Vodafone And MSFT Reach Inter-Modal IM And SMS Connection

In an important development for the world of communication, Microsoft’s MSN division and Vodafone have reached a deal to interconnect the Vodafone SMS network with the MSN Instant Messaging community. At Techdirt we often cite Metcalfe’s law, which says that the value of a network increases exponentially as the number of connected nodes increases. By adding the 165 million MSN IM users together with the 155 million Vodafone subscribers worldwide, it’s closer to a 4x benefit to consumers than a 2x benefit. The big IM companies have been looking for ways to patch in to the mobile messaging SMS networks for a while. That’s because the mobile phone carriers have been raking in a ridiculous 10 cents per SMS, while the IM guys get a more anemic 0 cents per message. The interchange deal will follow a Calling Party Pays model, which means that MSN IM users will need to open their wallets on MSN if they want to send or reply to a Vodafone SMS user. This is very significant for MSN, who can use the SMS community as a crowbar to wedge open the tight purse strings Internet users seem to have. Once the purse is open (an auto bank withdrawal, credit card, or stored-value) it becomes easier for MSN to sell other communications services or other services like online gaming. Presence is also an interesting part of this deal, and presence information will apparently be shared between the two networks. A while ago, my consulting firm advised our mobile carrier clients that for mobile IM, they should build their own branded clients, and patch them into the big IM networks instead of adopting the IM brand as an IM client on the phone. We were sure that the closed communities of Yahoo!, AOL, and MSN IMs would open up if their were money on the table, which now appears to be the case. The mobile carrier should try to ‘own’ the relationship with the customer, especially for IM, which is a communication service and core to a telecom. Vodafone seems to be managing this strategic risk, so the deal is likely to be good for the two partners, and their customers.

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