Skype, Google Voice and Viber allow wireless users to make calls over the Web and avoid charges for minutes of use. Texting services such as GroupMe, Beluga and LiveProfile let users tap messages to one another without the fear of blowing monthly limits.
Now the big telecoms are scrambling for new ways to serve consumers, and finding that with so many free and low-cost applications available, the biggest game in town is mobile Web access.
“Customers are getting used to the idea of getting things for free and in other ways than from a carrier,” said Jeffrey Silva, an analyst at Global Medley Advisors. “That puts the onus on wireless carriers to come up with new ways to monetize their networks and get people to stay within their universe of services.”
The transition from their core businesses to the Internet has been rocky.
For years, carriers have enjoyed the lucrative business of providing voice calls and texting, which cost little to operate and reap big returns. With the Internet, carriers saw an opportunity to provide high-speed connections to devices beyond the telephone — not just tablets and smartphones, but even cars, dishwashers and toys.
Wireless carriers have seen revenue from Internet data increase five-fold to $46.8 billion in the past five years. Alcatel-Lucent, a network equipment provider, projects data consumption to increase 30-fold in the next five years.
The AT&T offer to buy T-Mobile for $39 billion, announced Sunday, is in part an effort to capitalize on the data explosion and to compete with industry leader Verizon Wireless. AT&T has said that adding T-Mobile will bolster its high-speed Internet network to better meet President Obama’s goal of expanding broadband access to all corners of the country. Analysts also say that T-Mobile would help AT&T alleviate network congestion, especially in cities, though critics complain that the merger would reduce competition for consumers.
The network is key, because carriers have had little success launching their own apps to attract users. Verizon’s VCast video player is meant to compete with Hulu and YouTube, but has not had nearly as much traffic. Sprint Nextel and T-Mobile have global-positioning apps that struggle to compete with Google Maps. All have talked about social-networking apps, plans that quickly faded with the rise of Facebook and Twitter.
And connecting all those gadgets to cellular networks has proven to be a challenge. Text messages and calls are tiny and cheap to carry compared with streaming a YouTube clip over a mobile phone. The iPhone showed carriers how vulnerable AT&T was to the flood of online traffic that hit the network all at once.