SMS charges set to hit rock bottom

Trai To Review Telecom Tariffs Following TOI Expose On Texting Rates Shalini Singh | TNN  New Delhi: SMS rates are set to crash with telecom watchdog Trai reconsidering its longstanding policy of non-interference on tariffs.      Following an expose by TOI on November 5 that SMS tariffs are 50 to 100 times higher than what it costs service providers, a top Trai official said, "We are going to issue a consultation paper to review telecom tariffs within 20 days to a month.''      This means consumers can expect substantial relief in SMS tariffs latest by March.      According to the official, the move would have come sooner had the regulator not had its hands full with a consultation process on controversial 3G spectrum issues.      The now inevitable tumbling of SMS rates has important implications for data usage in the country. At present, SMS forms less than 5% of the total revenue for mobile operators. The widespread proliferation of texting is expected to spin off into far higher levels of internet usage. Experts confirm that a crash in SMS tariffs could be the first step to generating demand-side pressure for wireless broadband access.      The cost of an SMS is a fraction of a paisa. This is because an average SMS consists of 1KB data, which takes a fraction of a second for transportation and termination. SMS and other valueadded services form 10% of the Indian telecom industry's annual Rs 1 lakh crore-plus revenues. The current regime followed by telecom operators is "bill and keep". This means your operator keeps the entire amount that he bills you for the SMS and pays nothing to the network to which the SMS is sent. This is for two reasons: First, the proportion of traffic across networks is roughly equal, and second, the cost of termination is negligible.      This revelation by TOI knocked the bottom out of claims that India has among the lowest telecom tariffs in the world.      Trai has so far refused to regulate rates under the belief that competitive markets were at work and tariffs reflect costs. However, in the SMS arena, competition has clearly failed to move prices closer to costs. The practice of pricing SMSs high has been prevalent for several years while Trai has chosen to look the other way. This, despite facts stating otherwise in Trai's own cost data from its IUC regulation of August 2006.      As it turns out, the true cost of sending an SMS would never have come to light if new entrants had not been forced to sign interconnection agreements with existing operators at a price that is far higher than the actual cost.      Voice calls are already being offered at 1 paisa per second. As new players flood the market, SMS tariffs could become the next major frontier of the pricing war now raging in the Indian servicing industry.

160By2 Launches Free SMS To Kuwait, UAE, Saudi Arabia & Singapore

Hyderabad based SMSCountry, which operates the free SMS service 160by2, has launched free SMS services to Kuwait, UAE, Saudi Arabia & Singapore. This means that registered users can send an SMS to mobile numbers in these countries, without paying the standard International SMS charges. Satya Kalyan Yerramsetti, CEO and Co-founder of SMSCountry has said that the company plans to launch services in other South East Asian markets as well.

By aggregating free SMS services in various countries on an Internet platform, this free SMS service is disrupting the existing format in which International SMS' are sent. 160by2 has a mobile application as well, which uses both SMS and GPRS to send free SMS'. For Pre-paid users in Kerala, Airtel charges Rs. 3 for an international SMS to the Gulf region, while BSNL charges Rs. 5 for all International SMS'.

A Precedence in Internet Telephony

A precedence exists in case of voice over Internet protocol (VoIP/Internet Telephony), wherein one can make calls to International telephone numbers using services like Skype, at a lower cost. In India, VoIP is not allowed to terminate in a PSTN (Landline or Mobile) network, though the telecom regulator TRAI is pushing that agenda.

Competition & Costs

SMS costs in International markets are higher (we're assuming that Bulk SMS costs are higher too), so will any one be willing to take on the costs? Other service providers can follow suit, but garnering a user base is quite another task: 160by2 claims to have 4 million registered users (India has over 400 million mobile subscribers), and monetizes with advertisements using 80 characters of each SMS sent. Based on their website, they have a campaign running for Sprite, and also offer mobile classifieds services (though mobile SMS based classifieds are free).

Readers will remember that Indiatimes used to offer free SMS services earlier, though MocoLife, which was launched last year, offered 30 free SMS' a month. NEA Indo-US and DFJ funded startup MGinger also has launched Free SMS services.

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