So why didn't Indian telecoms implement all-you-can-eat messaging to stop the erosion of users moving to WhatsApp?

Even better they partnered with WhatsApp and offer "unlimited WhatsApp" packs:

http://telecomtalk.info/tata-docomo-launches-unlimited-whats...

SMS costs Rs1 per

The number of WhatsApp users in India is still infinitely less than the plain vanilla SMS people. Specially the ones living in villages which is a huge majority with a huger margin.

We also have SMS packs like 100 SMS a month by paying Rs 40 or so. But a DoT rule (which was actually twisted and misinterpreted by telecos) make that plan ineffective on any festive day and on those days you pay for each SMS and the rate is almost double or x3 or sometime x4 of what you would have paid without the SMS pack :-)

They did for prices ranging from $1 - $2 per month. But text messaging does not do groups remotely as well as Whatsapp does.

You can use it do group thing but then every message sent to group will charged as: cost of one SMS x number of users in the group.

That charge will come to each user of the group whenever a message (%160 chars) is sent.

Indian telecom sector is highly regulated by the Govt. And it is very competitive. So there's no way such an all-or-nothing deal can be introduced so late in the game.

Edit: Moreover, the telecoms do make money on the data plans don't they?

The best part is most womenfolk at home, can use unlimited messaging if all they is a wifi connection and absolutely no balance on their pre paid cards.

Essentially WhatsApp is free messaging as long as you have a internet connection. And that's pretty cheap these days.