The messaging industry continues its steady growth, reaching $130 billion in 2008 and predicted to reach $224 billion by 2013, representing almost 60 percent of carrier non-voice revenues, according to research released today by Portio Research.

Some additional perspective: global movie box office revenues reached $26.7 billion in 2007, according to The Motion Picture Association of America. That means that simple SMS and other mobile messaging services represent a business almost five times larger than perhaps the most glamorous of content-based businesses. It’s also much bigger than online advertising, which in 2007 reached just $25.5 billion in revenue, according to numbers from IDC.

Portio defines the mobile messaging market as not only SMS but MMS, mobile email and mobile IM as well. That said, SMS remains the “king” of mobile messaging, thanks to its ubiquity and ability to seamlessly cross carrier networks. But other messaging is growing as well, including mobile instant messaging, which Portio predicts will grow from 111 million users this year to 867 million users by 2013, with a corresponding five-fold increase in revenue, from $2.5 billion in 2008 to $12.4 billion in 2013. MMS also continues steady, if not spectacular growth, reaching $30 billion in revenue in 2009, Portio predicts.  

Portio predicts mobile messaging will continue to grow, even in the face of a down economy. Just as impressively, it is growing in the face of rival technologies, including much more widely available Internet data offerings and Web-based messaging services. Those services — almost always free to use – range from desktop-driven instant messaging to Twitter and other alternatives.

Looks like a clear and well-time warning for service providers: be careful chasing new markets when the ones you are already sitting on hold so much potential.

[Editor’s Note: Who should be telecom’s candidate to be national CTO? Nominate your candidate in the comments below]

Interesting peek into the political process from Business Week today, with speculation on Barack Obama’s plans to name a national chief technology officer if elected.

The CTO title fits the Obama profile — it’s a flashier title than chief information office, or CIO. CIOs are hands-on implementers; CTOs, for better or worse, tend to be the visionary types.

So who’s on the short list, at least according to BW: Vint Cerf, Google’s chief Internet evangelist (and Internet pioneer); Microsoft’s Steve Ballmer; Amazon’s Jeffrey Bezos; and Ed Felton, Princeton University comsci professor.

This list is particularly interesting when one takes into account the apparent goal of this would-be CTO: raising national broadband penetration. From the BW story:

“Obama sees greater broadband penetration as an enormous economic engine, much like the railroads were a century ago,” says Andrew D. Lipman, a veteran communications lawyer in Washington. “That is why the CTO will play such a critical role in any recovery plan.”

If broadband deployment is the key to our economic future, why do the potential CTOs including a search engine exec (ok, that’s a bit unfair to Cerf — if accurate), CEO of a desktop software company, CEO of an e-commerce company and an Ivy League professor?

Where’s the candidate representing today’s actual broadband industry? I’m not saying an incumbent telecom industry player would be the best choice — someone with a lack of conflicts and deep industry ties could probably get more done.

But the list of proposed candidates show a lack of respect toward the mainstream telecom sector and a lack of understanding of the complexities and challenges of truly building a national broadband infrastructure.

It also is a relatively bad omen for the traditional telecom industry, which may be viewed more as having impeded choice and a path to the broadband future than enabling it.  The industry already has a fairly combative relationship with the FCC, do we need to be battling the “Office of the National CTO” as well?

So who should be added to that list from the telecom sector. Here’s some possibilities gathered from a quick poll of the Telephony staff:

- Larry Irvin, former head of NTIA and current co-chair of the Internet Innovation Alliance.

- Bill Smith, former BellSouth CTO

- Mark Wegleitner, current Verizon CTO

- Barry West, Xohm, Sprint/Nextl

- Rob Pullen, CEO, Tellabs

We want your opinion: Who should be telecom’s candidate to be national CTO? Nominate your candidate in the comments below.

[Note: Obama/Superman photo courtesy of Mashable, which wrote about the CTO idea when it was first floated earlier this summer.]

[Editor’s Note: We want your thoughts on this controversial development. Should operators be allowed to raise SMS service fees? Give us your opinion in the comments section of this story on our Web site and we’ll highlight the best responses in an upcoming follow-up story.]

With Verizon Wireless apparently weighing the possibility of charging a 3-cent-per-message fee to SMS aggregators, text messaging business models may be in for a reevaluation as well.
Here’s the back story: an email from Verizon’s billing provider OpenMarket detailing the new fee began circulating among aggregators and content providers this week, setting off a flood of media coverage and criticism against Verizon. Verizon officials denied its decision was final, while admitting it does plan to reassess the fees it charges aggregators, in part to better reflect network costs. Verizon said it has not increased per-message fees to third-party providers since its SMS service launched in 2003.

This is a big deal to SMS such as mBlox and VeriSign, as well as the content companies that leverage those aggregators to deliver SMS text alerts, promotions and interactive voting notifications. Some examples would be TV shows like American Idol, which conduct SMS voting; SMS-based “answer” services like ChaCha or Google Answers; and Web-based messaging services like Twitter. Such services, which rely on relatively low-cost SMS to augment their existing content distribution, would be hard-pressed to swallow such a large potential fee increase.

SMS is a huge business. At the CTIA show earlier this year, the trade group said that operators at that time were delivering more than 75 billion text messages every month.

Because of Verizon’s non-committal response, uncertainty in the SMS market will rein – at least for the time being. The larger question is if Verizon ups its rates, will other operators follow their lead? As for content providers, they may have little choice but to raise rates to end-users, putting into question existing business models that factor current SMS rates into their equation. With ubiquitous access SMS’s key selling point, no content provider would likely be willing to simply abandon one third of the nation’s wireless customers in order to avoid Verizon’s would-be charges. But could their business models hold up?

For operators, the timing of such proposed rate hikes could be a challenge. Already, Web access on mobile devices is rising, potentially offering a messaging alternative to SMS. Further, the government is looking closely at SMS rates already – rate hikes will only draw more attention. Last month, Senate Judiciary antitrust subcommittee Chairman Herb Kohl (D-Wis.) sent a letter to mobile operators raising concerns about recent text messaging price increases.

We want your opinion: are service providers within their rights – and is it good business – to be raising SMS rates to third party providers? Let us know what you think in the comments section below.

Remember when phones and PIMs (personal information managers) were separate devices? Phones had dialpads, PIMs typically had touch screens and a stylus (and pretty good handwriting recognition, a slick technology that is now mostly irrelevant). Device UIs and input styles were simpler then.

The Blackberry with its full keyboard changed the game and became a standard, until the Apple iPhone appeared and a large (multi) touch screen made its reappearance added by the iPhone’s super-slick Web browser and native apps. But the iPhone left as much behind — mainly an easy-to-access an use physical dialpad and keyboard. For some, the trade-off was worth it; for other users, it’s a problem.

As serious iPhone competitors come to market, some new screen and input paradigms are emerging. And though the phones aren’t available yet, some online emulators and hands-on reviewscan provide some feel for what they’ll be like.

First up is the T-Mobile G1, based on Google Android (click here to access the Web-based emulator), which will be in stores later this month. Android combines a touch-screen with a slide-out, landscape-oriented keyboard. Playing with the OS and emulated device, it’s easy to see that this hybrid approach may make sense for some users. It results in a bulky device, but the hardware profile is sure to slim down over time.

More interesting is the new Blackberry Storm, previewed today on a few gadget Web sites and soon to arrive at Verizon, Vodafone and other carriers. Gone is Blackberry’s trademark keyboard, either its full keyboard or Pearl SureType-driven keyboard. Users interact with the phone strictly via the touchscreen, much like the iPhone. What’s interesting, though is that the Storm’s touch-based keyboards appear to be taking software UI-based keyboards to the next level by providing additional tactile feedback from the screen. Essentially, using the Storm on-screen keyboard, you touch an onscreen button to “indicate” the letter you want, then physically * push down * on the screen to enter the character.

It’s an interesting compromise — a soft keyboard with tactile feedback from an unexpected part of the hardware, the screen itself.

Why is this important? The success of the user interface of mobile devices will have a huge impact on how the mobile world evolves. The iPhone actually plays in the real world more like a browsing and app platform than a phone/messaging device, a reality that will ultimately impact its adoption among the non-early-adopter crowd.

Innovative hybrid input/UI solutions such as those from Google, RIM — and certainly, future iterations of the iPhone — will have a major impact on how such devices will be used in the future.

At last week’s Telephony Live event in Chicago, panelist Thomas Howe tried to downplay some of the iPhone App Store love in the room and told the audience to look at RIM and the Blackberry for another, more enterprise-focused application strategy.

Well don’t look now, but a Blackberry app store is apparently just around the corner as well, if we’re to believe the leaks (courtesy of Crackberry.com). The store will be on-device, which, beyond the obvious UI advances Apple has brought to the game, is really the biggest game-changer with ALL the new app stores — easy access to apps right on the device.

Even more intriguingly, RIM has apparently found room for mobile operators to be part of its app strategy, says Crackberry.com:

While the iPhone App Store is the one-and-only hub for developers to sell apps and consumers to purchase them, it seems RIM is really providing the Application Center as an additional tool for carriers to more easily distribute their supported apps (think carrier billing for apps that are not free). At this point I’m not expecting to see thousands of BlackBerry Apps available for purchase on-device anytime soon (carriers tend to be pretty stringent in terms of what they’re going to support).

The opposite of the apparent RIM strategy isn’t Apple but Android, whose app store will have a very low bar of participation, in keeping with its open source, Web-centric focus.

It makes good sense, if it’s true, for RIM to keep close ties with mobile operators. Carriers are good partners — and sales channels — for not only RIM devices but Blackberry push email service. And with a more enterprise focus, operators will be able to help market, distribute and possibly even help bill and support Blackberry apps.

It’s good to see variations on the app store — especially ones that aren’t all about routing around mobile operators.

Not to say there won’t be RIM route-arounds: an independent, on-device store — BerryStore.com –  just went into beta.

May the best apps strategy win.

Earlier this week VoIP and apps platform vendor Broadsoft announced the winners of its voice mashup developer contest. 

I’ve written about Broadsoft’s mashup platform a handful of times (1, 2, 3) in the past, so they were kind enough to contact me to be a judge in the contest. I’ve been skeptical about the value of voice mashups, particularly on the wireline side (it certainly seems Android0 and iPhone-style mobile apps will be where the action is).

Did my time as a judge change my mind? Yes and no. Read on below.

THE FINALISTS

The finalists came down to six apps. Four of them provided access via a PC or mobile phone to VoIP soft clients/IM apps as well as slick check box-style control of calling features, like call forwarding, call notification, call waiting, voice mail management, etc.

I actually liked an app called VFX Manager, which (somewhat embarrassingly) didn’t make the final top three.

It was a very simple PC app that disappeared to the system tray but provided easy access to all the ways you’d want to control your phone. I know if I had an app like this, I’d use it. That’s why it got one of my top votes.

What all of these phone control apps had in common was that they took very difficult to control — but simple to understand phone features — and made them much easier to manage.

Most of us work at PCs all day, so using a simple app as an interface is not only natural, but preferable. Many times, I have occasion to forward my phone but as often as not forget to do it because it just isn’t convenient.

The other notable aspect of these apps was that they came in a few different desktop styles, including a slick Adobe Air application, called QuickSet, that came in third place in the contest (see the interface below).

THE TOP TWO

While call control apps are nice, the top two applications succeeded in doing quite a bit more. Most importantly, they were focused on business process and not just telephony feature control.

The runner up app was called Project ARCTIC, and was created by New Zealand carrier WorldXchange. It dealt with the less than thrilling — but mission-critical — process of accounts receivable. Yes, A/R. You certainly don’t see many Web mashups targeting accounting functions (more on that later).

The application leveraged access to the Broadsoft platform APIs and Voice XML scripts on the back-office side of the business to deal with delinquent accounts. Before receiving a formal letter, the system automatically sent out a click-to-call message alerting the customer to the problem and offering to transfer them to an agent to deal with it.

The ultimate winner was dubbed Disaster Dispatcher, written by Thomas Howe — with whom we did a podcast long ago and who is sitting on a panel at our upcoming Telephony Live event. The application integrated Twitter, RSS feeds and the Broadworks API to create a one-window communications tool for emergency operators. The look and feel was a bit like a small call center, but communications spanned the Web and telephony worlds, with status updates provided via Twitter and click-to-call (via cell phone, more likely to be reachable during an emergency) handling the voice side. The RSS feeds kept the dispatchers up to date with external news on the emergency.

Thomas is perhaps the most vocal advocate and a leading practitioner developing so-called communications-enabled business process apps today. Disaster Dispatcher showed what’s possible with open telephony APIs and links out to the Web world.

THE VERDICT

So as I mentioned in this post (and hinted out in the headline), my top vote went to a call control app. I thought it was the cleanest, clearest example of what could be done with the APIs. I * did * pick Disaster Dispatcher and Project ARCTIC in my top three, so I wasn’t far off the pace.

What are the implications here?

In the end, it’s hard to argue that the two apps that would have the most business impact came in as the top two. They didn’t sport the slickest interfaces nor do the fanciest jobs. Rather they used telephony APIs to support business processes — what is likely to be the bread-and-butter of the voice mashup development world. It’s not sexy nor consumer-oriented.These sorts of apps will never fill-up an App Store. That will make the ultimate success of voice mashups hard to measure.

But they hold the potential to improve key business processes while also driving voice usage and integrating the world of the Web. And more than anything, they’ll help service providers help their customers — and that’s a winning proposition.

- I wrote about the Android launch yesterday. A few more tidbits worth noting:

• The G-1 TOS seems to imply that even with an unlimited plan, users consuming more than 1GB of data per month will be throttled back to low-speed access, though T-Mobile denies it.
• Wired did the TCO math and found the T-Mobile G-1 $380 cheaper over a two-year contract than AT&T/iPhone.
• Google’s GTalk app on the phone is not set up to allow VoIP calling, although there are supposedly not specific limits on third-party VoIP apps coming to the Android Market.
• It’s worth noting that the G-1 is fully integrated into the Google world; you need a Gmail account to even use the phone and all data, contacts, email, etc. is synched to the Google cloud, not your desktop. This gives Google a huge lead over Microsoft on this front, which is busy replacing desktop apps with cloud apps on the desktop but as far as I know hasn’t even talked about such integration in the next version of Windows Mobile.

So Verizon is apparently well on its way to cutting a search deal with Google. Terms are still rumored, but it looks like Verizon would put the Google search bar on is phones — and maybe on its Web portal and FiOS video services as well. In exchange, the two would share search revenues. The deal would give Google preferential access to 68 million subscribers — a much quicker router to mobile success than building and selling an entire operating system from scratch. Sure these two have been rivals in the past — competing for 700Mhz spectrum and vying over net neutrality issues. But AT&T is in bed with Yahoo for search, which makes a Verizon/Google pairing all the more strategic.

Also notable: Verizon’s search option already comes in second to Google on Verizon devices. According to Nielsen Mobile (via the NY Times story on the deal), of the 36 million VZW users who access data using their phones, about 13.1 million search the Web. About 3.8 million of those users already access an off-deck search engine like Google or Yahoo; only 2.3 million use Verizon’s search tool — even though it’s more prominently featured.

That points to at least one thing Verizon will be getting in this deal: association with the strong Web/media brand that is Google.com. If mobile users want to see Google on their phones, Verizon would be smart to give it to them.

But is that enough to make the deal worthwhile for Verizon?

It’s interesting to note that what appears to be holding up the deal, according to press reports, are negotiations over how much information Google can retain about Verizon’s customers and their searches.

Here’s where things get more interesting.

One way this deal could end up is that Verizon gets a few advertising dollars, but Google gets the real prize: access to millions of users, a data store of their profiles/location data and the ability to serve those customers targeted ads.

What Verizon — and other network providers — should focus on is crafting a deal where not only are they sharing in Google’s straightforward ad-serving revenues but they are extracting value (via straight fees or better revenue share terms) for their information about their users. Whether extracted from their billing systems or lifted in real-time for their activity on the network (such location information or DPI-extracted knowledge), operators should be selling this information to Google, which in turn should be using it to extract higher CPMs and better ad rates from its advertiser customers.

In this way, all parties do what they do best: operators run their networks and manage their customers; Google builds search algorithms and sells ads. And in the end all boats rise.

Sure, Google could do a lot of this themselves. They could use cell tower triangulation or GPS for customer location and put their “cookies” on steroids to track mobile users like Web users today.

But that’s no more a winning proposition for them than building a search engine is for Verizon or other operators.

Want to see a model of how an easy money — yet high-impact — Google deal works? One where each party does what *they* do best and each side comes out a winner?

Consider Mozilla, the open source holding company that builds — and gives away for free — the Firefox browser. It recently extended for another three years a deal with Google that makes it the default search engine in Firefox. In 2006, it was making almost $60 million off that arrangement; today market watchers figure they make two to three times that — and that’s for simple preferred placement.

But Verizon is no Mozilla, and a Verizon/Google search deal should use that as a starting point in a deal between digital equals.

Ask anyone: music subscriptions are a really crappy way to listen to music. That is, until Apple pronounces that it is cool — as it is rumored (again) to be considering.

The irony, of course, is thick in that opening paragraph. But there’s some truth in it too. Myself, I’m a big believer in music subs: I used Rhapsody until PlaysForSure failed to work; I was a member of a now-defunct P2P music sharing site that was like a dream come true (before it was shut down); and am now — believe it or not — an all-you-can-eat Zune sub, with a — believe-it-or-not — BROWN 30GB Zune I bought on Woot.com for just $79!

But enough about me. The truth is, even though music subscriptions are a great way to sample a wide array of music, very few users take advantage of it. Why? The iPod. Most people use iPods and Apple doesn’t offer a subscription service.

So what will happen if/when Apple does? My guess is that it will prove a big success, changing the digital music game from downloads to subscriptions. And chances are that the iPod/iTunes pairing will be the main way music buyers buy subscriptions. A possible close second: Nokia, which began experimenting with its Comes With Music Service.

So where are the operators? If device makers like Apple and Nokia can prove the market, there may be a chance for service providers to add mobile music services to their monthly bills. Verizon Wireless, in fact, has experimented with handing its device music service over to Rhapsody, albeit very quietly.
Or it may be too late. Which would be a shame, because with a little bit of foresight, it could — should — have been operators, and not Apple, to benefit from the ARPU-fattening possibilities of subscription-based music.

Twitter — the tech-elite-popular SMS-like micro-publishing/messaging service, if you didn’t know — this week announced $10 million in funding, including an investment from Amazon founder Jeff Bezos.

The Bezos addition is interesting because if anyone knows how to scale an online business it’s Amazon — and Twitter definitely needs help scaling because despite (or probably more likely because of) its popularity the service has suffered repeated downtime.

In announcing the investment, the Twitter blog proclaimed the service’s goal was not to come up with a business model (at least not yet) but rather to establish itself as “a global communications utility.”

At its core, Twitter is SMS-for-large-groups. If with SMS you send a personal message to one person, with Twitter you send a not-so-personal message to everybody “following” you — for some super-users, that’s thousands of followers at a time. The result is a kind of highly-distributed “town-crier” effect in which news and new ideas spread very quickly across the Twitter-sphere.

As a would-be “communications utility” and a clear cousin to the extremely lucrative SMS, Twitter would seem to hold appeal to service providers. But without a business model in sight, can carriers really be bothered with Twitter? The clear answer seems no.

And that’s too bad, because Twitter could use a dose of “five-nines” religion right now if it’s ever to make it pass the early adopter phase and into the mainstream. As the telco industry knows, the SMS explosion came with its own growing pains.

The biggest difference, however, is that even as SMS was growing (and struggling to grow) carriers were able to track — and bill — on per-SMS-message basis while Twitter continues to search for a way to turn Tweets into revenue.