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SMS in the U.S. Market: Why Doesn't It Work Here?
SMS in the U.S. Market: Why Doesn't It Work Here?

Wireless text messaging (or SMS) is a juggernaut in almost every GSM mobile operator network on the planet. Here's a look at some of the reasons why it hasn't yet caught on in the U.S.

Since the beginning of 1G wireless networks, wireless has always had a hard time living up to the expectations placed on it. (Hey, did you hear the loud gasp from the marketing folks out there? Sorry guys.) Well, today's wireless data products are still part of the status quo.

The continual "reality gap" that marketing builds to help with the adoption of wireless products and services does not, in the end, work in wireless's favor. This reality gap has appeared with the early rollout of 2G, with the rollout of some of the pager networks and, even as I write, with the 3G technologies (and let's not forget WAP as another current shining example of over-hyping wireless). Of course all these technologies will ultimately have value - you'll just have to wait for the market to catch up a bit to the hype.

It's important to note that today's SMS is different though. For SMS, a service that was admittedly somewhat of a by-product of the wireless network itself, there was no real hype and no real expectations at all in the U.S. market and, arguably, in any GSM market.

In fact, you could even call SMS the "paper clip" of the wireless world. SMS is not as "sexy" as all those cool 3G color screen devices seen in so many press kits (being from the U.S., I would ask if those devices are just a Photoshop creation or if they're for real... someday we'll find out), but SMS provides real value to today's customers. Not to mention the revenues it brings in for the mobile operators running GSM networks.

In fact, SMS has generated such popularity that BBC Prime Time ran a TV show this past June in the U.K. called "The Joy of Text," a 45-minute piece that described the ways "texting" touches people's lives. Even ABC news ran a piece on "texting" in mid-July.

Five Reasons Why
the U.S. Wireless Data Market Is Missing the SMS Boat

So what's the deal with the U.S. market for SMS messaging? To get to the bottom of the question of "Why isn't SMS big in the U.S.?" we need to look at a number of different issues. Each issue contributes to the full picture we see today in the U.S. wireless messaging market, and each has had its part to play in getting us here. I'm sure I've missed many reasons here. The following are my favorite picks:

1. SMS 'Out of the Box' and Wireless Product Confusion
How can SMS take off when the major U.S. carriers don't seem interested in making it happen? Maybe they're still gun-shy from the WAP debacle. Generally speaking, as of the end of the second quarter of 2001, only two U.S. carriers have SMS turned on when you purchase their basic service with a new phone. In fact, most times, you'll have to call your carrier and ask to get your SMS messaging turned on for a small monthly fee. And the service person may not even know what SMS is, or he or she will confuse it with their wireless Internet offering. Keep at it, though, it's worth it.

Sadly, product and brand confusion in the U.S. among wireless carriers tends to be a way of life. U.S. carriers need to get their marketing act together. If you recall, U.S. mobile services consumers have always been perplexed by all the voice product and service offerings. What will be in store for the wireless messaging consumer in the U.S. market when two-way messaging products really make their way to the front of the stage? It's shaping up that history will repeat itself. If each carrier calls their two-way product by a different name, and their messaging product offerings by another name, you get the picture. If just a few U.S. carriers could co-brand a name for SMS one-way and two-way messaging products, it would streamline the marketing efforts and could have a large impact on cutting through the confusion that seems to be inevitable.

2. The 'Walled Gardens' and the Voice-centric Ways of U.S. Carriers
The walled gardens of the U.S. wireless carriers notwithstanding, any messaging product co-branding attempts between them will create the market leaders for wireless messaging services in the U.S. Of course, the motto of these same carriers is "keep your customers at all costs." It's a very competitive landscape for carriers and each customer they get is important. It's especially tough right now because some carriers can't compete with anything but voice products. U.S. carriers are also part of a status quo that, as yet, has not provided for revenue-sharing arrangements with third-party messaging companies, which leaves little incentive for the creation of new messaging-based services that would increase SMS usage and revenues. If they do not foster this kind of cooperation for wireless messaging offerings, ultimately, only the U.S. carriers will suffer. EU carriers have these kinds of relationships in place.

It's also true that for most U.S. carriers, voice is a "known quantity" that generates a steady revenue stream - stick with what you know right? This kind of thinking doesn't tend to allow a large push into SMS products and services. It's like Hollywood moviemaking. Hollywood will go after a known quantity over an unknown one. Getting funding for another Kevin Spacy movie will be easier than funding a film with an unknown actor.

3. GSM vs Non-GSM
U.S. wireless standards, such as CDMA and TDMA, to name the top two, are another pitfall for SMS messaging usage in the U.S. market. If you examine the rest of the world, depending on who you ask, research companies will tell you that 70-80% of the mobile phone world uses GSM.

That makes the U.S. market very much in the minority. Why does this matter? Here's a hypothetical situation for you. If you had a software or service that would enable the use of SMS messaging at a carrier level, where would you put most of your efforts? It's likely you'd go after the larger economies of scale where the lion's share of the messaging market exists - GSM. Then you'd worry about creating carrier-grade solutions for the smaller markets, such as the U.S. Now I'm not pointing fingers here, I'm just stating a business case that seems to make sense.

4. Population Density
If you think of the wireless carrier networks as infrastructure used to deliver services, compare most GSM networks around the world to the U.S. network, and examine the amount of equipment needed to service the requirements equally, you'll find an interesting situation. According to an Ovum research study of average population density you'll find that the U.S. has some real catch-up and infrastructure building to do. Germany is the leading user of SMS messages in the EU today according to the GSM World statistics.

5. The 'Regionality' Factor
In the U.S. we have lots of computers and a lot of Internet access to boot. Compare the U.S. to Japan in this regard. In the U.S., you can still find Internet access for free if you know where to look. In Japan, it's cheaper to have a DoCoMo phone than to have dial-up Internet access.

To help describe the unique characteristics of each market, it's useful to coin a word that describes how a given wireless service may, or may not, enjoy successful adoption. The word regionality might be defined as the effect that a number of cultural, technological, or economic factors can have on whether a given wireless product or service will make it in a given market or region. We'll talk more about regionality in future articles.

How does all this affect SMS adoption in the U.S.? It has to do with the U.S. Internet regionality factor. (How many people have easy access to the Internet in the U.S. market and what effect does that have on SMS?) According to research done by the Alpha Group, more than 60-million households in the U.S. have access to the Internet via PCs, and more than 90-million people have wireless phones. Which do you prefer if you have easy access to the Internet? Read an e-mail or instant message on your computer, or get a wireless text message on your phone? The Internet factor in the U.S. creates a regionality effect that shows that the U.S. might not be as motivated to adopt SMS early on because of the wide adoption of Internet-based messaging tools such as e-mail - which is sometimes hard to come by in other parts of the world.

As mobile and wireless services move forward in the U.S. market, into consumers' everyday lives, wireless providers and analysts will continue to find that it's never as simple as it first seems. A focus on delivering real value can be a guide, even if that value is complex in nature, such as creating customer loyalty or retention.

Since there are many significant differences in the U.S. markets as opposed to those of the many GSM networks out there, the U.S. market will need to find its own way. For instance, it seems likely that instant or unified messaging will play a role in the U.S. wireless messaging market that it might not elsewhere.

Of course, no matter what happens, it's up to the U.S. wireless carriers to promote and nurture wireless messaging services. By doing so, they hold the key to creating value for their customer base. For motivation, they need only to look at any GSM operator network to get a glimpse of what wireless messaging could be in the U.S.

Are there other reasons for SMS not working in the U.S.? Let me know at

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