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T-Mobile’s rumored SMS price hike threatens mobile marketing


Are we approaching the extinction of feature phones?

T-Mobile USA will reportedly increase its SMS rates at the beginning of next month, a move that threatens the viability of many mobile marketers’ business models.

The rumored changes in T-Mobile’s pricing structure would increase the charge for standard-rate messages—both mobile-originated and mobile-terminated—sent over the T-Mobile network by $0.0025 per message. If enacted, aggregators and other mobile service providers would pass the extra cost of the increased per-message fee along to clients beginning as soon as Oct. 1.

“Any attempt by a major carrier to increase rates, whether it’s 3 cents, as previously attempted by Verizon, or one-fourth of a cent, as we currently see from T-Mobile, would ultimately hurt commercial mobile services,” said Noam Samson, CEO of CellForce, Coral Springs, FL.

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“Once a rate hike, large or small, will be accepted by the market, other carriers will follow and a trend of cost increase will be established,” he said. “Soon enough we will find ourselves spoon-fed the same 3-cent increase Verizon attempted not so long ago.”

Based in Bellevue, WA, T-Mobile USA is the No. 4 carrier in the United States based on number of subscribers. It is wholly owned by Deutsche Telekom, which is based in Bonn, Germany.

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An angry mobile phone user

Slippery slope?
In short, while an increase of one-quarter of a cent does not seem like a lot, it adds up for mobile marketers that operate on small profit margins as it is.

In addition, many fear that any increase, however small, represents a slippery slope.

Similar rumors have been circulated about Sprint following T-Mobile’s lead and upping its SMS rates, as well as imposing quotas.

Leading direct response media agency tests mobile

Testing texting rate increases

When this would occur is unclear, but what is clear is that the other U.S. carriers would no doubt feel emboldened to raise their rates once T-Mobile decides to do so.

When Verizon Wireless faced intense backlash after its planned 3-cent increase leaked, it relented, deciding it was not worth the hullaballoo to follow through with the SMS rate hike.

The T-Mobile move could signal a different tactic—inch the rate up slowly and steadily, rather than 3 cents at a time.

T-Mobile’s rate hike is rumored to be industry-wide, and aggregators will pass that increased cost on to their clients.

This seems to be a new attempt by a major carrier, similar to Verizon’s previous attempt, to increase revenue generated from a captive audience—mobile marketers—that has no choice but to comply.

While T-Mobile declined to comment, several aggregators confirmed the carrier’s intentions.

“T-Mobile has communicated a pricing change for standard-rate messaging campaigns and mBlox has already notified our clients of this impending change,” said Brian Johnson, senior vice president of sales and marketing at mBlox, Sunnyvale, CA.

“Mobile operators have the right to adjust the pricing as they see fit for their business,” he said. “And conversely the market will make the judgment if the pricing is reasonable and fair.

“Pricing changes always affect certain business models and the market may need to adjust to these new economics—we will all be watching to see how this plays out.”

Some aggregators have been paying T-Mobile a service set-up fee of $500 per program. They said that the cost-per-standard text message has gone up, while the cost-per-free-to-end-user SMS has actually gone down slightly.

T-Mobile reportedly came up with one standard agreement for all aggregators. The carrier is not negotiating on terms, according to sources who prefer to remain anonymous. Fees are now standard.

As this increase is pretty significant, it will likely cause the smaller aggregators to consider going through another vendor to reach T-Mobile.

While T-Mobile's fees will be going up significantly, for the most part, its fees are more or less comparable with what aggregators are seeing from other carriers. It is the precedent more than anything else that is alarming.

T-Mobile expects everyone on this new plan by Oct. 1.

Many industry veterans appeared unsurprised by T-Mobile's decision.

"It is certainly not surprising given AT&T's 'no unlimited' [data plans] announcement this summer," said Michael Foschetti, managing director of Mobisix, Charlotte, NC. "With intense competion and device wars in the carrier market, they need to continue to focus on ARPU and implement rate, as well as feature strategies to drive revenue.

"As SMS has become a staple among comminication channels across demographics, I don't think this will really change customer behavior," he said. "Meanwhile, the impact on mobile as a marketing channel with these kinds of changes really remains to be seen."

Final Take
Dan Butcher, associate editor at Mobile Marketer, New York

Related content: Messaging, TMobile, TMobile USA, Deutsche Telekom, Noam Samson, CellForce, aggregators, Brian Johnson, mBlox, SMS, text messaging, standard rate messaging, mobile marketing, mobile

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Comments on "T-Mobile’s rumored SMS price hike threatens mobile marketing"

  1. Tony Giuliani says:

    September 13, 2010 at 2:16pm

    I think it's absolutely a slap in the face to mobile marketers by T Mobile. The economy needs a boost.

    This may not sound like a lot of money but when you have 10's of thousands in your subscription data base or as we work with our larger clients who will have 100-200K plus, it adds up substantially.

    They are fully aware of the growth of mobile as the new media and seem to want to position themselves to benefit off our hard work. We spend a small fortune on technological R&D to make mobile more cost effective and functional, a better ROI to boost the use of the medium and therefore the economy.

    I guess they thought they could slip this under the Radar, guess again T mobile.
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