The Messaging Rivalry

With the introduction of digital services, concern and debate have abounded about the future of paging. Some analysts argue that short message service (SMS) will drive paging away. But paging still is around, and SMS still is growing in the marketplace. Will these two services continue to co-exist? If so, what market segments will they reach?

PageMart and Western Wireless offer their views on where each market is headed.

PAGING PERSPECTIVE By Allan Angus

SMS and paging have been unfairly pitted against one another and presented in a rival fashion by industry observers and carriers. The allure of SMS has driven concern over paging's future. But with another year of double-digit growth, paging isn't going away. For both SMS and paging, there is an abundance of subscribers, huge potential for applications and sufficient interest in the services. What is lacking is education about what these two services can and cannot offer their respective customers.

A network's design intent determines its utility and its limitations. The concept of smart phones with SMS combines the functionality of a wireless phone with a wireless data device. Intriguing as it is, SMS still is data over a network built for voice. Paging networks were designed for short, bursty data with high reliability and low cost. They are optimized for wireless messaging in a noise-limited environment. Wireless voice networks were designed for continuous, synchronous, compressed voice in an interference-limited environment. More simply, voice is to paging networks what paging is to voice networks.

There are interesting applications for hybrid solutions; that is, voice over paging or paging over voice networks. Ultimately, however, consumers will gravitate toward the network optimized for their needs, or they will rely on the services of two different networks, which explains why so many wireless-phone users carry pagers, and vice versa. Paging usage among wireless subscribers remains high. In fact, the Yankee Group's 1998 Mobile User's Survey polled wireless subscribers of less than one year and discovered that paging use actually is a few percentages higher -- at 51% -- with new wireless subscribers. It is a tale of two complementary technologies. The best example of a hybrid product is the clock radio, combining the best of form and function of two different technologies. Together, the clock and the radio created an application for "music snooze," which is a great achievement by any standard.

Customers want to simplify their lives and carry fewer devices for the same reason they don't want a clock and a radio cluttering the bedside table.

WIRELESS MESSAGING & THE ENTERPRISE For the right application, SMS can be a clock radio. If you are highly mobile in a local area, need access to e-mails or stock quotes and would rather not carry a laptop, SMS is a useful tool. A smart phone can be attached to a laptop for wireless computing, but that seems to defeat the purpose of portability. If you need sales information and customer data in the field, then a phone display may limit the application. SMS may be a step beyond alphanumeric messaging, but it is still below personal digital assistants. That is an important consideration when customers decide which device should support their wireless service.

Carriers have an opportunity to bundle SMS to better use airtime and offer new services to customers while leveraging existing distribution channels. But who is the target customer for SMS? Is it an off-the-street consumer who will purchase SMS at a retail outlet or a business that will want to integrate wireless messaging into an overall enterprise communications system? If it is the latter, then the complexity of the sale and the system increases, and a new competitive paradigm must be addressed.

The role of paging inside an organization is changing dramatically, almost on a daily basis. Companies with the foresight to integrate the Internet with e-mail addresses assigned to pagers and message launching via the Internet have given paging a foothold as the wireless messaging solution of choice. Seamless integration into existing applications can be done at a lower cost than other wireless technologies. Better in-building penetration, device cost, battery life and seamless nationwide and international coverage keep this the technology of choice with CFOs, IT managers, and telecom managers looking for cost control and flexibility in their communications choices.

With the advent of narrowband PCS advanced messaging services, the migration path from traditional 1-way paging services to full 2-way communications is a clear and a cost-effective one. Paging companies have the opportunity to re-optimize the paging network as they overlay narrowband PCS on their existing 1-way network. In turn, they can offer value-added services such as guaranteed messaging, message acknowledgment, and 2-way communication without much additional cost to the subscriber. It is difficult to determine how and if wireless carriers will be able to upgrade their service offering with attractive new messaging solutions at a comparable cost, but it is worth a try.

This is where education is important. Helping businesses understand the impact of wireless messaging on how they relay information, evolve their internal processes, improve communication with customers and ultimately enhance their competitive edge with these types of services benefits the entire messaging industry.

THE DEVICE DEBATE Perhaps one of the greatest debates between SMS and paging is over which device is preferred. The Yankee Group survey concluded that wireless subscribers prefer to deploy a new technology on a familiar device. But the question is, which is the familiar device -- the pager or the phone? As a paging carrier, our contention is that the pager is the familiar device. The concept of sending wireless messages to a pager is well established and growing in popularity as the numbers of alphanumeric subscribers continue to boom. Businesses and individuals alike depend on this technology for productivity and advanced communication.

Businesses and individuals will appreciate the seamless international roaming capabilities of messaging delivered from paging networks and their network affiliates. And with the patchwork quilt of incompatible digital technologies being deployed in the cellular and wideband-PCS sectors, it is difficult to see how national roaming can occur for SMS. However, if SMS creates demand for wireless messaging, then the paging industry is all for it, just as SMS providers probably appreciate the awareness that paging gave their service offering.

MESSAGING CHOICES Regardless of device, it is important that subscribers have choices. If you don't want to take your phone to the movie, opera or an important meeting, you don't have to -- you can carry your pager. Better yet, you can carry your 2-way pager and reply to messages without interrupting whatever is going on around you. If you want to be able to do it all from your phone, then you can do that too. Paging will continue to have a price and coverage advantage that will be difficult for most to overcome. And a new generation of advanced messaging services offering new features and capabilities will add another competitive dimension.

Together, paging and wireless carriers will create an appetite for these services. They need to focus on having vast networks so people can use them where they want to and customize these services for specialized applications. Also, customers need education about how to make these services work seamlessly and cost-effectively within the business and personal arena. The messaging industry must offer a continuum of services for the beginner, intermediate and advanced wireless-messaging user.

SMS PERSPECTIVE By Jeff Bartee

Customers don't care about SMS. What they do care about are the benefits they receive from SMS. Providing customers information via their handsets or pagers is only half of the picture. Giving customers applications to act on the information completes the picture and will drive SMS usage.

Currently, the wireless industry is at the crossroads of both market and technical forces that will make SMS a valuable service for the consumer market. First, the onset of multiple wireless carriers within each market, all with good voice systems, generates the need for differentiation. Next, SMS technology is ready to evolve from simple 1-way messaging to more advanced, flexible 2-way systems delivering useful information to consumers. Finally, the proliferation of the Internet has educated consumers to the benefits of computer networks and messaging applications.

Historically, SMS has offered the ability to send messages back and forth. In order for SMS to be successful in the future, the SMS channel must deliver services that are timely, target-group relevant and actionable. In this way, applications can be associated with a specific customer benefit rather than the SMS channel being the beginning and end itself. Although consumers won't buy the SMS channel, customers will value the benefits of the various applications that SMS delivers to them.

USERS & APPLICATIONS Today, typical SMS market segments are business users and other high-end consumers who see the benefits of simple SMS messaging and will take the time to learn the application. However, the target market will expand to the average consumer and casual business user once applications are available to provide real value with a minimal learning curve.

Currently, SMS and paging services both offer 1-way Internet messaging with intelligent filters, scheduling rules and prioritization. Both deliver information when the customer wants it. It is at this level that the real differences between pagers and phones begin to take hold.

For example, GSM technology allows customers to take action when they receive relevant information by leveraging memory within the handset, 2-way alphanumeric messaging and alternative communications channels (voice). In the near future, customers also will be able to leverage predictive spelling software, location technology incumbent in digital PCS systems, the SIM card and the SIM toolkit.

These capabilities will allow carriers to offer additional flexibility and customized services. For example, customers will be able to subscribe to a stock-brokerage service and receive more than simple stock quotes. This 2-way service could send customers predetermined stock information. Within each message are buy and sell commands. The customer receives a message referring to a specific stock; buy and sell commands are assigned to context-sensitive menu keys. The customer presses "buy," and the message "# of shares?" comes up on his phone. The customer keys in the number of shares and presses "send." A confirmation message is returned that states "Purchase 'X' shares at 'Y' price where 'Y' is the current market price." The customer presses "send" and then receives a short message confirming the transaction.

A taxi company could use SMS for radio dispatching. A message containing the address of the next fare is sent to the taxi. Within the dispatch message commands for the phone menu may include selections to accept the fare, wait for the next fare, break for lunch, or call it a day and sign out.

Implementing location technology will enable companies to provide geographically relevant information and possibly capture additional revenue. Users could be traveling down the freeway during rush hour, and based on their location and customer profile, they could receive information about an accident on the freeway that is causing a delay.

For wireless carriers, another future advancement for SMS will be the ability for companies to deliver services easier, cheaper and faster. A customer calls customer care or accesses a web site to order a 2-way e-mail service. At activation, a short message is sent to the phone enabling e-mail menus as well as providing a brief tutorial on how to use the service. With menu management such as this, companies can simplify the phone's user interface by showing only menus that are useful to the user.

Today, SMS is a strong tool for carriers to enhance the customer's experience. However, today's SMS only is a glimpse of tomorrow's benefits. As the technology evolves from 1-way messaging to advanced 2-way systems delivering useful information to customers, SMS will grow in popularity. Likewise, the early Internet was a tool for people who wanted to learn file transfer protocol and Gopher search engines. It became useful and valuable to the consumer once programs such as web browser and e-mail clients interpreted and presented information via the web.

Similarly, as SMS features become simple to use, customers will rely more on their wireless handsets to conduct business or other 2-way communication. SMS will offer carriers the flexibility and capability to turn wireless phones into multimedia communications devices.

THE MARKETPLACE Because SMS paging is widespread in Europe, GSM-based carriers have had a head start when compared to other voice providers. Many wireless carriers are offering SMS, but on different levels. Eventually, all carriers will reach the threshold of having suitable and acceptable 1-way functions and systems. There are many 2-way systems in place, but it will take further development of applications to truly make systems valuable to consumers.

Meanwhile, the paging volume will continue to increase because the advancement of all wireless communication is enhancing the visibility of messaging services. Pagers always will have a place in the market because their characteristics appeal to a select user group. Pagers are small, convenient, low-cost and durable. The only chance that pagers would go away is if pricing became identical, which probably never will happen.

However, PCS phones will continue to gain market share by leveraging messaging channels to bring additional value to their core service offerings. And as wireless phones offer a tighter integration of short-messaging features, a portion of the paging customer base will move toward relying just on its PCS phones.