T-Mobile SMS rate hike raises anti-trust issues
By Dan Butcher
September 22, 2010
Are we approaching the extinction of feature phones?
With the industry in an uproar over T-Mobile’s impending SMS rate increases, mobile marketing service providers are accusing the carrier of creating an unlevel playing field and violating anti-trust laws.
It is one thing for a carrier to charge higher fees to content providers or, in this case, the aggregators that support the content providers. However, unless those fees are charged to everyone—including Twitter, Google, Facebook and Yahoo—then it will be difficult for independent mobile marketing companies such as Sumotext, ChaCha and 4Info to compete.
“Everyone knows that the mobile phone, and particularly the SMS channel, has become the connective tissue that links social networking, multimedia and commerce,” said Tim Miller, president of Sumotext Inc., Little Rock, AR. “Everyone knows that consumers already pay heavily for their SMS services while application providers and large content providers pay transaction fees to the carriers’ designated connection aggregators to access their mobile networks.
"If a particular carrier decides to begin triple-dipping with an SMS tariff, the results of that decision will play out on its own,” he said.
“But if a few preferred companies like Twitter and Facebook are exempt from these tariffs, it becomes a classic anti-trust issue, because it determines who has an opportunity to compete and who gets run out of business.”
ChaCha generates love for Dove
Last week, this publication broke the news that Deutsche Telekom's T-Mobile USA is planning on raising the SMS rates it charges aggregators, a move that threatens the mobile marketing industry (see story).
Tenets of competition law
Mr. Miller said that the tenets of competition law include prohibiting agreements or practices that restrict free trading and competition between businesses, in particular the repression of free trade caused by cartels.
The laws are designed to combat anti-competitive practices that tend to lead to a dominant position in a certain vertical, including predatory pricing and refusal to deal.
New York Yankees’ YES Network SMS alerts are powered by 4Info
The goals of competition law include protecting the interests of consumers and ensuring that entrepreneurs have an opportunity to compete in the market economy.
“Competition law is a backbone of a free market and entrepreneurs are necessary to rebuild our economy through innovation and hiring,” Mr. Miller said.
“If T-Mobile doesn't add the $.0025 tariff to everyone, the competitive landscape of the entire mobile ecosystem will be in immediate jeopardy," he said.
ChaCha to boycott T-Mobile
If T-Mobile moves forward with its so-called “Twitter tax” that is rumored to begin Oct. 1, ChaCha has announced that it will absolutely drop T-Mobile from its service.
The mobile SMS search specialist claims that T-Mobile is a carrier that does not understand the realities of content businesses, including Facebook, Twitter, ESPN and ChaCha.
ChaCha claims to have more than 15 million monthly unique users, for whom it answers more than 2 million questions every day.
The vast majority of these answers are delivered via text message.
“T-Mobile is already getting paid by subscribers for these texts and they are paid something already by aggregators and publishers,” said Scott Jones, CEO of ChaCha, Indianapolis. “Now, they plan to impose an egregious and unacceptable tax.
“Given that the costs to deliver text are miniscule, T-Mobile already makes profits from what they charge their customers, aggregators and publishers,” he said. “Therefore, T-mobile is triple-dipping, and we don’t see any reason for this, other than greed.”
This will be unfortunate for T-Mobile users who will either need to switch to another carrier to enjoy texting services or access similar services via the mobile Web and/or mobile applications, for which T-Mobile gets nothing incrementally.
“We will make it clear to our T-Mobile users that ChaCha would still be available on other carriers and via the mobile Web or mobile apps,” Mr. Jones said. “If T-Mobile moves forward they will give their subscribers reasons to consider other carriers and/or prevent defectors from AT&T, Sprint and Verizon from considering T-Mobile.
“Also, their proposed pricing move will completely stifle innovation in the space, further harming T-Mobile customers,” he said. “ChaCha knows that our real-time answers and database of billions of answers is valuable and can be leveraged within any of these platforms.
“We prefer that T-Mobile not take this step, but if they do, we will no longer provide our free SMS service to T-Mobile and shift the traffic to other carriers and platforms—it’s unfortunate for T-Mobile subscribers since they will miss out on ChaCha and many free services because of this short-sighted move by T-Mobile.”
T-Mobile hurting itself
Many brands are using SMS to build a database of consumers, send out alerts, coupons and promotions or take advantage of text-message real estate to run advertising, including a recent example from KFC (see story).
4Info is a company that specializes in SMS search, alerts and advertising. Its business model would be threatened by T-Mobile’s price increase.
Zaw Thet, CEO of 4Info, San Francisco, issued the following statement to its clients in response to T-Mobile’s decision:
I wanted to let you know that T-Mobile has informed the industry that they plan to charge a $0.0025 toll to all businesses for every standard rate text message sent through their network beginning Oct. 1.
You may recall that Verizon Wireless considered a similar charge in 2008, but relented under consumer and industry pressure, helping to enable the vibrant mobile service programs that exist today.
Carriers have been increasing the cost of text messaging to consumers over the past several years, drawing antitrust investigations and class-action lawsuits. Now they are turning to businesses to do the same thing.
We recognize the economic realities of the times, but it is very disappointing that T-Mobile is taking this action against their own consumers and the mobile industry.
This action will stifle or reverse growth of mobile messaging service businesses, harming not only consumers but also T-Mobile itself.
Message volume will go down as businesses pass the costs of such programs to consumers, and consumers as a result move to carriers that can provide full access to mobile content.
This action will likely result in T-Mobile customers being unable to access SMS services offered by businesses, such as real-time sport scores, social networking updates, interactive voting and special offers.
This will affect 4Info publishers such as Yahoo, AOL, the NBA, Zynga, Playdom, The Weather Channel, USA Today, the NFL, NBC, CBS, IAC, Comcast and other media companies, banks and mobile marketing firms that use text messaging as a communication tool.
They may be forced to turn off services to T-Mobile consumers.
Although the fee may seem small, companies like 4Info, Facebook and Twitter send billions of messages to tens of millions of consumers in the U.S., and the implications of this move from T-Mobile are far-reaching and damaging in the long term.
4Info has seen great success as we’ve expanded into mobile display and apps, but we are adamant about this issue, as SMS is a critical part of our one-stop mobile tech platform.
Dan Butcher, associate editor, Mobile Marketer
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