Who (Dis)Continues to use SMS in the Age of Ubiquitous Mobile Internet Access?: A Two-Level Investigation of Residential Mobile Communications Customers in Germany

Who (Dis)Continues to use SMS in the Age of Ubiquitous Mobile Internet Access?: A Two-Level Investigation of Residential Mobile Communications Customers in Germany

Torsten J. Gerpott (Mercator School of Management, University of Duisburg-Essen, Duisburg, Germany)
Copyright: © 2015 |Pages: 23
DOI: 10.4018/ijebr.2015070103
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Abstract

Using data of 11526 residential postpaid subscribers of the German subsidiary of a multinational mobile network operator (MNO) extracted from the firm's customer and billing records, this investigation empirically examines the association between monthly mobile Internet (MI) data traffic volume generated by consumers and their monthly number of SMS sent at the within- and between-subjects levels over 25 months from October 2011 to October 2013. Multilevel analysis of the time-varying and -constant study variables suggests that, in spite of a sharp decrease in the average/median number of outgoing SMS in the course of the investigation period, customer heterogeneity with regard to the relationship between MI and SMS use intensities is very large. The number of customers with a negative with-person regression slope for MI data volume is almost as high as the number of consumers, whose slope is positive. Subscribers, who are most likely to reduce their SMS volume in parallel to an increase of their MI data traffic, are persons, who (1) are heavy SMS users in the initial study period (October 2011), (2) are female, (3) have a longer MNO tenure, (4) are currently in an SMS flat price scheme, (5) are presently equipped with an Apple iPhone or a Samsung Galaxy smartphone and (6) put their current handset into operation more recently. Implications of these findings for service-marketing strategies of MNO and for future research on demand interdependencies between relatively newly introduced and well-established mobile communications services are discussed.
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Introduction

Since the first trials in late 1992 the Short Message Service (SMS) provided by mobile network operators (MNO) has changed the way people communicate everywhere in the world. Market researchers estimate that in 2014 the number of SMS delivered globally per day amounts to about 21 billion (Deloitte, 2014; Informa, 2013). The popularity of SMS has even led to concerns about an excessive integration of this service in people’s daily lives, particularly among younger MNO customers (Lu, Watanabe, Liu, Uji, Shono, & Kitamura, 2011; Skierkowski & Wood, 2012). However, in the recent past the massive proliferation of so-called smartphones with browsers, which enable consumers to conveniently access the Internet and its services via data networks of MNO and with the capability to run software applications downloaded with the help of wireless or wired telecommunication networks has drastically changed the demand prospects for SMS. In particular, downloadable over-the-top (OTT) messaging applications, such as WhatsApp or Facebook-Messenger in Europe and the US, WeChat in China, KakaoTalk in South Korea or Line in Japan which smartphone owners can take to instantaneously send/receive text messages enriched with photos or other media elements to/from contacts using the same application, are portrayed as better surrogates of the old-fashioned SMS (Leonhardt, 2012; Mäkinen, Luukkainen, & Karikoski, 2014; Nikou, Bouwman, & Reuver, 2012; Ogara, Koh, & Prybutok, 2014; Rio & Malik, 2013).

Indirect support for this view can be obtained from a secondary analysis of use statistics collected at the aggregate level of national mobile communication markets. According to OFCOM (2013, p. 302) the average monthly number of outgoing SMS per capita decreased in 2012 relative to the previous year by 5.8% in the US, 11.1% in Sweden, 25.1% in Spain and 29.3% in the Netherlands. In the same period mobile Internet (MI) data traffic and revenues soared in each of the four countries (OFCOM, 2013, p. 298). Specifically in Germany, the country which is addressed in the present empirical analysis, the number of SMS recorded in 2013 was 37% lower than in 2012 while MI use intensity (= volume of Internet Protocol (IP) traffic down- or uploaded over the infrastructures of MNO) increased by 71% compared to 2012 (Bundesnetzagentur, 2014, p. 77). Rio & Malik (2013, p. 7) estimate that the worldwide loss in revenues of MNO in 2014 due to the substitution of SMS by various MI services amounts to 21 billion USD (equal to about 16 billion EUR as of October 2014).

The market level trends may be taken to suggest that SMS and MI services in general and mobile instant messaging applications in particular are close substitutes for each other (Mäkinen et al., 2014). In line with this, quite a number of analysts conclude that the SMS era will irretrievably end in the short- to mid-term future (Fröhlich, 2011; Jayakar & Park, 2014; Kern, 2012; Rio & Malik, 2013). For MNO this view implies that hardly any further resources ought to be invested in the development of SMS pricing concepts and SMS sales strategies which offer the service on a stand-alone basis or package it with MI access offerings.

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