resentment-based pricing leads to spectacular churn rates at a later date, when credible competition appears. It also leads to regulatory pressure if customers feel ripped-off.

From a European analyst's perspective, some of the North American carriers are now seriously miscalibrating the value/resentment balance on SMS pricing.