Fixed-line SMS cannot compete with mobile

29 Apr 2003

If Eircom and Esat BT are hoping to make significant revenue returns on fixed-line short messaging service (SMS) over the latest digital phones they may be disappointed, according to Ovum.

Whilst mobile SMS has been a spectacular success worldwide, generating an estimated revenue figure of US$36bn in 2002, hopes by incumbent and other fixed-line telecom operators to see the same success may be limited.

According to Ovum analyst Nikki Matkovits, fixed-line providers are hoping to emulate mobile data functionality and maximise usage of fixed network assets.

In Ireland, Eircom introduced a text messaging service on its new generation of fixed-line digital telephone handsets earlier this year. It was originally blocked from doing so by the Commission for Communications Regulation because Eircom did not offer its rivals a wholesale service that they could in turn provide to consumers. The blockade was removed when Eircom wrote to rival operators in the Irish market offering them the wholesale service. So far, Esat BT has admitted it plans to present a fixed-line SMS service.

However, if Eircom or Esat BT think they can compete aggressively with mobile operators in the Irish market such as O2, Meteor or Vodafone, according to Ovum they are sorely mistaken. Throughout Europe, other operators such as Deutsche Telekom, Telekom Austria, Telecom Italia and Belgacom have similar aspirations. Each believes that it will stimulate the small office, home office and small to medium-sized enterprise markets buy offering fixed-to-mobile SMS services.

Matkovits believes the economics are wrong and has voiced caution on such a move. “Mobile SMS currently generates around 10-15pc revenue of an average mobile operator’s airtime. Vodafone generates just under 15pc. No single operator can predict fixed-line SMS revenues reaching anywhere near the level of mobile SMS revenues.

She says: “Due to high mobile penetration levels, fixed network SMS services have a head start and will sit well above zero. On the flip side, high mobile penetration is in danger of cannibalising usage of fixed SMS services, as most users will already have access to SMS via their mobile phones. In order to achieve mass growth, awareness of fixed network SMS has to be high. The likelihood of the service ever becoming a mass-market product remains doubtful.”

She continues: “The only application on offer to date appears to be the reception of messages. The important question is whether people will want to receive messages via their fixed phones. It is clearly less cumbersome to say which airport you want to travel to than to input the information into a phone via a keypad. All in all, there will be no market for fixed network SMS until customers buy new terminals supporting SMS text messaging. One option would be to offer cheap terminals and expensive services, but operators will be reluctant to give such terminals away, as they are more costly to produce than normal fixed-line telephones.”

“To the mobile world, the message is simple: text messaging is as much about lifestyle choices as it is about necessity. Challenges facing fixed-line operators are likely to outweigh the benefits,” Matkovits concludes.

By John Kennedy