From The Economist print edition
A new service hopes to do for texting what Skype did for voice calls
TALK is cheap—particularly since the appearance of voice-over-internet services such as Skype. Such services, which make possible very cheap (or even free) calls by routing part or all of each call over the internet, have forced traditional telecoms firms to cut their prices. And now the same thing could be about to happen to mobile-phone text messages, following the launch this week of Hotxt, a British start-up.
Users download the Hotxt software to their handsets, just as they would a game or a ringtone. They choose a user name, and can then exchange as many messages as they like with other Hotxt users for £1 ($1.75) per week. The messages are sent as data packets across the internet, rather than being routed through operators' text-messaging infrastructure. As a result, users pay only a tiny data-transport charge, typically of a penny or so per message. Since text messages typically cost 10p, this is a big saving—particularly for the cost-conscious teenagers at whom the service is aimed.
Most teenagers in Britain, and elsewhere in Europe, pay for their mobile phones on a “pre-paid” basis, rather than having a monthly contract with a regular bill. Pre-paid tariffs are far more expensive: bundles of free texts and other special deals, which can reduce the cost of text messaging, are generally not available. For a teenager who sends seven messages a day, Hotxt can cut the cost of texting by 75%, saving £210 per year, says Doug Richard, the firm's co-founder. For really intensive text-messagers, the savings could be even bigger: Josh Dhaliwal of mobileYouth, a market-research firm, says that some teenagers—chiefly boys aged 15-16 and girls aged 14-15—are “supertexters” who send as many as 50 messages per day.
While this sounds like good news for users, it could prove painful for mobile operators. Text-messaging accounts for around 20% of a typical operator's revenues. With margins on text messages in excess of 90%, texting also accounts for nearly half of an operator's profits. Mr Richard is confident that there is no legal way that operators can block his service; they could raise data-transport costs, but that would undermine their own efforts to push new services. Hotxt plans to launch in other countries soon.
“The challenge is getting that initial momentum,” says Mr Dhaliwal. Hotxt needs to persuade people to sign up, so that they will persuade their friends to sign up, and so on. Unlike Skype, Hotxt is not free, so users may be less inclined to give it a try. But as Skype has also shown, once a disruptive, low-cost communications service starts to spread, it can quickly become very big indeed. And that in turn can lead to lower prices, not just for its users, but for everyone.
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