My three cents: Verizon's text fee could cripple SMS services

Verizon Wireless dropped a bomb today on companies that send content over SMS text messaging systems. (Techmeme) Effective Nov. 1, companies that send messages and other notifications to Verizon Wireless customers via SMS text message - that's everyone from Google to Twitter to startups like alerts.com - could be forced to pay an additional fee of three cents per outgoing text message.

As a user of SMS notification services, I can only imagine how much my usage would impact content providers. I regularly send Google queries to GOOGL (46645), which sends the results back to me in the form of several text messages. Likewise, I get news alerts throughout the day from various news sources - as well as a handful of friends - who blast Twitter updates. ESPN sends me NFL score updates via SMS and The Washington Post provides alerts in the latest developments in the election.

I shot off an email to Twitter this morning to find out whether a fee hike like this could cause the company to suspend SMS notifications or try to pass along the new fees. Certainly, as someone who updates my own Twitter account somewhat regularly, I'm not inclined to start paying for users to receive my notifications via SMS. If that were the case, I'd just stop using Twitter. But, of course, Twitter doesn't want its users to start thinking that way. Twitter CEO Biz Stone replied to my email, but only to say that the company is still investigating and doesn't yet have definitive answers to my questions.

I also reached out to alerts.com, a startup that launched at the DEMO conference in San Diego last month. The core of the alerts.com business model is updates via SMS, e-mail and other notification platforms (such as Twitter and IM). Through partners, they're sending out horoscopes, personal reminders, updates on craigslist queries and updates on RSS feeds. There is also plans to expand the service to things like SMS coupons and instant SMS lottery results.

CEO Pascal Stolz said there are no immediate plans to change the business model but did note that, once the details are settled, companies like his may have to assess the value of offering SMS updates on some of the content. Maybe lottery results and craigslist updates will only be offered via e-mail while sports scores will continue to be delivered via SMS.  This move by Verizon, though, is definitely a game-changer, he said. And he's fully expecting the other carriers to eventually follow Verizon's move.

updated: I had put a call into Verizon Wireless for more background on the fee and today's news. Earlier, a representative told news site RCR Wireless that the fee is necessary to cover the carriers' own costs to deliver the message. Interestingly enough, a new Verizon statement implies that this was not a final decision but rather the notice was an internal draft of a document that was intended to spark business discussions and not intended for public release. (note: an earlier version of this entry was missing the word "not" in the previous sentence. It obviously changes the meaning.) Yet, the text of the letter includes an "effective date" and says it "will assess" the fee, not "we are exploring" a fee. This is the statement I received from Verizon Wireless:

As Verizon Wireless continues to review the competitive marketplace, we constantly work to provide additional value to our customers, employees and other stakeholders.

We are currently assessing how to best address the changing messaging marketplace, and are communicating with messaging aggregators, our valued content partners, our technology business partners and, importantly, our friends in the non-profit and public policy arenas.

To that end, we recently notified text messaging aggregators - those for-profit companies that provide services to content providers to aggregate and bill for their text messaging programs -  that we are exploring ways to offset significantly increased costs for delivering billions upon billions of text messages each month.

Specific information in one proposal, which would impose a small per-message fee on for-profit content aggregators for commercial messages, has been mistakenly characterized as a final decision to implement.  We don't envision this type of change to in any way affect non-profit organizations or political and advocacy organizations.

We have not increased the per-message cost to aggregators since our messaging service began in 2003, and we have never envisioned a cost to consumers or content companies, but rather on content aggregators themselves.  That draft was intended to stimulate internal business discussions and in no way should have been been released to the public and represented as a final document.

At Verizon Wireless, we strive to provide our messaging customers with maximum value, and work to implement business decisions that encourage the use of messaging between individuals and organizations in both the marketplace of ideas and the commercial marketplace, and we will continue to strongly encourage the use of our services by charitable organizations as they perform their good works.

Seeing how Congress has launched a inquiry into the doubling of the price-per-text that consumers are charged, it was unlikely that the wireless carriers would want to impose another price hike on consumers. (So, they charge consumers for SMS and the content providers who send SMS updates. Isn't that like, ya know, double-dipping?)

Previous coverage: Text message pricing: Is Sen. Kohl fighting the wrong battle?

I initially thought that this could be a way to push users into mobile Web plans (which the wireless carriers charge a pretty premium to access) and into Web applications designed for the Web. Google, for example, has a nice search interface on its mobile applications lineup - one that doesn't use SMS. But, mobile Web is still in its infancy and this might have a bigger impact overall on consumers who are just starting to give their phones some wings by experimenting with these services.

From a tech innovation standpoint, this feels like such a step backward.

update: There seems to be some confusion about whether this is per-text fee is actually something that will be imposed on Nov. 1 or if it’s something that’s just being considered. I spoke with a Verizon Wireless spokesman, who said the fee in question is just being considered and that no determination has been made. I asked him specifically if he could explain why a letter from Open Market (below, from RCR Wireless), which manages the delivery of the publishers’ content to the mobile device, to its customers stated definitively that the fee would be imposed effective Nov. 1. (I haven’t yet reached anyone at Open Market.) He could not offer an explanation and said he had not seen the letter.

So, as of now, Verizon Wireless will not be imposing a three-cent per-text fee on Nov. 1 on content providers who deliver news updates, horoscopes or reminders via SMS.