UPDATED: ‘Sense of panic’ as content vendors respond to Verizon Wireless’ proposed 3-cent texting fee: Carrier softens stance following outcry

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 ([email protected]), 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.