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Giving Text Messages a Voice

A Combination of Text Messaging and Voicemail, Voice SMS is the Latest Twist on the Burgeoning SMS Market

So pricing a voice SMS is equally an arbitrary exercise. For example, a user records a 20-second voice message that is sent from the handset as a voice call over the network to an interactive voice response (IVR) server, a trip that lasts around 30 seconds. The IVR server sends an SMS to the recipient. When the recipient clicks on the SMS, they make a voice call to the IVR server to hear the message, again another 30 second call. In the end, the system used two voice calls and an SMS message to complete the transaction.

In the early stages of adoption when there is no “real” peak traffic period, such a voice SMS ends up costing the operator nothing because the network isn’t fully loaded. If the service takes off, and people begin sending voice SMS messages at a high rate during the day, the operator will likely consider differential pricing based on peak traffic periods much as with voice calls.

Priced to sell
So what pricing model is going to work?

In most of the world outside of the U.S., voice SMS is priced somewhere between text messaging and voice calls. Case in point; voice calls in Asia are five to 10 times the cost of text messaging. This explains the growth of text messaging as a primary means of communication there. Most subscribers aren’t willing to pay huge bills for voice calls.

Progressive operators who have launched voice SMS services in Asia priced them to drive adoption as well as profits. In most cases, they are about two times the cost of a text message. That pricing model has worked as early statistics show rapid adoption. For example, DiGi reported a whopping 35 percent penetration in only six months. Subscribers sent more than 200,000 voice SMS messages a day by the sixth month.

Grameenphone’s first-year adoption may be a harbinger of things to come as operators around the world begin offering voice SMS. Launching in September 2005, the company priced its voice SMS service up to 66 percent higher than SMS. And yet, it had six percent adoption in the first week, and 40 percent penetration of repeat users (3.6 million) by August of 2006 – faster than the adoption of SMS in most markets.

Voice SMS works in areas where voice calls are very expensive (like Asia and Europe) only when they are offered as an operator service and priced accordingly. U.S.-based voice SMS service providers Kirusa and Bubble Motion have seen their stable of operators grow in Asia and the Middle East as demand grows and operators strive for competitive advantage.

In the U.S., it’s a different story. Voice services are cheaper per minute, and there are more minutes used per subscriber than most anywhere in the world. That’s a result of the fiercely competitive mobile services market here. Operators who want to launch voice SMS here shouldn’t price them any more than their text messaging if they want to speed adoption. Sprint offers a voice SMS service at the same rate as its text messaging. But the Sprint service only works with selected handsets on the Sprint network, not with every 2G or 3G handset in the country.

But the competitive landscape in the U.S. has also created a market opportunity where service providers can offer voice SMS independently of an operator. Pinger.com is an Internet company launched in 2005 to enable users to dial a number, key in or say a number (or name if you’ve loaded a directory), and record and send a message over the public switched telephone network (PSTN). The recipient dials a number and retrieves the message. It works on all of the major carrier networks and it allows users to send and receive voice SMS messages to and from other countries around the world.

This scenario won’t work in Asia or Europe because the high cost of voice calls would make it prohibitively expensive for a third party operator to negotiate the termination fees between operators, countries, etc.

Whether voice SMS evolves from a flat-rate, niche, “hip technology” to a messaging necessity that operators will ultimately charge a premium for remains to be seen. Early analysis suggests that voice SMS plays to a common theme among successful mobile applications – new, more personalized communication option. As long as operators deploy it without requiring new handsets or major network upgrades, and price it appropriately for their markets, they have the best shot at making it profitable and driving its adoption.

More Stories By Brough Turner

Brough Turner oversees the evolution of technology and product architectures and works on business strategy and new market development at NMS. He is a recognized expert in the telecom industry and has been heavily involved in VoIP since 1996. Brough invented the multi-vendor integration protocol (MVIP) and led the MVIP consortium as well as worked within the PCI Industrial Computer Manufacturers Group to drive the creation and adoption of CompactPCI. Brough earned a bachelor?s degree from the Massachusetts Institute of Technology.

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