Verizon SMS Hike: A Lose-Lose-Lose For Carriers, Marketers, Consumers

As if Verizon Wireless hasn’t had enough negative publicity by refusing to grant SMS short codes based on content, the U.S. cellular carrier made another PR blunder Thursday when it announced increased rates for outgoing texts. Effective November 1, Verizon will increase the per-message price for sending texts by 3 cents. The move will ultimately …   Read More

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As if Verizon Wireless hasn’t had enough negative publicity by refusing to grant SMS short codes based on content, the U.S. cellular carrier made another PR blunder Thursday when it announced increased rates for outgoing texts.

Effective November 1, Verizon will increase the per-message price for sending texts by 3 cents. The move will ultimately double or triple the cost for marketers who send messages to opted-in subscribers, considering that marketers currently pay an average $0.025 per message sent.

“I have one word to say in reaction,” Forrester analyst Neil Strother said. “Ouch.”

Mobile marketing professionals everywhere were scrambling to make sense of the rate hike, in some cases holding emergency meetings to decide how to cope. While many are going to demand further explanation from Verizon, I have to wonder about the long-term effects on the mobile marketing industry. Could other carriers follow suit? Who will end up paying? Could this lead to all content becoming premium content–that is, that is content that people pay extra to receive?

First, it’s important to figure out specific reasons for Verizon’s move. Mr. Strother noted, “We have seen a huge explosion of the use of SMS in the United States–not just among consumers but with so-called ‘app-to-person’ messages–you know, things like text alerts.” Thus, it could be that it’s costing Verizon too much to process all these messages. In other words, mobile marketing might have been too successful.

But another expert doesn’t think so. “They clearly want to continue to control their network as much as possible; they probably want to get rid of as much off-deck stuff as possible,” said Jared Reitzin, CEO of mobileStorm, a digital messaging solutions provider. “It shocks me they would do this, especially after Congress is looking into the possibility of carriers falsely ballooning text message pricing to consumers,” he said. He was referring to recent U.S. Congressional inquiries–not to mention consumer lawsuits–regarding the increase in per-message texting costs by all carriers.

Because all cellular providers are under scrutiny already, it wouldn’t be surprising if competitors said, “What the heck,” and throw in their lot with Verizon. “My take is, they will follow suit if Verizon is able to hold this price,” Mr. Strother said. Mr. Reitzin added, “Could they be colluding to drive up revenues? It is possible.”

Both experts, however, indicated that other mobile providers would be better off not doing this. Rival carriers could differentiate themselves from Verizon and perhaps steal its market share, especially if consumers end up paying for part or all of the added fee. (Investors didn’t seem to approve of the move; Verizon Communications shares were down 6.49 percent to $25.93 when the market closed Thursday.)

Sure, marketers’ high SMS usage could have affected Verizon’s decision. But they shouldn’t be punished. “At mobileStorm we have worked hard for almost a decade to advance this industry. Mobile is starting to really take off,” Mr. Reitzin said. Indeed, consumers have become more reliant than ever on their cell phones, using handsets instead of computers to go on the Internet or stay in touch with not just voice and SMS, but also MMS, mobile email, and mobile IM.

“Do they really want to kill this momentum? Carriers need to be very aware that they could hurt the industry and themselves,” the CEO said.

mobileStorm, and probably other mobile content and mobile messaging companies, is going to have to raise its prices for all text messages that clients want to send to Verizon phones. True, it’s possible to ultimately pass this cost onto consumers, who Mr. Strother said are already getting used to paying for “premium” SMS like sending vote texts into their favorite TV shows. But there’s one more option for marketers: Shut Verizon off completely.

Heck, that would get Verizon-subscribing consumers–those who want to receive messages from their favorite brands–angry enough to complain, too.

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3 comments

  1. Mobile News - Mobile Industry Buzz!! » Senate: Carriers Got Some SMS ‘Splaining To Do

    […] that the major U.S. carriers have been accused of text-induced greed). Last fall, Verizon invited heaps of criticism after its plan to increase rates for commercial texts came to light. The company later […]

  2. Jared Reitzin

    Amen brother Scott

  3. Scott Springer

    This isn’t the first time that Verizon has upset millions of people. Back in 2007, there was its shortfall fee – a $2 monthly charge that was levied to clients who didn’t use their long distance service. Now, Verizon has come up with another creative approach to revenue creation – charging 3 cents for every text message processed on its network. Of course, this charge would arrive on the eve of mobile marketing’s explosion in the US. Clearly, Verizon has seen an opportunity to capitalize on a rapidly emerging market, but its actions, however, do little to embrace the market’s growing acceptance of mobile as a very serious and relevant marketing channel.

    This new cost, albeit still in “proposal stage” according to Verizon, comes as a shock to everyone in the mobile landscape. The announcement that the imposed new fee would start on November 1st, has not allowed for any significant discussions or greater consideration for the subsequent impact to the industry, and consumers. Verizon, by acting in such a short-minded and selfish way, has marred our industry – everyone from messaging aggregators, content partners, mobile marketing providers – and has potentially set mobile marketing in the US back 5-10 years.

    If Verizon’s new messaging charge does go ahead on November 1st as threatened, thousands of providers will also be forced to increase their price structures, including ours. This will completely upset the model upon which our industry has been built. But then again, a selfish and short-sighted company wouldn’t care about that. Simply put, this move by Verizon is not conducive to the greater advancement of mobile marketing being considered and conducted by so many companies at a time when they need it more than ever.

    Scott Springer,
    Vice President, Strategic Services
    SmartReply, Inc.

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