Worried about Texting-Revenue Losses, Telecoms Present Their ‘Joyn’ Strategy

by Cynthia Wilson | March 2, 2012 12:22 pm

Fed up with free text messaging and voice applications such as iMessage, Facebook Messenger, GroupMe, and Samsung’s (PINK:SSNLF[1]) newly upgraded ChatOn client eating away at their profits, major telecommunications operators are fighting back with a new messaging technology, called Joyn, that will be launched initially by carriers in Europe and South Korea.

Joyn is based on what the carriers refer to as Rich Communications Suite, or RCS—software that the telecoms hope will be installed by smartphone manufacturers and will create a uniform texting platform for the entire smartphone community. The strategy is based on the fact that most of the apps now serving as texting-fee workarounds can text only to phones that have the same app.

Joyn was introduced this week at the Mobile World Congress in Barcelona by industry group GMSA, or Groupe Speciale Mobile Association.

GSMA demonstrated a beta version of Joyn to some Spanish clients of Vodafone Group (PINK:VOD[2]) using smartphones running on Google’s (NASDAQ:GOOG[3]) Android operating system. The RCS application will become available later this year through wireless operators in France, Germany, Italy and South Korea.

Paid text messaging, which uses relatively little network capacity, has been a cash cow for wireless carriers, pulling in an estimated $153 billion last year. But revenue from text messaging is falling rapidly even as texting becomes more popular: more than 7.5 trillion text messages were sent in 2011. Ovum, a London-based research firm, estimates that telecommunications companies lost $13.9 billion in text messaging revenue last year because cell phone users are migrating to free services such as Apple’s (NASDAQ:AAPL[4]) iMessage, Facebook’s Messenger, and GroupMe.

Many different ways to dodge texting fees

Introduced last October as part of Apple’s iOS 5 operating system, iMessage automatically deploys when iPhone users send SMS (short messaging service) texts and MMS (multimedia message service, for photos or video) text to another iPhone, iPad, or iTouch. And when used on a WiFi network, the feature allows virtually free texting and related communications.

Because the RCS application will be fully integrated in cell phones, negating the need for users to download a texting app, wireless carriers hope Joyn will help them win back texting customers. RCS also will allow users to engage in live chats and video sharing during a call.

By implementing Joyn it may look like the wireless carriers are helping to kill an important revenue source. But what they’re really doing is trying to find a new way to package texting into their pricing, although it’s not clear what, if anything, carriers will charge for Joyn. The technology could, for example, help carriers like AT&T (NYSE:T[5]), Verizon ( NYSE:VZ[6]), and Sprint (NYSE:S[7]) justify higher overall subscription fees, albeit without separate texting packages or overage charges, if it increases usage time on their networks.

An initial challenge, however, will be to get consumers, who already have an overwhelming assortment of apps to choose from, to use the feature. Wireless carriers also will have to come up with more ideas to boost revenue outside of AT&T’s latest proposal, which would have companies that provide services requiring data streaming to pay AT&T for network usage. One catch to that idea is that the services likely would simply bake the carrier fees into their pricing.

Source URL: https://investorplace.com/2012/03/worried-about-texting-revenue-losses-telecoms-present-their-joyn-strategy-aapl-ssnlf-t-s-vz/

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