Back in July, I briefly mentioned Nathan Martin, the CEO and Co-Founder of an innovative mobile startup called deepLocal
. Martin and his colleagues develop location-based services that deliver content to users via SMS messages--a method that allows owners of all sorts of mobile devices, not just smartphones, to use deepLocal's services. At an FCC En Banc hearing in Pittsburgh, Martin railed against the carriers
for maintaining high barriers to entry for companies hoping to develop SMS-based applications. "Why was I able to do for free in a matter of days three years ago what today will take me half a year of approvals and cost me tens of thousands of dollars a month?" Martin asked, referring to the fact that he had once delivered messages using a homemade SMS gateway before deciding to go legit. "You own the channel, now let me compete!" Martin's story is a compelling one and you would think that the wireless carriers would heed his call, thereby encouraging developers to create innovative services that would, in turn, encourage SMS use. Instead, at least one major carrier, Verizon Wireless, has decided to make life even more
difficult for SMS service providers like deepLocal, further discouraging innovation in the SMS services market in the process.
Earlier today, Verizon announced plans to charge content providers $0.03 per SMS message
, in order to send messages to Verizon subscribers. At present, content providers pay anywhere from a fraction of a cent to a few cents for what are called "Mobile Terminated (MT)" messages, which include text alerts, SMS search results and interactive voting notifications. This new $0.03 fee will be added on to the existing fees that content providers pay, while users will continue to pay $0.20 per each SMS message received (a rate which, being both industry-wide and one of the highest in the world, has attracted Congressional scrutiny
Sure, $0.03 might not sound like a lot of money on paper. But when you consider the volume of SMS messages that mobile service providers send on a daily basis, that increase of a few cents per message could prove prohibitive for providers of all but the most lucrative services. And considering that some of the most popular SMS-based services are free--for example, Twitter
and Google Search
--this increase could have a devastating effect on the market (remember: not only is Verizon is the second largest wireless carrier in the nation, it's soon to be #1, pending its acquisition of Alltel Wireless
Verizon, for its part, claims that it has no choice but to increase the cost per message to content providers. “Just like any business, we reassess our charges to make sure they align with our costs for providing the service and sometimes it becomes necessary to make adjustments,” Verizon representative Brenda Raney told RCR Wireless earlier today
. “In this instance, this is the first increase the company has implemented since the service began in 2003.” Have the costs associated with delivering an SMS message really increased? That remains unclear, though some have suggested that the actual cost of delivering an SMS message nowadays is close to $0.00
Ultimately, if we look at both this recent price hike and Verizon's blocking of text messages
that don't agree with its corporate values
, we can see that SMS messaging is perhaps the most tightly-controlled service on Verizon's network. And that isn't just bad for service providers--it's also bad for consumers. When Verizon's increased MT message fee kicks in, the content providers who choose to continue delivering messages to Verizon customers will have no choice but to pass those increased costs on to consumers. Take, for example, Gizmodo
commenter Andrew Pollack, whose company, Second Signal
, allows local fire departments to send SMS alerts to firefighters who are outside of radio range. "If this goes into effect and gets picked up by all the major carriers, that would increase the price of my service to those departments by 50%," Pollack writes in a comment on Gizmodo
. That $0.03 increase probably doesn't seem quite so trivial anymore, does it?
On Monday, I received the following response to this post from Jeffrey Nelson, Verizon's Executive Director of Corporate Communications:
As Verizon Wireless continues to review the competitive marketplace, we constantly work to provide additional value to our customers, employees and other stakeholders.
We are currently assessing how to best address the changing messaging marketplace, and are communicating with messaging aggregators, our valued content partners, our technology business partners and, importantly, our friends in the non-profit and public policy arenas.
To that end, we recently notified text messaging aggregators - those for-profit companies that provide services to content providers to aggregate and bill for their text messaging programs - that we are exploring ways to offset significantly increased costs for delivering billions upon billions of text messages each month.
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.
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.
At Verizon Wireless, we strive to provide our messaging customers with maximum value, and work to implement business decisions that encourage the use of messaging between individuals and organizations in both the marketplace of ideas and the commercial marketplace, and we will continue to strongly encourage the use of our services by charitable organizations as they perform their good works.