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Mobile Phone Companies Seek to Curtail Free Text/Calling Alternatives

Phillip Dampier February 29, 2012 Competition, Consumer News, Wireless Broadband No Comments

As wireless carriers watch their revenues from texting and calling begin to decline as consumers increasingly turn to third-party applications that offer free alternatives, some companies are striking back.

Vodafone Group (part owner of Verizon Wireless) and Deutsche Telekom (owner of T-Mobile USA) are introducing new instant messaging applications this summer that will directly confront free services offered by Google and third party providers like WhatsApp.

Operators have already lost nearly $14 billion is text/SMS revenue in 2011 as subscribers shut off lucrative texting and messaging plans, according to Ovum, a mobile market researcher.

The companies blame messaging competitors like WhatsApp, Apple and Skype for the loss of that revenue and will confront them with the launch of Joyn, a new service that will offer a suite of features such as instant messaging and video-calling.  Joyn will quickly achieve prominence as carriers intend to automatically install the application on smartphones as the service launches.

Joyn will first be offered in Spain and Germany, and possibly also eastern Europe.  But providers expect to expand the service to North America if the initial launch is successful.

In Europe, Vodafone already bans Skype calls that travel over the company’s data network unless customers pay an additional charge.  Deutsche Telekom blocks these external services for customers in the United Kingdom altogether.  In the United States, Verizon Wireless routes domestic Skype calls over Verizon’s network.

KPN, the largest mobile phone company in the Netherlands, summed up providers’ attitudes about third-party apps and services bypassing the company’s own services by raising rates on smartphone customers to win back the revenue they lost.

“You can’t just have free services,” Deutsche Telekom’s Kobus Smit told Bloomberg News. “Because who is going to pay for it.”

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