Australians are increasingly using free apps to send text, picture and video messages and make calls - with savings over $100 in value a month for heavy texters - raising the question of whether telcos are becoming merely a "conduit" for smartphone makers and app designers.

Apple will hurry this shift along this week with the release of a new free messaging service for iPhone owners. But carriers, for their part, say SMS is still going strong.

Email and other electronic communication on smartphones is now virtually free, making it more difficult to justify charges of 25c per SMS and more for picture messages. Telstra charges 75c to send texts overseas.

Many are choosing to avoid these charges by using apps such as WhatsApp, Facebook, Skype, Windows Live messenger, Viber and Bump. These are largely used for sending text, picture and video messages but Skype, for instance, can be used for making calls.

Bundle plans make it difficult to determine how much an average user could save from switching to free apps.

But Rolf Hansen, CEO of low cost carrier Amaysim, said heavy texters sent about 500 texts a month or more and at an average rate of 25c a text, that worked out to $125. He said switching to free apps could save 95 per cent of this cost.

"You can't stop technology and if consumers see benefits they will embrace them, full stop ... as we can't stop it we're just trying to come up with smart data products that people will use to bypass some of the legacy products [like SMS]," he said.

High margin SMS 'progressively eroding'

The free apps are richer than standard SMS messages and users can see which of their friends are online and whether they have read their message.

"Over time what we're seeing is that these kind of very high margin telco services are progressively disappearing, progressively eroding," Nick Ingelbrecht. research director for Gartner, said in a phone interview.

Jordan Zacharowitz, 18, from Sydney, uses tools such as Whatapp, Twitter and Facebook to send a large chunk of his messages and would send more if more of his friends had smartphones.

"I'd say maybe 40 per cent would go through Whatsapp and other messaging services," he said.

With Apple's update to its iOS platform this week, iPhone users will be able to quickly and easily contact each other for free using iMessage.

More Australians own iPhones than any other smartphone and the feature is similar to BlackBerry Messenger, which has long been one of BlackBerry's key drawcards. Microsoft, Samsung and Google are reportedly working on integrating similar apps.

With these apps, instead of using the carrier's mobile network it instead uses the data network, which consumers still pay for but at a much lower average rate per message – just a few cents.

Telcos becoming 'dumb pipes'?

Elise Davidson, spokeswoman for the Australian Communications Consumer Action Network (ACCAN) said Australians had a well-known voracious appetite for new gadgets and many savvy customers were using apps to text for free.

"Now this may seem like pie in the sky stuff for some, but there's a definite trend towards data away from voice and text," she said.

"The telcos will no doubt be looking at their bottom lines to make sure they don't just end up a conduit through which smartphone manufacturers and app designers make money."

Telco reps have previously complained that companies like Google were transforming them into "dump pipes".

Not just for the geeks

Ben Zocco, 19, from Melbourne, said he was a "massive Twitter nut" and also used Whatsapp and Facebook to send messages.

"I've got unlimited texts and I still prefer using the more data-based contact methods," said Zocco.

"If I load up Whatsapp for instance 40 or 50 of the contacts on my phone use the app – it's not just the tech savvy people who do it, it's normal plebs who use the apps due to text messaging restrictions and you can see whether someone's online, whether they've received your message and whether they're replying to you."

A recent Ovum report found mobile messaging was fast approaching an "inflection point" as consumers moved from SMS to internet-based messaging services.

"We see a larger proportion of messaging moving away from SMS and MMS towards internet-based services such as instant messaging (IM), email, messaging apps, and mobile social networks," wrote Ovum analyst Neha Dharia found.

"[A] larger share of messaging revenues which initially went to the operator [are] now falling into the hands of third-party services or adjacent players such as Google and Facebook."

Analyst firm Gartner said in a recent report: "[Telcos] need to factor into their revenue forecasts the increase in smartphones among younger people. Growing use of social media on mobile devices by this demographic will increasingly eat into traditional messaging revenue."

Growing number of Aussies using free apps

Telsyte telecommunications analyst Foad Fadaghi said a recent survey Telsyte conducted of 1143 Australian smartphone users found 44 per cent had a free instant messaging application.

But he said the availability of large text and voice caps as well as unlimited plans had so far mitigated the ability of free apps to eat away at carrier SMS revenues.

"53 per cent of mobile IM users in our survey indicated they have not changed the amount of SMS messages they send and receive due to mobile IM," he said.

"Despite this, IM messaging is very popular especially for people communicating with friends overseas, where text messages are charged separately and often at much higher rates."

Fadaghi said that using services like Skype to replace phone calls had been limited due to 3G network reliability issues, but many were using it to save costs on overseas calls.

'There's a huge amount at stake here'

In the US, more than two trillion text messages are sent each year generating more than $US20 billion in revenue for the industry. SMS revenues account for about a third of Verizon's operating income.

"There's a huge amount at stake here," Craig Moffet, a telco analyst at Sanford C. Bernstein, told The New York Times.

"They are undermining the core business model for an industry that makes most of its money from services that are high priced and low bandwidth, like texting."

Telcos not worried

An Optus spokeswoman said SMS remained a very popular product with its customers and noted that Optus offers unlimited SMS on many of its most popular mobile plans.

Vodafone said it hadn't seen a major take up of free messaging apps or IM services and in fact Vodafone text messaging use was "continuing to grow strongly".

"Vodafone Infinite plans are based on a flat rate (from $45) and give customers infinite texts to personal mobiles here and to overseas mobiles as well as standard national calls, social networking on a range of sites and data so customers can download and use whatever apps they like – messaging or otherwise," a Vodafone spokesman said.

"There's also a new prepaid offer – the $30 prepaid cap – which includes infinite texts each recharge."

Telstra said its SMS messages were also growing and had hit 9.9 billion messages last year, up 5.4 per cent on the previous year.

But Gartner's Ingelbrecht said these increases could be partly explained by organic growth such as the acquisition of new customers. He said the growth in SMS text messages had slowed as people increasingly used free apps.

"There's inevitably going to be a ceiling and what we're going to see is ...  attrition of the text messaging market to other communications protocols whether it's instant messaging or a cheap voice call," he said.

IDC figures seem to back this up. Analyst Yee-Kuan Lau said free messaging services were having a "noticeable impact" on local mobile service providers' SMS business.

"SMS traffic growth fell from 15% YoY in 2009 to just 5% YoY in 2010. IDC believes SMS related revenue will drop from 19% YoY in 2010, to just 5% YoY at the end of 2011 as a result," Lau said.

This reporter is on Twitter: @ashermoses