Why should Twitter and Facebook get a pass on Sprint SMS fee hike?

By Dan Butcher

February 15, 2011

SMS marketing is a key tactic for brands and retailers

Some mobile marketing service providers are accusing Sprint of creating an unlevel playing field by raising its text-message rates but not charging more for messaging via other channels such as social media.

If a carrier chooses to charge higher fees to content providers and the aggregators that support them, that is one thing. However, unless those fees are charged to companies enabling all types of mobile messaging—including Twitter, Facebook, Google and Yahoo—then it will be difficult for independent mobile marketing companies to compete.

“I actually don't see anything wrong with a carrier charging higher fees to content providers or, in this case, the aggregators that support the content providers,” said Tim Miller, president of Sumotext Corp., Little Rock, AR. “However, unless those fees are charged to everyone—including Twitter and Facebook—then the rest of us, including ChaCha, 4Info and large content providers, can’t compete.

“Twitter and Facebook are already getting free passes on compliance—they don't include ‘Reply STOP to Opt-out’ at the end of every message like every carrier requires from the rest of us,” he said.

“But if their sites are the only places that content providers can send text messages without tariffs, it is a classic issue of anti-trade, because nobody else can compete.”

A link within a text message drives opted-in consumers to a CoverGirl landing page on the mobile Web

Dwindling profit margins
Sprint, the third-largest carrier in the United States, is planning to raise its text-message rates as soon as the beginning of next month, a move that could jeopardize the profitability of SMS-based marketing.

Sprint contacted the aggregators it works with to inform them that it is going to be initiating an increase on standard SMS, possibly as high as a half-cent per text message, as soon as March 1 according to some reports, or within two or three months at the very latest.

While Sprint's rate increase is not expected to apply to premium SMS, it is still a big blow to mobile database and customer-relationship-management marketers that rely on text messaging.

Dan Hesse is CEO of Sprint Nextel

“When the carriers raise prices for standard-rate short-code messages, it puts a damper on the whole industry,” said Kirsten McMullen, director of marketing at 4Info, San Mateo, CA. “It creates a barrier to innovation in mobile messaging for marketing, CRM or advertising, and this ultimately hurts the consumer.

“It is fortunate that the increased penetration of smartphones provides consumers with other opportunities for mobile engagement,” she said. “Because apps and mobile Web sites aren’t limited by carrier pricing, they are exploding with growth.”

Unfortunately, the mobile Web and applications cannot entirely replace SMS for reach, real-time interaction and convenience, per 4Info. 

And any carrier price increase, even a fraction of a cent, has the potential to push many SMS-dependent business models from the black into the red.

“We’ve found that even smartphone owners often still prefer text messaging for many marketing applications,” Ms. McMullen said. “These are the programs that are at risk due to carrier price increases.

“They will be dropped entirely, or at least be limited to select carriers,” she said. “Perhaps this will be a differentiator for the carriers – if consumers want to enjoy text-message alerts, they will need to pick a carrier that supports commercial texting.”

Marketers’ worst nightmare is a single carrier setting a precedent with an increase in SMS rates, and its competitors following its example soon after, creating a domino effect.

Last fall, word leaked that T-Mobile was planning a similar, although less severe, rate hike, increasing the charge for standard-rate messages—both mobile-originated and mobile-terminated—sent over the carrier’s network by $0.0025 per message.

Back in 2008, this publication broke news that Verizon Wireless was planning a three-cent SMS rate increase. Immediate backlash from the across the ecosystem caused the carrier to rethink its plans.

Sprint speaks
In response to inquiries on the topic, Emmy Anderson, Minneapolis-based spokeswoman for Sprint, gave the following statement:

Sprint is partnering with many industry-leading companies to form the core of Sprint’s Solution Enabler Program.

These solution-enablers have direct access to Sprint’s APIs that are exposed through the new Sprint Services Framework.

Solution-enablers will also provide many of their own value-added services to help a customer deliver an optimized solution that meets their needs.

As the first wave of APIs, Sprint is exposing services such as LBS, SMS, MMS, geofence and presence as part of the Sprint Services Framework.

Many services will be provided for free such as presence, while some services will require Sprint to charge solution-enablers, aggregators and developers a fee to recoup our costs of delivering these services.

Sprint is not increasing the messaging or data fees consumers pay.

Specific to SMS, Sprint will charge a per-message fee to aggregators and solution-enablers for SMS programs.

This charge is a cost-recovery measure designed to allow Sprint to continue to support the billions of SMS messages that are sent each year as part of mobile marketing campaigns, alerts, et cetera.

Final Take
Dan Butcher, associate editor, Mobile Marketer

Comments on "Why should Twitter and Facebook get a pass on Sprint SMS fee hike?"

1. Jeff Judge says:

   March 9, 2011 at 1:59pm

   As an update to this article, OpenMarket notified us that Sprint has levied fees of $0.005 per message for standard rate SMS, $0.0025 per message per standard rate MMS and $0.0025 per free-to-end-user message. These fees will definitely dampen brands willingness to engage via SMS and push communications to (1) email where they're already use to spending 0.001 per message that includes trackable, rich content and (2) social media, which is free.

2. Michael Thomas says:

   March 1, 2011 at 1:44pm

   Does anyone, except the aggregators know what fee is Actually charged by the Big Four: ATT, Sprint, Verizon and T-mobile.?I would sure like to know.

3. Kim Smith says:

   February 15, 2011 at 6:35pm

   I think content providers should stop sending contents to Sprint customers.

4. Jeff Judge says:

   February 15, 2011 at 10:30am

   This is a horrible precedent that started with T-Mobile and I fear will unfortunately not stop with the remaining carriers if Sprint takes this action. These fees don't just hurt SMS marketing, they hurt SMS as a two-way communication channel for all businesses in relation to customer service and enabling multiple channels communication for products. I implore the carriers to take a look at moves like this and the impact they'll have on the level of innovation and serviceability with their customer base. Finally, it is simply unfair and anti-competitive to give large social networks like Facebook and Twitter a pass on the same rates - this simply says that the carriers don't care about working with businesses that aren't valued at billions of dollars.

5. Dawn Rowley says:

   February 15, 2011 at 10:15am

   Sounds like the law of the jungle out there.

6. Jonathan Goodyear says:

   February 15, 2011 at 9:01am

   This is disappointing news. I am more interested in whether this emboldens other (more important) carriers to apply their own fee hikes. It seems odd that they would put in the effort to build a huge SMS ecosystem only to tear it down. Smartphones sales are way up, but the total penetration is still not high enough to abandon SMS just yet. Services that rely on just an iPhone or Android app to deliver mobile coupons and other offers are missing massive swaths of customers. It is hard to even pretend that's a good idea, regardless of how "cool" apps are.