SMS is huge in countries such as India. Innovation in SMS based solutions is much more advanced in India than in the US. This has to do with the SMS cost structure. In India the SMS costs are much cheaper (even considering the purchase parity) and there is no charge for incoming messages. In US you have to pay for incoming messages, which I beleive is the primary reason businesses don’t use SMS to communicate with customers.
Josh Goldstein writes about the SMS crisis in africa caused by high costs of SMS forced by the greed of carriers.
It would be easy to conclude that Africa is entering the golden age of mobile innovation. In Kenya, mPesa, a Safaricom service, allows users to send money anywhere in the country via mobile phone at very low rates. Next door in Uganda, rural users out of reach of the Internet can use a new SMS-based service from MTN, Grameen Foundation and Google to trade goods, search the Internet and query local reproductive health and agriculture information.
These services, however, represent a trickle of innovation where there should be a downpour. The source of this sluggishness is the structure of African mobile phone networks, which discourage entrepreneurs from quickly and cheaply creating, testing and deploying applications.
Mobile networks are costly in Africa. The price of sending SMS texts is kept high by a combination of high taxes, interconnection fees and network provider choice. And because mobile networks are closed, no one can deploy a new application without the network expressly adding it to a consumer package.
In Uganda, for example, the cost of a user-to-user message is 5 US cents. A premium message (any message not sent from a single user to another) is 10 US cents, despite high levels of competition and low cost. Since it’s rare for a mobile network to grant a discount to a premium service provider, entrepreneurs must attempt to scale in an environment where, according to ResearchICTAfrica, the average Kenyan already spends over 50% of her disposable income on communication. This is not a promising environment for innovation.
This means that many new ideas will never reach the market, not due to engineering challenges, but because of the underlying cost structure of SMS.
There cost of SMS to carriers is almost zero. There is no real reason to charge outrageous rates other than greed and short sightedness. So far the carriers in India have been sensible on this count and I see a lot of innovation which will funnel a lot of money to this ecosystem and therefore to the carriers. But recently some greedy carriers are trying to implement interconnect charges that are threatening to kill the SMS ecosystem in India. If this becomes the industry practice then the carriers can be credited for killing the golden goose of SMS data services. I hope they have enough common sense to realize the gold mine they have in their hands and not bury it with these silly interconnect charges.