UPDATED: ‘Sense of panic’ as content vendors respond to Verizon Wireless’ proposed 3-cent texting fee
Carrier softens stance following outcry
October 10 2008 - 2:19 pm ET | Colin Gibbs | RCR Wireless News
The off-deck content world reacted with shock to Verizon Wireless’ plan to impose a drastic new fee for vendor-generated text messages. However, it’s unclear whether the carrier will actually follow through with the charge.
“It came completely out of left field,” said 4INFO CEO Zaw Thet, estimating that the hike may amount to a staggering 50-fold increase in his company’s cost of delivering texts to Verizon Wireless users. “I think this means we will no longer be able to support Verizon customers.”
The nation’s No. 2 carrier this week informed partners that it plans tack on a 3-cent charge for every MT (motile terminated) message processed on its network beginning Nov. 1. MT messages typically include text alerts, interactive voting notifications and SMS search responses, and have become increasingly popular as SMS has become mainstream in the United States.
The notice was distributed by OpenMarket, the Seattle-based division of Amdocs Ltd. that handles billing issues for Verizon Wireless, Sprint Nextel Corp. and others. RCR Wireless News first reported on the notice Thursday.
Today, however, Verizon Wireless seemed to soften its stance on the issue.
“Specific information in one proposal, which would impose a small per-message fee on for-profit content aggregators for commercial messages, has been mistakenly characterized as a final decision to implement. We don't envision this type of change to in any way affect non-profit organizations or political and advocacy organizations,” the carrier said in a statement. “We have not increased the per-message cost to aggregators since our messaging service began in 2003, and we have never envisioned a cost to consumers or content companies, but rather on content aggregators themselves. That draft was intended to stimulate internal business discussions and in no way should have been been released to the public and represented as a final document.”
If Verizon Wireless does indeed move forward with the 3-cent fee plan, smaller players will see their SMS costs double or triple on Verizon Wireless, while bigger players with bulk-pricing deals like 4INFO — the carrier’s most commonly-used short code, according to Thet — will see exponential increases in overhead. What’s more, they’ll have only a few weeks to adjust their business models or drop service to Verizon Wireless users altogether.
And while some companies may opt to send texts by e-mailing messages to the e-mail address of the recipient’s phone (phonenumber@vtext.com), e-mail gateways are far more prone to flooding and impossible to filter effectively, industry sources said.
Other tier-one carriers have long considered implementing MT messaging fees, according to industry sources who requested anonymity. But with SMS activity enjoying a massive surge in the United States, most of the recent discussions have centered on incremental increases and, in some cases, shared advertising revenues.
Indeed, the proposed fee appears to be an effort to leverage the rapidly increasing popularity of ad-supported services such as 4INFO’s and ChaCha’s, which include a short marketing pitch with many messages. Revenues from such offerings have begun to ramp up for mobile startups and their major media partners. Given the relatively small revenues Verizon Wireless sees from MT messaging, it’s possible the operator figured it was time to cash in — and forgo revenues from SMS players who won’t play ball.
Other carriers are sure to be watching to see whether Verizon Wireless can weather a certain storm of fury from its partners — if the carrier does in fact implement the plan. While most pure-play mobile content companies can be easily dismissed, major media and Internet companies are sure to take issue with the new fee — perhaps publicly.
Indeed, Verizon Wireless last year reversed itself after drawing substantial criticism for barring an abortion-rights group from sending text messages over its network, but competitors may follow its lead and implement their own MT messaging fees if the backlash isn’t too severe.
The ironic thing about the proposed move, according to Thet, is that ad-supported services like 4INFO’s have struggled on Verizon Wireless’ network even as they’ve thrived with other carriers. The operator might offset costs with marketing revenues if its network were more ad-friendly, Thet implied.
“It’s not like anyone was making a whole lot of money off Verizon anyway,” Thet claimed, citing Verizon Wireless’ lack of widespread support for text links, which can deliver users from an SMS message to a mobile Web site with a single click. “Verizon was one of the harder carriers to monetize well.”
Regardless, players in the SMS space last week were furiously trying to book meetings with the operator as they drew up contingency plans. And some will surely be reviewing their business models if the No. 2 operator does implement its plan.
“There’s absolutely a sense of panic, and it has to do with the immediacy of the move,” said Steve Livingston, CMO of mBlox, a dominant player in the message-aggregation space. “We really haven’t had time to discuss it. There are a lot of questions that we’re trying to assess. One answer we do know is that certain segments of the market will not be able to participate in it. Maybe certain carriers don’t want to participate; I don’t know the answer to that. But when you get to three cents a message and above, that’s dramatic.”
Verizon Wireless’ proposed fee is in addition to current MT-messaging fees, which typically cost the sender anywhere from a fraction of a penny to a few cents per text. The charge would apply to both standard-rate and premium programs, according to Verizon Wireless’ e-mail notification, but not to text-giving or free-to-end-user campaigns, where the sender absorbs all the costs and the user isn’t charged for receiving a message.
October 17, 2008 06:23 am
This isn’t the first time that Verizon has upset millions of people. Back in 2007, there was its shortfall fee – a $2 monthly charge that was levied to clients who didn’t use their long distance service. Now, Verizon has come up with another creative approach to revenue creation – charging 3 cents for every text message processed on its network. Of course, this charge would arrive on the eve of mobile marketing’s explosion in the US. Clearly, Verizon has seen an opportunity to capitalize on a rapidly emerging market, but its actions, however, do little to embrace the market’s growing acceptance of mobile as a very serious and relevant marketing channel.This new cost, albeit still in “proposal stage” according to Verizon, comes as a shock to everyone in the mobile landscape. The announcement that the imposed new fee would start on November 1st, has not allowed for any significant discussions or greater consideration for the subsequent impact to the industry, and consumers. Verizon, by acting in such a short-minded and selfish way, has marred our industry – everyone from messaging aggregators, content partners, mobile marketing providers – and has potentially set mobile marketing in the US back 5-10 years. If Verizon’s new messaging charge does go ahead on November 1st as threatened, thousands of providers will also be forced to increase their price structures, including ours. This will completely upset the model upon which our industry has been built. But then again, a selfish and short-sighted company wouldn’t care about that. Simply put, this move by Verizon is not conducive to the greater advancement of mobile marketing being considered and conducted by so many companies at a time when they need it more than ever.Scott Springer, Vice President, Strategic ServicesSmartReply, Inc.
October 13, 2008 04:04 pm
Verizon Wireless' move is a slap in the face to it's own Get It Now / Media Center application developers, who were told earlier this year that alerts to wakeup Get It Now apps had to start facing standard rate sms fees, and now are facing an additional 3 cents per message. This makes delivering alerts and content to apps that Verizon Wireless has chosen to include in its Get It Now / Media Center catalog untenable, as most of these developers earn revenue on a fixed per user basis, and have no means of absorbing the variable high cost of standard rate SMS, plus 3 cents/message to boot. Say goodbye to the incredibly convenient SMS wakeup functionality in Verizon's 3rd party on deck apps. VZW's continued closed and predatory approach to application developers for its feature phones will simply drive developers to more open smart phone platforms, thereby hastening the day that all phones are smart phones, and the carrier is little more than a bit pipe.
October 13, 2008 06:01 am
The motive for the charge is unclear, obviously it leads a lot of people to conclude that it's for their own profit. There are too many consequences to mobile marketing and valuable content providers (NOT spam). Most won't be able to absorb the cost and therefore will have to impose it on their customers or go out of business. Verizon, this is no time to be greedy, the mobile platform just started taking off with new exciting innovations, don't cripple them when the economy already is!
October 12, 2008 04:37 pm
Woss: You are missing the point. Those providing premium SMS still have margins. Those of us who provide legitimate alert services such as emergency text messages or the soccer club notifying the soccer team that practice has been cancelled now have a .03 increase! The people who complain about spam are likely receiving all of the spam through Verizon's SMTP services! It baffles me why Verizon even offers SMTP!
October 11, 2008 06:01 am
You all seem to have MISSED, or not seen, the real reason this is happening. Currently in the FCC there is an action whereby VERIZON has failed to allow a number of service companies to use their shortcode on VERIZONs network. While Verizon says it is doing this to stop from ADULT or BAD SMS actions to children, many of the short code applications VERIZON has denied have been for dial around services, whereby VERIZON customers would get a local number to dial when wanting to connect say internationally. Where would this send a bad/disturbing text message to a child? It wouldn't. So VERIZON basically does not allow any kind of competition on the network is the real reason. So now these companies filed suit against VERIZON at the FCC level. (re: Rebtel, etc)http://www.publicknowledge.org/node/1774And why do I say the two are related? Well specifically the First Amendment has been brought into play in this FCC action, and isn't it funny that when VERIZON now sends out to ALL AGGREGATORS a RATE INCREASE (*not to start charging* but to CHARGE MORE) (3 cents more) per MT message, they also now say in this PRESS RELEASE how NON-PROFIT and POLITICAL adds will not be charged, etc.VERIZON fears it is going to lose in this FCC action, and must place obstacles in the way now, instead of blocking, prior to the FCC ruling. Now those folks will be allowed to send messages to VERIZON but at a cost of 5-6 cents (3 is the already existing fee, and with a 3 cent raise, will be 6 cents), the service companies will not be able to do it!! And if you, the service company don't like it, sue them (ever look to see how many times VERIZON / MCI / NYNEX has been sued)Every time their is a dispute,they don't negotiate, or reason, they make you sue. So in two years you may actually be able to get into court on the issue of them charging too much, discrimination, etc.. By then SMS will have passed to some new technology boom, and again VERIZON will have held its position and dictatorship hold over the consumer...Unless the LEC (RBOC) can be the one in charge and control, and making 99% of the money, its just a legal battle waiting to happen....my "3" cents...Shawn
October 10, 2008 06:41 pm
Long live the DUMB PIPE!
October 10, 2008 06:41 pm
Verizon's softer stance is typical monopolistic double speak. "It won't affect political organizations..." Of course not or it would draw their ire! "it won't affect content providers..." Do you think the aggregators who make slim margins are just going to eat an operational cost or pass it on to the content providers? "it won't affect end users..." Do you think the content providers are going to just eat the price increase or pass it on to the consumer?The MMA has to band together to prevent this from becoming broad carrier policy!
October 10, 2008 04:13 pm
You state that you work for Verizon Wireless, then please read up on the facts of this change and what is actually impacted.I agree premium service are out of order and needs to be cleaned up, however, this suggested change has a minimal to no impact on premium services - instead it is impacting companies who are providing services at std rate that people HAVE signed up to. The majority of SPAM on all US carriers come from your SMTP gateways, close these gateways and SPAM complaints will drop drastically. Why? Because a shortcode creates accountability and responsibility.How many customers are complaining about receiving their local weather, celebrity gossip, CNN updates, Craigslist updates, etc?
October 10, 2008 04:13 pm
None of what Verizon has stated mark this as an anti-text spam measure, so to speak. Nor is the issue as simple as covering overhead and getting margin profit as the company (as well as other cell phone companies offering text messaging services) is already charging the (corporate) sender of the message fees as well as the receiver of the message. Even considering the price to maintain the hardware required to send the messages and the employee cost involved in pertinent employee salary, there is a LARGE amount of profit going to Verizon as a service provider here.Usage of text messages (similarly to email) vary per user, some not using the service at all and some sending literally hundreds a day. Consumers using large amounts of text messages will have plans that cover them but (similarly to insure plans) are priced so averaging out usage vs cost still put Verizon and other cell phone companies well into the profit range.If the technology required for these services was easily accessible (like consumers running home based web servers), the pricing monopoly held by a handful of cell phone companies would drop to a reasonable rate just like web site domain hosting fees.
October 10, 2008 04:14 pm
@Mark LaPointe: That spam and junk services are the only service which can sustain a business which uses SMS messages is more a symptom of the telco price gouging than SMS as a medium.If the price of SMS was drastically reduced, community services or simple notification would become much more commonplace and useful.Same with mobile web - doomed to be a bit player while the carriers strangle it with obscene fees trying desperately to cling onto a dying business model.