Verizon Wireless announced yesterday that it is going to start charging content and messaging companies an additional 3 cents to send text messages to consumers, RCR Wireless News reports. That hike will put services like ChaCha in jeopardy.
The price hike will go into effect on Nov. 1.
The 3-cent fee will be applied to any Mobile Terminated (MT) message that is processed on the No. 2 phone carrier's network—and it will be added on to the existing fees it already charges. That means SMS services like Google news updates, ESPN score alerts and, yes, answers to questions from ChaCha will see their operating costs triple at the end of this month.
OpenMarket is a direct-to-consumer messaging service that a service like Google News alerts uses to send text messages to users who have opted in. The company sent a letter to their customers yesterday informing them of the change.
"Effective Nov. 1, 2008, Verizon will assess a transaction fee of $0.03 for every MT message processed on its network," the e-mail states. "Please note that these message fees will apply to standard rate and premium programs. Transaction fees will not apply to Free-2-End-User, Mobile Giving or Non-Profit organizational programs."
The email goes on to inform OpenMarket customers that the additional charge will be passed along to them.
"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."
Verizon's price increase comes as a blow to consumers who have grown accustomed to signing up for and receiving text message-based news on the go. Whether or not small companies like ChaCha will be able to continue operating with the increased costs from the wireless carrier remains to be seen.
"This recent announcement from Verizon is very significant because a large number of market segments will no longer be able to participate in off-portal SMS services," Steve Livingston, chief marketing officer of mBlox, wrote in an e-mail. "Although we understand the carrier's need to monetize, the immediacy, the market timing and level of cost will create a shock to the system. The mobile channel will quickly become unattractive to many companies, small and large, that have been investing in new innovative programs and services."
The text message price increase comes amid an ongoing investigation by antitrust regulators about, naturally, the cost of consumer text messages. Last month, Sen. Herb Kohl, chair of the Judiciary Subcommittee on Antitrust, wrote a letter to four major mobile carriers questioning the recent increase in the cost of text messaging. Kohl cited the lack of increasing operational costs and a price increase of 100 percent in his letter.