Editor’s note: This guest post is an open letter from Scott Jones, founder and CEO of ChaCha on why the recent “T-Mobile Text Tax” is now a Net Neutrality issue.
While the Federal Communications Commission fiddles with the issue of Net Neutrality, and by extension mobile broadband regulation, Rome has begun to burn. While the fires now are relatively small, they threaten to combust into an uncontrollable conflagration that will leave customers wondering why they don’t have access anymore to their favorite websites or mobile applications.
The concept of Net Neutrality is pretty simple. Consumers look to the FCC to prevent Internet access providers from discriminating against particular Internet content or applications, while allowing for reasonable network management, which should be entirely transparent. Today, the providers may not like bandwidth hogs like BitTorrent; tomorrow they could decide they don’t like YouTube or music sites because they also use lots of bandwidth. If unchecked, the providers could limit (by slowing their page loads) or totally preventing consumer access to whatever they don’t like such as political or religious sites with views they corporately don’t agree with. The providers would decide what is appropriate for consumers to see or access. Suddenly, the world’s largest library of information has “Do Not Enter” or “Not Allowed” signs posted here and there. Consumer and advocacy groups say Net Neutrality legislation will prevent this kind of “corporate censorship.”
Net Neutrality supporters say it is critical that the concept also apply to wireless services and their operators because, in the not-so-distant future, most people will access the Internet via wireless devices.
“If consumers had a wide choice of broadband service providers, preserving an open Internet might not be such a critical issue,” Vint Cerf, Google’s chief Internet evangelist, wrote in a blog post recently. “Unfortunately, the vast majority of Americans have few (if any) choices in selecting a provider. As a result, these providers are in a position to influence whether and how consumers and producers can use the on-ramps to the Internet–and we’ve already seen several examples of discriminatory actions or threats that impair openness.”
For example, Skype, which allows users to make free and low-cost phone calls over an Internet connection, and Google Voice, which allows use of a single phone that follows them, regardless of which voice network they use, have been blocked by certain carriers.
T-Mobile has been sued by a text-message marketing company for allegedly blocking access to the T-Mobile network because of a client that provided information on medical marijuana. Ez Texting, a company that helps businesses send marketing text messages to large numbers of people, filed the suit Friday. The company provides the behind-the- scenes infrastructure for the type of ad that asks consumers to text a specific word to a specific number to get more information on a product. “This case is yet another example of a totally arbitrary decision by a carrier to block text message calls between consumers and organizations they want to communicate with,” Gigi Sohn, president of public interest group Public Knowledge, said. “The FCC should put a fast end to this blocking by issuing the ruling we asked them for three years ago.”
Similarly, T-Mobile plans to suddenly institute a charge for every text message that ChaCha’s messaging aggregator sends on ChaCha’s behalf to T-Mobile customers. Never mind that T-Mobile is already making a small fortune charging their customers for text plans or on a per-text basis, and never mind that T-Mobile already charged profitable and fair rates to aggregators and content providers including ChaCha. Noted global expert on mobile telecom, Tomi Ahonen has written that, for carriers, texting is “the most profitable mass market service in the economic history of mankind…with a profit margin [that] is north of 98%.” Oh, and by the way, in the second quarter of 2010, T- Mobile USA reported service revenues of $4.70 billion up from $4.63 billion in the first quarter of 2010.
T-Mobile would have you believe that the charge will help reduce “unsolicited” commercial texts, but ChaCha is contacted proactively by mobile users asking questions (over 60 million a year JUST from T-Mobile customers). We are a free service that provides timely, accurate answers. We answer over 2 million questions a day, primarily from folks who text us and we text them back answers, although the service is available via www.chacha.com, the mobile Web, mobile apps, via Twitter, etc…. We are commercial only in the sense that we also serve our users one or two text ads in conjunction with each answer (and never unsolicited). This helps pay for the more than 50,000 people answering all those real-time questions.
Interestingly, T-Mobile is exempting Twitter and Facebook (which send collectively about 15 times as many messages to T-Mobile users than ChaCha does) from the new charges because they won’t be subject to the tax like the rest of us. Even more interesting is that, to the extent T-Mobile has any congestion from all the increased texting, Twitter and Facebook are driving the lion’s share of the explosion of texts coming from content providers, so why are all the other publishers footing the bill on behalf of Twitter and Facebook? Because this charge will be passed along to ChaCha, amounting to a 600% price increase on October 1st, we have no choice but to drop T- Mobile customers from our SMS service, unless something changes.
As for T-Mobile stifling innovation, if Twitter had to endure this tax across all carriers, it would cost them about $50 million annually, based on their Q2 2010 Nielsen-reported text traffic. If the “text tax” had been in place over the past few years, it would have made it impossible for Twitter to have grown or prospered.
What this means is that T-Mobile has decided on behalf of their customers that having access to the world’s largest repository of questions and answers is “not appropriate.” While you may not be a ChaCha user, think what will happen if T-Mobile’s text tax does impact one of the services you DO use and like, such as Zynga, ESPN, NFL, NBA, Fox, Foursquare, USA Today, the Weather Channel, Yahoo, AOL, or Google.
For ChaCha, this is a business issue. We have a work around to reduce the burden of this “tax.” But, T-Mobile is giving their subscribers reasons to consider other carriers and/or prevent defectors from AT&T/Sprint/Verizon from considering T-Mobile. Also, their “text tax” move will completely stifle innovation in the space, further harming T-Mobile customers. This is also clearly a Net Neutrality issue as it applies to wireless services and their operators. Without consulting its customers, T-Mobile is implementing a pricing structure that removes rights from their customers to utilize what we think are pretty valuable free services.
Your favorite site or service could be next.