Nationwide SMS is dirt cheap in most of Europe too. But the cost goes up rapidly when you send messages across borders, say from Italy to Germany. And international MMS are just ridiculously expensive. A friend of mine once paid ~5€ for a single MMS sent from Croatia to Germany. Croatian, Slovenian and Austrian telcos all wanted their share of roaming fees.

With WhatsApp you don't need to worry about all these things.

Seems like carriers or device manufacturers could easily undercut them by offering the same service, but preinstalled. I guess Apple already does, with iMessage. If only they weren't so blindly stubborn about interoperability.

The problem with iMessage is that you don't know if your friend has an iPhone.

I agree with this. In South Africa we use Whatsapp more than anything (including BBM these days). When I rocked up in Canada, I found that very few people use Whatsapp here, since BBM is losing market share, I find that most if not all of my colleagues are just using plain ol' text, as they get unlimited texting from their providers.