The Dumbest $20 Billion Profit Industry
June 11, 2011, 04:23 PM
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From the WSJ:
By ANTON TROIANOVSKI
Growth in the volume of text messaging is slowing sharply, just as new threats emerge to that lucrative source of wireless carrier profits. ...
The new messaging tools-answers to Research In Motion Ltd.`s popular BlackBerry Messenger-are a growing threat to a texting business that generated $25 billion in revenue in the U.S. and Canada last year.
Carriers, such as AT&T Inc. and Verizon Wireless, charge fees ranging from 20 cents per text to $20 a month for unlimited texting. The texting business has low costs and high margins. A dollar of texting revenue produces at least 80 cents of profit compared with about 35 cents of profit from $1 in wireless data or voice services, according to analysts at UBS.
So, the phone companies make $20 billion in profits on $25 billion in texting revenues? It`s a good thing that the Sierra Club and the NAACP are lobbying to let AT&T merge with T-Mobile to alleviate some of this cut-throat competition. My question, though, is: How can phone companies possibly be spending $5 billion per year to carry text messages? How much incremental bandwidth does sending 160 character ASCII text messages use on top of voice and, for a lot of people, video? One percent? What`s the next hi-tech cutting edge communications breakthrough after the great leap forward to texting? Perhaps by this time next year, all the tipping point trendsetters will be tapping out their messages in Morse Code? Or with texting while driving being increasingly banned, perhaps drivers will fill their backseats with smoldering green leaves and open and close their sunroofs to send smoke signals?