Premium rate text messaging could be a major moneyspinner for mobile operators but they are not able to fully exploit this opportunity because limitation of current SMS infrastructure allows for sub-optimal service design, relying on relatively low throughput rates. David Pearce explains how operators can tap into this potentially huge revenue stream.

David Pearce: I think it is a situation where there is a huge amount of money to be made. Consumers have shown they are more than willing and happy to use SMS as an interactive medium, but current architectures fail to capitalise on the potential messaging volumes that could be generated by services that require a degree of immediacy. With one particular game show, for example, a text competition draw in 2004 generated a response which would equate to more than 16,000 short messages a second being sent to enter a draw, at more than £1/message, and the network simply couldn’t cope. Text messaging is now ubiquitous: every show on the television says text to win a prize, or text to vote for your favourite to win. By implementing next generation network infrastructure operators could be capitalising far more things like text interaction and text voting. Consumers at large are more than willing to use text messaging in this context and it is not that price sensitive, it is not 3p or 5p or 10p a text, there is a premium rate to it.

Interactivity is now a key part of TV programmers’ and broadcasters’ strategies. They all want this interaction with their consumers but there is this problem in the middle. By getting their infrastructure right operators can tap into this new revenue opportunity.

At the moment in the UK, for example, there are a number of interactive TV shows so if I am watching a programme and someone says vote now, I press send on my phone, send my vote off and I get a response back saying message sent. That actually means that my message is sitting somewhere in a network operator’s SMSC. It does not mean it has got through to the voting application instantly. What we need to get to is that operators route messages directly through to the voting system. Message ‘sent’ actually means ‘message has been received by the voting system’. When my vote has been counted, I don’t mind being charged for it, but if I find out that my vote has not been counted and it said that it was message sent then I would be very unhappy. Indeed, regulation in Austria for instance, only allows premium text messages (over €0.70) to be charged to the subscriber when their message has been acknowledged. Of course, there is not necessarily a way in which I the consumer will find out that my vote hasn’t been counted but it becomes a bigger story when the revenues become even larger from this type of service.

There is a huge element of trust involved so when I send my vote in, when I interact with a service, I need to know that the interaction has taken place, I need to trust that this has happened. The architecture needs to change to make that happen but the willingness to use that service already exists.

TelecomRedux: This means that there is a revenue possibility but not if the system won’t handle it and, as you say, the other side is the fact that you are in an unspoken contract with the public to say - your vote counts. They keep saying those very words don’t they? ‘Vote now, your vote counts.’

DP: The opportunity is huge. With American Idol for example, in the first year there were two and a half million votes and last year there were 45 million. If that growth continues it causes both a massive opportunity and massive problems. As an example the USA had an almost 200% growth in text messaging last year. Again, following the role model, most of it was person-to-person but they get texts, and what we have seen time and time again with adoption of new technologies, new ways of communicating, but America gets it. They get it big time and because of the size of the population it just scales massively. Almost overnight, which you don’t get in smaller populations. Another example, in Sweden with one programme, four and a half million people voted, that is the equivalent of half the population of Sweden. Now, four and a half million is not a big number in itself. That’s because not many people live in Sweden. But lots of people live in America. So take the same model for the UK and say, OK 30 million people vote, take it to the US with a population of 250 million plus. Take it to China and say half a billion people voting, these are almost unbelievable mind blowing figures.

When I send off my vote I have to trust the operator to deliver it. I don’t know if it has been accepted, I just hear later on the show when all the votes have been counted. Wouldn’t it be so much better, or wouldn’t it take it to the next level of voting, if I can actually see on screen the effects of the incoming votes. Perhaps something like a counter or speedometer type device so that I could see the effect of the votes. No invention of technology is required to do it. There's implementation of the stuff that is already there. There has to be co-operation between the operators but look at what happened when they co-operated in 1999 and allowed cross-networked SMS traffic. Collaboration filled the market ten-fold and the SMS increased ten-fold over a year. Why not do that, create a bigger market and then compete for your share in it? I would rather have 25% of a market worth ten, twenty, thirty times more than it is today, than have a 100% of today’s market. Operators seem to be starting to get this now.

I think there has been less attention in recent years given to SMS because it’s not sexy. But I think we have seen a swing back of that pendulum now. It has come back to the realisation that that is where the revenue is coming from. If I go to an operator and say right I have a magic wand now and I can totally collapse one or more area of your business tomorrow. If I collapse all your value added services like wireless e-mail, mobile television, IM etc. what is the effect on your business? In fact, the answer is not too bad, bad PR but not a massive financial impact. But do that with SMS there will be a serious impact on the bottom line. It could wipe operators off the face of the earth. That's the realisation people have got to come to. There will always be great new services like mobile TV but there is a long, long way to go with talk and text.

I thing the big issue is because text is so ubiquitous, used by so many around the world and accepted by so many people. It may not be the most sexiest of technologies, text only, limited to 160 characters, but no more is needed for most interactions: it’s the emotional appeal of immediacy of interaction and the fact that SMS is used by huge numbers of people is what makes it so special.
Ian Channing