ChaCha Says They'll Bail On T-Mobile

The big SMS startups like 4INFO, ChaCha and others are seething at T-Mobile’s plans to charge $.0025 per SMS sent over it’s network. Currently these services generally pay a third party a set fee per month to send SMS messages, and their business model is dependent on fixed pricing.

At least one service, ChaCha, says they’ll stop sending messages through the T-Mobile platform when the charges begin. It’s 12% of their total traffic, says CEO Scott Jones, or 125,000,000 messages per year on T-Mobile. In terms of where ChaCha stands competitively, they are sixth on the list of U.S. SMS senders, after Twitter, Facebook, ESPN, 4INFO and Fox.

“The problem isn’t T-Mobile, it’s what happens if the other carriers choose to do this as well,” said Jones. “This is effectively an $8 CPM cost just for transport.”

Verizon explored a 3 cent fee per SMS two years ago, but it was never implemented.

ChaCha’s statement:

If T-Mobile moves forward with its “twitter tax” that is rumored to begin on Oct 1st, ChaCha absolutely will drop T-Mobile from our service. T-Mobile is a carrier that doesn’t understand the realities of content businesses including Facebook, Twitter, ESPN, and ChaCha. ChaCha has more than 15 million monthly unique users for whom we answer over 2 million questions every day. The vast majority of these answers are delivered by SMS text. T-Mobile is already getting paid by subscribers for these texts and they are paid something already by aggregators/publishers. Now, they plan to impose an egregious and unacceptable tax.

Given that the costs to deliver text are miniscule, T-Mobile already makes profits from what they charge their customers, aggregators, and publishers. There, T-mobile is “triple dipping.” We don’t see any reason for this, other than greed.

This will be unfortunate for T-Mobile users who will either need to switch to another carrier to enjoy texting services, or access similar services via the mobile web and/or mobile apps (for which T-Mobile gets nothing incrementally). Starting today we will make it clear to our T-Mobile users that ChaCha would still be available on other carriers and/or via the mobile web or mobile apps.

If T-Mobile moves forward they will give their subscribers reasons to consider other carriers and/or prevent defectors from AT&T/Sprint/Verizon from considering T-Mobile. Also, their proposed pricing move will completely stifle innovation in the space, further harming T-Mobile customers.

ChaCha knows that our real-time “answers” and dbase of billions of answers is valuable and can be leveraged within any of these platforms. We prefer that T-Mobile not take this step, but if they do, we will no longer provide our free SMS service to T-Mobile and shift the traffic to other carriers and platforms. It’s unfortunate for T-Mobile subscribers since they will miss out on ChaCha and many free services because of this short-sighted move by T-Mobile.

4INFO also sent us a long statement on this topic:

I wanted to let you know that T-Mobile has informed the industry that they plan to charge a $0.0025 toll to all businesses for every standard rate text message sent through their network (beginning October 1, 2010). You may recall that Verizon Wireless considered a similar charge in 2008, but relented under consumer and industry pressure, helping to enable the vibrant mobile service programs that exist today. Carriers have been increasing the cost of text messaging to consumers over the past several years, drawing antitrust investigations and class-action lawsuits. Now they are turning to businesses to do the same thing.

We recognize the economic realities of the times, but it is very disappointing that T-Mobile is taking this action against their own consumers and the mobile industry. This action will stifle (or reverse) growth of mobile messaging service businesses, harming not only consumers but also T-Mobile itself. Message volume will go down as businesses pass the costs of such programs to consumers, and consumers (as a result) move to carriers that can provide full access to mobile content.

This action will likely result in T-Mobile customers being unable to access SMS services offered by businesses, such as real-time sport scores, social networking updates, interactive voting, and special offers. This will affect 4INFO publishers such as Yahoo, AOL, the NBA, Zynga, Playdom, The Weather Channel, USA TODAY, NFL, NBC, CBS, IAC, Comcast …and other media companies, banks, and mobile marketing firms that use text messaging as a communication tool. They may be forced to turn off services to T-Mobile consumers.

Although the fee may seem small, companies like 4INFO, Facebook, and Twitter send billions of messages to tens of millions of consumers in the US; and the implications of this move from T-Mobile are far-reaching and damaging in the long term. 4INFO has seen great success as we’ve expanded into mobile display/apps, but we are adamant about this issue as SMS is a critical part of our one-stop mobile tech platform. Let me know if you’d like to discuss this further. I’d be happy to go on record about it.