US aggregators stunned at Verizon’s $0.03 MT transaction fees increase

The US text message market is in a bit of flux.

I’ve been getting phone calls and text messages from aggregators across the country who can’t quite believe that, from 1st November 2008, Verizon will apply a $0.03 transaction fee on every outgoing text message through it’s network.

I can’t quite believe it either.

It did cost roughly $0.01 if you bought in bulk.

Now, er… now it’s going to be $0.04.

And if your business plan doesn’t have much flexibility, screw you.

Screw you with bells on.

I was forwarded this email — reportedly from leading US aggregator, OpenMarket, by multiple folk:

IMPORTANT NOTICE: PLEASE READ

Verizon Wireless to Start Charging for Messaging Fees

Dear OpenMarket Customer:

Effective November 1, 2008, Verizon will assess a transaction fee of $0.03 for every MT message processed on its network. Please note that these message fees will apply to standard rate and premium programs. Transaction fees will not apply to Free-2-End-User, Mobile Giving, or Non-Profit organizational programs.

Pursuant to your Commercial Services Agreement with OpenMarket (including former Simplewire Agreements) concerning Third-Party/Operator Fees, in the event message fees are assessed by Verizon for any of your programs, these fees will be passed on to your company at cost.

Please forward any questions or feedback to your Account Manager.

Sincerely,

OpenMarket

I see that RCR Wireless carried a piece on this issue quoting the same email earlier today.

What the hell are Verizon thinking?

There’s a heck of a lot of mobile services utterly, utterly dependent on low cost text messaging costs.

A few sample quotes from (understandably anonymous) US aggregators that I called this evening:

“It’s absolutely appalling!”

“I cannot believe they’ve done this.”

“I reckon perhaps 15 of our clients will stop their services as a result of this cost increase.”

Those same aggregators are, to use the American term, ‘pushing back’ on Verizon. That is, they’re not sitting back and taking it in the neck like OpenMarket appear to have done.

Dead right.

Complain. Cajoule. What ARE Verizon thinking?

I know you have to ‘keep the lights on’ but surely a 3 cent rise is just silly. If you are running at a huge loss, sure — tell the marketplace. Advise them. Let them know that come 2009 you’ll need to increase per-message MT costs by $0.01. Then by another $0.01 in July 2009. And finally another $0.01 by December 2009. A staged increase is a lot more sensible — if you HAVE to make an increase.

Or, perhaps Verizon are hoping to kill of MT text traffic in favour of data. Email, for example.

What’s your viewpoint?

How would you feel if Vodafone UK increased their interconnect/MT fee by £0.03 from next month?

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  • http://www.interlinkedmedia.com Chris Newell

    We spoke to our aggregator about this earlier today who said that the Verizon issue is being pushed back by them, and that they don’t expect it to be applicable to their traffic, so it may be a case of Verizon only applying the increase to companies they don’t favour and let people like Facebook, twitter and other aggregators continue as before. As a side note, Verizon have been doing a lot of audits recently and generally making it harder to run campaigns with them…

    Chris Newell
    http://www.InterlinkedMedia.com

  • Naushad

    Nothing short of a threat to the US market that was just on the verge of breaking out in a big way into mobile marketing. Timing couldn’t be worse, just as agencies and brands are creating their 09 budgets to take a serious step into mobile and figure out ways to monetize messaging through ad models, they get hit with this!

    Kudos to those aggregators that did not cave instantly to the beck and call of VZN. I hope the’re able to push back

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  • http://www.adambird.com adambird

    There is a positive. This should make spamming people with marketing nonsense less viable.

    The success of SMS is founded on it's ability to allow people to communicate. Having people broadcasting indiscriminately, ie not communicating but telling, devalues this service.

    I'm comfortable that if someone wants to send me a message it's going to cost them. It makes them consider whether it's really worth both our whiles sending me that information (ultimately I'll be paying). That way when I receive an SMS i can be pretty sure it's going to be useful/of interest to me.

    Marketers trumpet the fact the 90%+ of SMS messages are opened and acted on on receipt. Heaven help us if we get to the email situation where 50% of what we receive is junk. People will ignore the new message indicator and response rates will plummet. It'll take years for spam filters to find themselves into operators or onto our phones. By then then customer will have moved on.

    IMHO ;)

  • jv

    Get real. Nothing is free. Free wideband, free search, free social networks, open source — is all underwitten by profits on something else. Somebody has to pay to build networks and run them and put in servers and all that stuff. Almost all of it is based on leverage.

    They ain't no more leverage. The economic reboot button has been pressed. It will be slower than Windows to get the machine back up and ready to run again. In the meantime leaverage is dead.

    Free isn't. You pay now.

  • http://www.mobileindustryreview.com smstextnews

    Fair comment. But a little one-sided, JV. How would you react to getting a letter from your mobile operator explaining that, “free isn't and from next month, your $100/month service contract is now $400/month, kind regards, sincere apologies, credit crunch and all that”

    Free isn't the way to go. Definitely not. But potentially killing the market for MT messaging via huge cost increases is bad news for the US.

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  • fu

    It’s 160 bytes for Pete’s sake and all the infrastructure for SMS is there to help THEM more efficiently manage the phones on their network. This is just ridiculous. More of the same from these carriers to squeeze every penny out of networks that run on publicly leased airwaves because they are a cartel and they can.

    We need legislation to break these guys.

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  • Omer K

    i would agree that it might be all about killing SMS all together opting pushing people to use email instead. how else can you explain the total lack of MMS capability on the iPhone ?

    is this a good thing? while the price hike is not, pushing the market towards email (text or html) is one way to standardize and reduce infrastructure costs. sms belongs to an era where phones were clunky and wireless carriers had no idea what IP stood for.

    things have changed…

  • alleagra

    “message through it’s network.”

    You’ve written ‘message through it is network.’
    There is no apostrophe in “its network”
    nor in
    Its power supply… its engine… its cooling system….its news outlet… its own color…its heater….its fur….its smile…its growl…its bite…but it’s quite simple really.

  • http://www.i2SMS.com Giff Gfroerer, i2SMS

    We have already heard from one Fortune 500 company that if Verizon does this they will cancel their SMS program set to launch 11/15 as they are assuming the other carriers will follow suit.

    As we have mentioned repeatedly, the carriers just don't understand SMS. They need to be lowering the fees to get more Americans involved, not raising the fees.

    I would imagine a great deal of marketers will just say “Fine, let's run the program, but only on the carriers that are not imposing this fee.”

    Obviously, most US based SMS gateway providers are not in agreement with this policy, right as most companies are cutting back their spending anyhow based on the economy, or lack there of…

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  • John-Daniel Trask

    In New Zealand, sending a text has always cost money. Twenty cents has always been the expected amount. It's free to receive. Using a SMS gateway drops the cost to businesses of sending a text to about 7 cents.

  • Florian

    That's probably a panic price raise which won't hold long, and then the deflationary pressure kicks in. They just need money, now. Watch for that pattern in other non-banking operations in the near future. A seasoned journalist told me about the effect almost 10 years ago, and that it happens when the big collapse eventually unfolds.

  • anonymous

    Whatever an aggregator and MT is.

  • Mike42

    You are so wrong on so many counts it's hardly worth typing a reply.

  • Mike42

    You are so wrong on so many counts it's hardly worth typing a reply.

  • http://heritagerockers.com John Agathon

    Ooof, maybe because of the global recession, Verizon is forced to raise prices to compensate for reduced profits? As I write this, December 2009 has not arrived yet but that extra 1 pence increase is going to be hurtful to some people.

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