Orange, mmO2, T-Mobile swap photo messages

Update: Some may have been surprised to find that the camera phone they got for Christmas couldn't send pictures to phones on other networks. Three UK mobile phone networks have now made the first step to remedy the situation

Orange, mmO2 and T-Mobile have begun to correct one of the dirty little secrets of the widely hyped Multimedia Messaging Service (MMS) technology: that it does not work across different companies' networks.

MMS, marketed by Vodafone, Orange, T-Mobile and mmO2 under names such as picture messaging or photo messaging, was introduced with great fanfare in the latter part of last year, as part of the network operators' plans for recouping billions of pounds spent on next-generation technology. But the initial services could not send images directly to friends using competitors' networks.

Deals announced on Sunday and Monday could begin to change that situation, with mmO2 agreeing to allow picture exchanges with Orange and T-Mobile. Orange said that deals with other major networks could be concluded by this summer. Customers on Orange and T-Mobile networks can send MMS messages to mmO2's UK network right away, and vice-versa, although T-Mobile and Orange customers still cannot exchange pictures directly.

European mobile phone companies have spent about 100bn euros, or about £65bn, on licences and technology for 3G networks, which will bring greater capacity and speeds high enough for video communications. Handsets with colour screens, tiny cameras and MMS capabilities were heavily touted in the run-up to Christmas, despite the lack of network interconnection.

However, a new report argues that MMS revenues are unlikely to add up to the panacea that mobile operators are hoping for.

The report from Datamonitor, released on Monday, predicts that the MMS market will grow at a rate of 388 percent per year for four years, but will still only be worth $4.9bn (or about £3bn) per year, by the end of 2006.

This is largely because the costs for operating MMS services are substantial, unlike the negligible cost of offering SMS, according to Datamonitor.

"As well as seeing phenomenal usage, (SMS) margins crucially stand at over 95 percent on the service. This is not the case with MMS," said Richard Clifford in a statement. "While the fall in SMS revenue will be more than evened out by the increase in MMS revenue over the next couple of years, operators' profitability will be hit as the margins (for MMS) are considerably lower."

Clifford also predicted that text-messaging revenues will peak this year, and then begin to decline as other technologies emerge.

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