Asia: 3G can wait, SMS is here

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NEW DELHI, India-The Asia-Pacific region is witnessing a rapid growth of short message service (SMS), which is not only beginning to contribute significantly to operators’ revenues, but is also setting the stage for future mobile data services. The Philippines continues to be the most popular SMS country worldwide, while other emerging markets, like China and India, are quickly catching up.

SMS is generating revenues. It is changing from a static application to a service concept, and it is being used to deliver useful content to subscribers not equipped with Wireless Application Protocol (WAP) phones. SMS is being seen as a customer acquisition and retention tool.

“In many markets, SMS is the biggest contributor to mobile data revenues-typically around 90 percent of mobile data revenues come from SMS. Mobile data revenues typically contribute 1 to 3 percent of operators’ total revenues outside Japan, although we see SMS growth increasing this to 5 to 10 percent in mature markets like Australia, Hong Kong, Singapore, within two years,” said Nick Ingelbrecht, principal analyst with Singapore-based market research firm Gartner Dataquest.

The three major GSM operators in the Philippines account for nearly 17 percent of the total world traffic in SMS messaging-some 50 million messages out of the global traffic of 300 million a day are generated there. And Globe Telecom accounts for a major share. In March 2001, 32 million incoming messages a day were handled by Globe’s network, generated by or destined for 2.5 million subscribers, 85 percent of whom have prepaid subscriptions. Globe experiences a daily peak volume, which is growing every month. For example, a peak volume of 1,000 messages per second was recorded on New Year’s Eve 2000, only to jump to 1,250 messages per second two months later.

“The craze, first discovered by young students, soon spread to other age groups. First, it was young professionals and then their bosses. SMS popularity grew so quickly that we were taken by surprise,” recalled Emmanuel Estrada, vice president mobile engineering for Globe Telecom.

This has meant constant investments in enhancing infrastructure. From a capacity of 80 messages per second in the early days of 1998, Globe has now moved to SMS centers (SMSCs) capable of handling 3,500 messages every second.

The Singapore-based CMG Wireless Data Solutions, which has supplied SMSCs to Globe and other operators in Malaysia (Celcom and Digi), Singapore (MobileOne) and Indonesia (Telkomsel and Indosat), has announced trials of its third-generation (3G) SMSC, which has clocked a high 8,000 delivery attempts per second.

“Undoubtedly, there will be early takers for this system. We expect SMS message growth to continue at much the same rate for the next two years at least,” said Marien van Ouwerkerk, Asia Pacific sales director for CMG.

Few limits

Industry watchers say there is every reason to expect other countries to go the Philippines way, given the fact SMS is a low-cost, nonintrustive communications medium. However, there are some limiting factors.

“Marketing of SMS only started recently in some countries, hence subscribers have only begun to realize the potential of SMS. And where SMS is marketed aggressively, growth is rapid,” observed Ingelbrecht.

The second factor is the lack of interoperator SMS, which slows the growth of SMS messaging within countries. International SMS is also limited by operator agreements, but domestic interoperability is clearly the key to growth. Other than a few carriers in Australia, Singapore and, to a limited extent, China, most carriers do not currently offer interoperator SMS services.

Operators adopting innovating SMS marketing strategies are reaping rich dividends. For instance, Escotel in India, which launched its SMS service under the brand names Beep It and Turant Taar-meaning instant telegram-eight months ago, is today at a level of 200,000 messages a day with user penetration at about 9 percent of its total subscriber base.

“With 20 messages per subscriber, we are already at international levels,” noted Rajiv Burman, Escotel chief officer of customer acquisition.

Another Indian operator, Birla AT&T, recently installed Nokia’s SMSC and is marketing its services under the brand name MSSNGR. The service costs just 1 Indian rupee for all outgoing messages.

“We are among the few operators who are providing this service on both the postpaid and the prepaid delivery, since we use an IN (intelligent network) solution for our prepaid that permits real-time decrementation,” said Rajat Mukarji, Birla AT&T vice president of business development.

A successful and simple strategy used by Globe Telecom is to provide SMS “virtually” free to educate subscribers and let them get used to SMS and then slowly increase the price per message when use matures.

“Operators who practice SMS as a `premium’ service policy are actually inhibiting the popularity of SMS and, therefore, cutting in their own flesh,” said CMG’s Ouwerkerk.

To some extent, SMS might be viewed as the bridge to mobile data, 2.5-generation (2.5G) and third-generation (3G) services. Once subscribers learn to use SMS, they know how to use their mobile phones as mobile data terminals. This provides the basis to offer all kinds of other screen-based services and content. Some operators have already begun offering services like picture messaging, SMS chat and SMS television.

“In the near term, SMS is evolving from a static application to a service model with the introduction of SMS acknowledgement services, SMS chat/communities, instant messaging and the addition of icon/picture attachments to SMS messages. All these services will evolve into richer forms of personal communications as the technology evolves. So although SMS technology will be superseded, the functionality which SMS delivers will be enhanced and expanded well into the future,” said Ingelbrecht.

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