British wireless subscribers can send and receive text messages at bargain-basement rates thanks to an IP-based messaging service released last week. But-unlike Voice over IP-analysts say the new offering poses little threat to mobile operators in the United States.
Hotxt, which describes its service as a kind of Skype for text messages, emerged from an 18-month stealth period to offer a service that uses the Internet to send unlimited missives between wireless consumers for $1.75 a week. Most carriers charge 10 cents per message. The Cambridge-based company is targeting 16- to 25-year-olds, claiming that a user who sends seven texts a day will save $367 over the course of a year with Hotxt.
The Java-based, downloadable application also provides a maximum message length of up to 640 characters, far surpassing the standard SMS maximum of 160. It is available to every U.K. wireless subscriber, according to Hotxt co-founder Doug Richard, except users of O2’s prepaid offering, which restricts Internet access.
Like Skype, Hotxt’s offering includes unlimited messages between subscribers of the service for a flat rate; messages sent to non-subscribers incur an additional 10-cent per message fee. The service supports instant messaging-type features including “tag” names and personalized settings, and Hotxt gives members an incentive to recruit friends by offering a free week of service for every outsider who signs up for the service.
“The real value is when you sign up all your friends,” said Richard, a Californian who found success in the United Kingdom with a venture capital-based reality show called “Dragons’ Den.” “The benefits simply grow as the group grows.”
Message-senders do incur data charges from their wireless operator, although Richard said carrier charges would be about a penny per message.
Although Hotxt essentially undercuts carrier messaging revenues, Richard hopes to eventually partner with operators, gaining deck placement and perhaps even enticing operators to bill their customers for Hotxt’s service. The software entrepreneur said that while U.K. operators haven’t exactly embraced the offering, none has acted to prevent Hotxt’s service on its network.
“We’ve been quite open about what we’re doing,” Richard said. “We did talk to a number of mobile operators. We just happen to be the first to market of the type of world that’s generally coming, but currently none of them have chosen to enter into any particular relationship with us.”
The offering could prove very popular in the United Kingdom, where more than 83 percent of all wireless users send text messages, according to M:Metrics. Hotxt is looking to expand to other European markets, and sees an opportunity in emerging countries such as India where it claims a discrepancy between per capita income and operator messaging charges.
Richard said he may eventually look to bring Hotxt’s service to the United States, where text messaging is only beginning to get legs among mass-market wireless users. But U.S. operators’ walled gardens and tightly controlled networks are sure to keep IP-based messaging at bay for the foreseeable future, according to Seamus McAteer, senior analyst at M:Metrics.
“Carriers can lock it down; they can (limit) access to the SMS infrastructure so the only way to get text messages to the phone is to go through the SMSC (SMS Center),” McAteer said. “There’s no way around an SMS gateway.”
U.S. carriers are slowly warming to VoIP despite the threat the technology may pose to cellular business models. Service providers like Skype Technologies and Vonage Holdings Corp.-as well as Internet giants like Google Inc. and Yahoo Inc.-are quickly approaching critical mass, forcing operators’ hands. But unless Hotxt can gain substantial traction among wireless users, McAteer said he did not think operators are likely to allow the startup to eat into their messaging revenues.
