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While no UK carrier seems to want to foot the bill entirely, why don't they just go in for a month's worth and use it as an advertising gimmick for their company to show they're 'down wit dem kidz' and social networking. You have Orange offering free access to Facebook, why not free updates from Twitter? Marketed properly this could be good for everyone (Twitter, Phone company, Users).
And if the ultimatum was that you got sent an advert via SMS every 5 updates you receive, would you mind if it allowed the service to run free?
Personally, I love the userbase that Twitter has, but if nobody's bought them by this point, they better have something nearly ready to implement. Otherwise, this will just slow the inevitably collapse. I'm interested to see who/what will pick up the slack if that does become the case.
Unfortunately, many Internet ventures get started without a viable business model and get lots of traffic, but are never able to capitalize on that traffic without a good model.
What about via SMS and and Twitter clients? Well, each user can have a mandatory "friend" like Tim on Myspace that will tweet relevant ads based on keywords targeted per user that only tweets in a proportionate ratio to how often a user tweets and their friends tweet so there is a decent signal to noise ratio.
Do I win a prize? =)
Also, while DM per SMS is nice (which is the feature I assume most people really use and not having everything delivered to their mobile) it is doable by mobile internet. That could be an angle to work it, but mobile phone providers are not interested in small apps with low footprint, as it does not bring in money.
To give you a reference: I use twitter extensivly through a prepaid data plan when in Germany for 24 Euro cents a mb and made barely 3 megabytes since last christmas. Not much to get there.