I've been thinking a little about the amount of text that can be moved over SMS messaging. Like around 1000 characters ... or a whole lot more than the 130-160 characters allowed in a standard uncompressed message.
It seems that if I write a text message with lowercase letters, numbers and a few punctuation marks, I could get by with a character set of maybe 42 characters ... whereas raw SMS seems to be able to carry a full 224 characters (from 0x20 on up).
On this assumption, the true bandwidth of a 160-character message is 160*224 = 35,840 distinct signals. (Assuming also that carrier-side compression is adaptive, so that as a message uses more of the bandwidth, carrier compression drops towards zero.) 35,840 signals is about 853 characters in a 42-character set. In a 48-character set (or allowing for more mode/signaling codes) we get 747 characters. And this is before applying any Huffman coding, any knowledge of common txtspeak, etc. Assuming we get some yield from those techniques, I'm SWAGging we could hit 1000 characters.
Despite the fabulous data rates of HSDPA, EV-DO, etc., there are core benefits to SMS: living in the signaling layer of the network, it works where voice calls and 3G (or 2G for that matter) data transport don't. Plus it provides fire-and-forget together with delivery tracking.
The idea of compressing SMS messages is not new -- there are a couple of relatively unused consumer-facing applications that let you send and receive compressed messages. It's also likely that the Blackberry push system and Microsoft's older pre-DirectPush real-time ActiveSync -- which both use special SMS messages to trigger device sync -- compress those messages.
If SMS message plans offered by wireless carriers are priced to average some profit per message, then there's little reason a carrier would promote a technique that lets consumers send fewer messages.
Maybe building this compression into on-deck txting is a first hack for your new OpenMoko phone. Plus it will motivate your friends to get one too since no one else will be able to make sense of your compressed messages.