Pennies from Heaven for Verizon (and by Heaven, I really mean from SMS)

Verizon Wireless announced on October 9 that it will start adding $0.03 in delivery charges to all mobile terminated (MT) messages sent by content publishers, effective November 1. This move sets a unwelcome precedent, leaving many mobile companies wondering about the probability of other carriers following suit. Verizon holds 26% of the mobile subscription base in the United States. With 67.2 million subscriptions, an extra three pennies will add up quickly.

This $0.03 fee increase is on top of the current MT messaging fees, and applies to standard-rate and premium-rate programs. The charge applies to all messages processed on the Verizon network, including text alerts, interactive notifications and SMS search responses. Companies in the mobile advertising space will be affected, along with media companies sending news feeds, mobile-coupon companies, banks and other institutions using mobile for customer service.

Brenda Raney, a representative for Verizon Wireless, announced that “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.”
Leading aggregator OpenMarket immediately passed the message, along with the costs, along to its consumers via email (though admittedly they should have texted it to Verizon customers, for the sake of irony):

“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.”

Mobile Marketer quotes an unnamed source from a competing aggregator expressing some frustration that OpenMarket passed the cost onto consumers without consulting other aggregators: “What should have happened is that before an aggregator went on the record with the rate increase, there should have been a joint communication strategy to ensure the correct message is being conveyed.” The same aggregator executive worries that a lot of SMS markeers will cease sending messages through aggregators because the ROI will fall, since many brand marketers or small mobile content providers might have a difficult time swallowing the extra costs.

Sumotext‘s CEO Tim Miller rightly points out that “The most amazing aspect of this [Verizon Wireless rate increase] is that it’s targeted at the legitimate short code programs responsible for the growth of the mobile channel.” This naturally raises some valid questions about the future potential of the mobile Internet—if costs continue to rise (particularly if other carriers follow suit), there will be less incentive to develop mobile applications.