By David Meyer
Friday, May 26 2006 10:17 AM
URL: http://www.zdnetasia.com/news/communications/0,39044192,39361708,00.htm

Analysts have warned that mobile operators may fail to capitalize on the full benefits of instant messaging (IM), which has the potential to overtake text messaging in popularity in the mobile space.

"The main replacement for SMS (short-message service) will be mobile IM," Ovum’s John Delaney said on Wednesday.

Citing a "faltering of growth" in the SMS market--outside the United Kingdom, at least--Delaney told delegates at the Global Messaging Congress in London that mobile IM "does it better, but if operators price it right it doesn’t do it any cheaper".

He later told ZDNet UK that he believed "IM will gradually take over from SMS in the next five years in Europe".

Delaney's views were echoed by Paolo Simoes of Portuguese carrier TMN, who said: "IMS-enabled IM/SIP messaging on convergent devices will be the predominant mobile messaging technology of the future, replacing all others."

But James Enck, an analyst with Daiwa Securities, believes operators could lose out in mobile IM because of their traditional approach to interoperability.

"If implemented in [the] way that carriers typically do, which is to pretend that the rest of the world doesn’t exist, then it’ll be a big failure," he said on Thursday.

Enck also pointed to IM’s capacity for showing other users’ online status as one of several discouraging factors for telcos.

"Presence in IM is certainly very compelling to the end user but, if you think about the revenue model for cellular operators, a lot of their money is made from a lack of transparency," he said, highlighting the revenues gained through roaming and voicemail. He added that the likelihood of widespread flat data rates in the near future would also make the proposition unattractive, as "SMS is the most profitable product in the history of telecoms".

The main efforts towards interoperability were being made by "IM giants", and "independent players who have a solution on the software side", said Enck.

The last year has seen IM interoperability agreements between MSN and Yahoo, and--through Google’s recent investment in AOL&--between Google Talk and AOL’s client.

Handset vendors were also an "important wildcard", said Enck, who suggested Nokia’s decision to open up its new series of mobiles to third-party softphone client developers indicated it had lost patience with carriers’ ability to take the initiative.

Nokia also teamed up with Google on its recent 770 Wi-Fi tablet, which has no GSM capability but now supports voice over Internet Protocol (it comes pre-installed with Google Talk) and Jabber-based IM.

Operators such as Orange, Vodafone and T-Mobile did agree earlier this year to work towards interoperability for any proprietary IM clients, but observers have suggested browser-based clients could prove more popular because of their large existing communities.

More competition to own-brand clients could come from social networking operations such as MySpace, which recently soft-launched its IM client and earlier this year went mobile in partnership with new US phone brand Helio.

"It’s not just the major usual suspects [such as MSN], but community interests and social networks who’ve got a major lead on the carriers in this space," said Enck.

Delaney insisted to ZDNet UK that the success of mobile IM would require "the co-operation of the operators and [having] them involved in revenue participation".

However, he acknowledged his prediction was "optimistic" and predicated "on the operators deciding to embrace IM in a way that they haven't been thus far".