MMS phones: Don't believe the hype

The shape of things to come? There are hurdles ahead for video messaging

LONDON, England (CNN) -- Mobile phone companies are telling us to expect a revolution in text messaging, but a consultancy is saying don't believe the hype.

Nearly 1 billion messages are sent in Europe every month. With its own unique language, text messaging took off in the late 1990s and has become almost as popular as voice calls.

Now texting, or SMS (short message service), is set to become dated as phone operators push ahead with new products. Waiting in the wings is multimedia messaging (MMS), which looks like a text message on steroids.

It allows users to send and receive messages with graphics, photos and audio and video clips. When it becomes widely available, users will be able to download payment vouchers, access banking services and watch movie previews.

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Phone makers Nokia and Ericsson and operators T-Mobile, Orange and Vodafone are betting that MMS services will enable them to boost growth and revenue as handset sales stagnate.

But consultancy Wireless World Forum, whose clients include Sony Ericsson, Vodafone and Deutsche Telekom, offered this caution: "Multimedia messaging is not going to match the hype that accompanies its launch. MMS is worth $5.8 billion by 2006 across 16 key global markets -- a figure (that is) 20 percent of the current crop of analyst predictions."

The consultancy says estimates that consumers will be sending 10 billion messages a month within two years are "unrealistic" and that the figure is closer to 2 billion a month by 2004.

Its rationale is based on the fact that no one predicted the text message phenomenon, which now generates about 12 percent of operators' revenues.

Also, its initial takeoff was fuelled by the youth market -- people under age 22 send 88 percent of all text messages -- because it was cheaper than making a phone call.

"Yet initial MMS-enabled handsets and services will be priced outside of their reach," the consultancy argues.

T-Mobile, the mobile phone unit of Deutsche Telekom, is selling MMS phones for between £229 ($345) and £299 ($450) in the UK. That does not include the £20 monthly charge to use the service, plus a 12-month price plan.

Most text messaging, which is initiated by teenagers, is done via pre-paid handsets.

Some analysts predict video messaging will begin to take off in Europe by the end of the year -- and that users will be prepared to pay more for it. With European mobile phone markets close to saturation, companies want to get more money out of existing customers.

Some 30 percent of all European operators were planning to launch their MMS service within the first half of 2002 with another 25 percent in the second half, according to research from the pan-European IT and telecommunications consultancy Forrester.

Even cynics in the mobile industry say video messages will become a hit among computer game fans, whose hunger for downloadable ring tones and logos seems insatiable.

"MMS will fail to substitute SMS, as the consumer will use the two platforms for very different purposes. ... MMS will only substitute a maximum of 10 percent of the SMS market," according to Wireless World Forum.

"MMS will find success in certain application areas – such as picture messaging. Data drawn from Sha-mail and I-Shot services in Japan highlight how targeted marketing and correct pricing mechanisms can help stimulate the uptake of multimedia messaging as well as reduce overall operator churn (the rate at which people join and leave a service)."