Although Short Message Service (SMS) is an integral part of the GSM standard deployed throughout Europe and Asia and with VoiceStream Wireless Corp. (stock: VSTR) in the United States, the message system's deployment needn't be tied to GSM only, said Logica officials.

Logica announced an exclusive deal to develop 3G messaging for AT&T Wireless Group (stock: AWE).

Although AT&T is planning to switch its network to GSM, the wireless operator recently unveiled its first two-way SMS services on its TDMA network.

While U.S. operators start to roll out two-way SMS services, Logica maintains European operators should start to lead the way with new SMS-based services instead of looking to WAP and waiting for the next generation of faster networks.

Logica, which has been working with operators around the world to deploy messaging systems in their second-generation networks, maintains that SMS will take off and can drive revenues far quicker than new WAP.

"Most handsets are not WAP and there are major costs for operators in subsidizing their subscribers' change to upgrade to WAP-enabled phones," said Rick Allen, director of business development for wireless Internet at Logica.

According to Logica, slow networks and tiny screens on expensive new WAP-enabled phones hamper WAP services.

With SMS deployed across Europe and just starting to be deployed in the U.S., that technology, according to Logica, supplies a rival way for operators to offer data.

Under Logica's scenario, instead of operators pushing wireless Web browsing using WAP infrastructure and handsets, SMS should be used to offer access to similar information, but using short messages and menu-specific information, accessed more quickly than through a WAP network.

There are already billions of SMS messages sent every month by wireless subscribers around the world.

According to Logica, operators should build on that user acceptance of the technology and leverage it both grow revenues and get subscribers used to using their phones to purchase goods and services.

"The big issue facing wireless operators is how to make money out of 3G," Allen said. "We maintain they should focus on making money from data services in 2G that can be migrated to 2.5 and 3G."

SMS micropayments could not only raise traffic and revenues on wireless networks, they can be used to make significant operating savings.

"Fifteen to 20 percent of the money an operator makes on a prepaid wireless card goes into producing and shipping the card," Allen said. "Instead, SMS can be used to offer a far less expensive way for subscribers to top up their accounts."

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