Will iMessage kill wireless carriers' SMS revenues?

In accordance with Betteridge's Law of Headlines, I believe the answer is a resounding "no."

The unusually virulent meme quickly spread around the Mac blogging world that iMessage will kill SMS as we know it and, going one stage further, to characterize iMessage as "an attack" on the carriers. John Gruber of Daring Fireball went so far as to say he would "cancel my SMS plan as soon as this ships."

But hold on there a second. Is it really that simple?

Sure, on the face of it, iMessage has all the ingredients to completely replace SMS. It can send text and pictures and contact vCards, exactly as an SMS can. It's enriched with the ability to tell when the person you're chatting to has received and read your messages, and you can also see when they are typing a response.

It can do many-to-many group messaging, too. And best of all -- this is all transferred over your iPhone or iPad's Wi-Fi or 3G data connections, so it's free! Well, at least until you exceed your 3G bandwidth cap and have to pay an overage charge, anyway. It sure sounds like iMessage is going to kick some sand in SMS's face.

But there's a bit of a flaw in this line of reasoning. iMessage is resolutely iOS only -- so far, we've not even seen any evidence it'll be able to interoperate with Macs, let alone work with other smartphones -- even though that means Apple is now shipping three incompatible communication clients (iChat, FaceTime and now iMessage). When you send a message to someone who doesn't have an iOS device (which it detects based on some sort of deep black magic that sounds similar to the SIP database Apple runs for FaceTime call placing), it falls back to plain ol' SMS.

So unless everyone in your life is an iOS user, if you message a lot, you're still going to be sending a lot of SMS messages. Apple's market share is settling to a value less than Android's, so it's highly unlikely that even all the smartphone users you know are on iOS -- let alone the armies of dumbphones and featurephones still out there.

Now, let's take AT&T for example. It charges a scandalous 20 cents per SMS off-plan, or offers bundles of $10 for 1,000 and $20 for unlimited. The tipping point is very low -- just 50 messages per month, and you are better off on the bundle. It's clear that, for most iOS users, iMessage is going to cut back the number of messages they send and receive, by automatically routing any iOS-to-iOS messages through its special service.

The question is, how many people will still be using more than 50 SMSs a month -- i.e., will be sending more than 50 messages to or receiving messages from non-iOS users? My guess is this applies to most folks, so it doesn't make any sense to cancel their SMS plans. They may be sending and receiving fewer SMSs, but AT&T isn't going to care about that -- it only cares how much money people are paying, and they'll still be paying for the bundle.

Another problem with the perception that iMessage is an attack on the carriers for swingeing SMS fees: it hinges on the view that SMS is a huge profit center for carriers, which happens to be very US-centric. Here in the UK, for example, even cheap £15/$25 a month tariffs typically come with an unlimited SMS allowance. Similarly in France and Germany and, more generally, in all the European nations I checked. In fairness, however, I must concede that my New Zealand dwelling TUAW colleague Chris Rawson reports that carriers down under charge a fortune for SMS, so it's not quite a US-only problem.

Still, though, I don't particularly see this as a sneak attack on the carriers carried out on our behalf by Apple's public spirited ninja coders. I think it's more accurately characterized as Apple seeing a problem with SMS's crummy feature set and setting out, as it so often does, to fix the problem by building a better mousetrap. Any loss of carrier revenue from that is just collateral damage but not, I feel, likely to be serious -- and it's neatly counterbalanced by the aggressive online nature of iCloud encouraging people to upgrade their plans to larger bandwidth caps.

But! I could be wrong. So please, tell me, reader: will you be canceling your SMS plan when you get iMessage on your iOS devices?

%Poll-64980%