Americans 4 years behind the UK in SMS adoption

While SMS adoption has been increasing rapidly in the US, it is clear that the overall development of the market is still in its infancy compared to Europe. The IntoMobile blog has some interesting statistics about adoption differences. For more details, check out Tomi T Ahonen's article.Verizon Wireless has just reached the '1 SMS sent per day per user' mark, which happened in the UK 4 years ago. Today, we're at 6 SMS per day per user in the UK, 5 in Ireland, 10 in South Korea, and 15 in the Philippines!

Verizon limits Premium SMS tariff to $9.99

Verizon Wireless announces an important change to their handling of new premium SMS campaigns. Effective immediately, the maximum price point available for new premium short code based campaigns will be $9.99.

This change only applies to new campaigns that are submitted to Verizon for approval. Campaigns that are currently running on price points higher than $9.99 can continue to do so.

New MMA documents

The MMA has released a new version of its Consumer Best Practices Guidelines, which can be downloaded here. The key changes are:

• Use of 'Free' has been relaxed. It used to be the case that the word FREE could not be associated in any way with a premium billed campaign (e.g. 'sign up now and receive the first 5 alerts FREE'). This is now possible, with certain restrictions.


• Marketing to children (anyone under the age of 13). The MMA requires content providers to adhere to COPPA, and also imposes additional restrictions in how mobile campaigns are being promoted.


• Restrictions on use of single opt-in for Participation TV programs has been made more specific. Restrictions include maximum price ($1.49), transaction-only billing, and use of both verbal and visual pricing instructions during the call-to-action.


• The Best Practices document now also includes guidelines for WAP services and IVR based opt-in mechanisms.


• Further restrictions on running chat programs.

The MMA has also released two interesting documents providing some background information about running off-deck services and creating successful mobile marketing campaigns.

• 'Off Portal - An introduction to the Market Opportunity' introduces the reader to the world of direct-to-consumer mobile services, the market opportunity, and the best practices on how to create an off-portal service.


• 'Understanding Mobile Marketing - Technology and Reach' describes the opportunity of using short codes and mobile technology to create interactive marketing campaigns.

While these documents are certainly useful, it is good to keep in mind that these are 'sales documents', mainly written to promote the use of mobile services, hence not necessarily very objective, and most definitely overly optimistic in describing the overall market potential. One example: the mobile marketing case studies tend to be very long on descriptions, but very short on actual results. Hmmm.... now, why would that be ?

Change in Verizon Binary Message Flow

(Updated: July 18, 2007)

Verizon is implementing a new billing mechanism to improve success billing ratios (SBR) for Surepay customers. Surepay is Verizon's prepaid brand.

The change involves 2 elements:

1. Change in message flow. Premium billing of the subscriber should no longer happen on the WAP Push message, but through a separate 'thank you' SMS message, as is the case with the other carriers. The 'thank you' message should only be sent after the WAP Push message was successfully delivered. the customer has received a handset delivery receipt, indicating that the content was successfully delivered to the subscriber.

2. Change in billing API.

Quios customers need not worry about the change in the billing API. This change will be handled by Quios without any customer impact. However, Quios customers will need to make the proper message flow changes. The deadline for implementing these changes is August 10, 2007. Certification requests entered after July 16, 2007 will also need to adhere to the new message flow. Please contact your account representative in case of questions.

Sprint Payment Re-Capture

Carriers have the right to deduct any non-collectible premium SMS revenue from the outpayment made to content providers. If the outpayment was already made, they have the right to reduce future outpayments to account for past uncollectible amounts. We haven't seen this happen ... until now.

Sprint has informed us of their plans to 're-capture' payments made to content providers for uncollectible revenue as well as refunds, and do so retro-actively starting January 2007. Details on the possible negative impact for content providers are not known at this time, and as soon as we receive further information, we will immediately inform the impacted content providers.

Summary Table of Carrier Requirements/Restrictions

It's often hard to keep track of what is allowed and what isn't. Because of that, we've created a table summarizing all carrier requirements and restrictions related to operating common short code (CSC) campaigns, both premium and standard rated, in the US.

You can download the table here. Let me know what you think. Drop me an email: marc at quios dot net.

Sprint Refunds and Message Flow Changes

Starting with the June billing period, Sprint will start deducting refunds from the outpayments made to content providers. Previously, Sprint was not accounting for refunds. Sprint has also implemented a new message flow whereby subscribers are 'validated' before the premium content is delivered and billed. This means that subscribers who cannot be billed will no longer be able to receive premium messages or make phone calls. These subscribers are 'hotlined' which means that when they attempt to make a phone call, they will be redirected to Sprint's customer service hotline. Quios will start returning a specific error code for hotlined subscribers.

Global Messaging 2007

The fourth annual Global Messaging conference took place this year in Monte Carlo. Analysts are predicting a continuing growth in the volume of SMS messages sent worldwide. In 2005, yearly SMS traffic reached the 1 trillion level. For 2010, estimates vary between 2.3 trillion and 3.2 trillion.

According to John Delaney, principal analyst in Ovum's Consumer Group, there are five reasons for the success of SMS:

1. Simplicity: everyone can use it.
   
2. Ubiquity: everyone has it.
   
3. Awareness: everyone knows about it.
   
4. Critical Mass: everyone can receive SMS and knows how to read it.
   
5. Reliability: SMS messages don't get lost all that often.

According to Cellular News "A key industry trend reiterated at Global Messaging 2007 was that in the mature markets, mobile networks are starting to acknowledge the important role of wireless applications service providers (WASPs) and aggregators in growing the A2P market. In the experience of mobile operators, the higher percentage paid out to WASPs, the more revenue the mobile operator makes from messaging. Mobile operators in the United Kingdom currently offer the highest payouts in the global messaging market."

Let's hope U.S. carriers get the 'message'.

Verizon Content Rating

Verizon is in the early stages of releasing a new content rating system for off-portal content. All short code programs will need to be categorized in one of four different content categories. All Verizon subscribers will also be categorized in one of four content categories. If a content provider is attempting to deliver content to a subscriber in a 'lower' category, the content download will fail and a specific error will be returned to the content provider, who will need to send a message to the subscriber alerting him/her that the content is not available.

The four content categories are :

Verizon content/subscriber categories

Category	Recommended Age Group
C7+	Age 7+
T13+	Age 13+
YA17+	Age 17+
Filter Off	Age 18+

The subscriber classification can be changed by parents by logging in to their Verizon account. The default subscriber classification is T13+. The content classification is set by the content provider and actively audited by Verizon to prevent abuse. The default content classification is T13+.

Timelines for implementation have not been communicated. While this potentially opens the door for content providers to offer adult content, Verizon has made it clear that only the first two content categories will be allowed for now. There is no firm date at this time for when content in the later categories will be allowed.

US Premium SMS Revenues

Telephia released the first ever study on Premium SMS in the US. Over the course of the first quarter of 2007, a total of 74 million premium SMS transactions were processed across all carriers, for a total retail value of $273 million.

A couple of interesting statistics:

• Mobile content downloads dominate in value (79% of total revenue). Average premium transaction value is $7.27
  
• Off-portal content downloads now account for 32% of all mobile content downloads.
• TV based voting and sweepstakes account for 47% of total volume, but that total is probably based on a few stand out hits like 'Deal or No Deal', who accounts for half of that volume. Average premium transaction value is $1.
  
• Based on Q1 results, we can now safely say that 2007 Premium SMS revenues will exceed $1 billion.

Detailed results are posted below.

Q1 2007 Premium SMS Volume and Retail Value

Category Type	Volume (000)	Volume Share (%)	Revenue	Revenue Share (%)
Mobile Content	29,544	40%	$214.9M	79%
Voting/Sweepstakes	34,716	47%	$35.4M	13%
Chat/Community	5,497	7%	$5.7M	2%
Other	4,208	6%	$17.4M	6%

Here are some thoughts about these numbers:

• The high transaction value associated with mobile content ($7.27) clearly indicates that the vast majority of all mobile content downloads is charged on a monthly subscription basis. If that is the case, roughly 10 million users are currently signed for monthly subscriptions, or about 4% of all mobile subscribers in the US.
• Furthermore, if we assume that binary content subscriptions (ringtones, wallpapers, games, etc.) typically cost $9.99 per month, where as pure text subscriptions (horoscopes, jokes, etc.) cost $4.99, it follows that 54% of all mobile content subscribers sign up for text alerts, and 46% sign up for ringtones.
• It is clear that most premium sweepstakes and voting contests run at a $0.99 price point.
• It is interesting to see that voting+content account for over 90% of all revenues. This means that other premium sms categories such as chat, dating, and micropayments haven't really taken off yet. This is hardly surprising given the limited support amongst carriers as well as the severe restrictions that some carriers are imposing on such programs.
  

Verizon and Reverse Auctions

Verizon Wireless now requires all premium billed reverse auctions to include some form of added value content (text alert, joke, trivia, etc.). This is due to the changing legal landscape causing reverse auctions to be considered as games of chance and no longer games of skill. Without the added value component, reverse auctions could be viewed as an illegal form of gambling in some states.

Although this provision specifically applies to reverse auctions (and not general sweepstakes), we do feel that the next step will probably be to extend it to premium billed sweepstakes. We encourage content providers to start modifying their premium sweepstakes and reverse auction campaigns accordingly.

Cingular Off Portal Purchasing Control (OPPC) System

Cingular announces important changes to the way its Subscription and Refund Management (SRM) system will work, mainly to improve Cingular's visibility over end-user subscription status to 3rd party content.

Under the new and revised SRM system, content providers no longer need to handle the double opt-in user interaction before starting a new subscription on Cingular's SRM platform. Instead Cingular will handle the double opt-in management through its Qpass billing platform.

Here's the old message flow:


And here's the new message flow:


The new system has the advantage that Cingular customer service reps will be able to handle consumer complaints more effectively and verify consumer claims about opt-in status to specific campaigns.

For Quios customers who use the Quios Permission Management System (QPMS) no changes will be needed. Quios will handle the revised requirements transparently to our customers.

The change-over is expected to take place by the end of Q3 2007.

T-Mobile and Games/Applications

T-Mobile announced today that all J2ME games and applications need to be certified by their independent certification partner, True North Service, before they will be approved by T-Mobile and made available to T-Mobile subscribers.

This new requirement doesn't change the previous requirement that all J2ME games and applications need to be part of T-Mobile's white list of approved applications.

The new independent certification step needs to be completed before submitting your short code campaign to T-Mobile for approval, hence further lengthening the approval process and time-to-market for your campaigns. Make sure to give yourself plenty of time (at least 10-12 weeks) to go through the entire T-Mobile approval process.

If you currently sell J2ME games on a T-Mobile approved short code, you need to contact True North within 30 days to start the re-certification process.

For True North Service contact details, contact us.

Sprint Premium SMS Message Flow (Updated)

Sprint is changing the way gateway providers interact with Sprint's message delivery and billing systems. Whereas content providers just deliver the proper premium sms message to gateway providers like Quios, we work behind the scenes to (i) deliver the content to the cell phone user; (ii) initiate a billing transaction with Sprint's billing system.

Previously, we were first initiating a billing transaction before attempting to deliver the content. Sprint is now requiring us to reverse this message flow, and first attempt to deliver the content, before initiating a billing transaction.

The message flow change will take effect on Wed. May 9th between 2am and 4am PT.

Customers do not need to change anything on their side. As is the case with the other carriers, Quios will perform retries on all failed billing transactions to optimize the success billing ratio.


We don't expect this change to have any material effect on success billing ratios. It will reduce the number of complaints from consumers about being charged for content that was never delivered. On the other hand, this new system could lead to content being delivered successfully without being charged (ie. message delivery succeeds but billing fails).


UPDATE: Sprint has warned aggregators to expect a reduction in success billing ratios of up to 25-30%, part of which is due to the rationalization of delinquent subscribers on their network. However, we have no further visibility on how this will affect individual content providers.

Goodbye Dobson, Hello Cellular One

Dobson has completed its rebranding from Dobson/Cellular One to Cellular One. Please update your marketing materials accordingly. You may use below logos (small or large) provided you follow the Dobson branding guidelines as documented in the Quios White Paper.

New Minimum Rates from Alltel

Alltel is imposing a new minimum rate of $0.50 on all premium billed campaigns. Existing campaigns below this minimum may continue, but new campaigns must adhere to the new policy.

The other carriers with minima are AT&T Mobility, who requires a minimum of $0.25, and Sprint, who requires a minimum of $0.15.

Verizon Pricing Changes

Verizon has announced following price policy changes. All affected campaigns need to start adhering to this new policy by APRIL 30, 2007. We will approach Quios customers who have affected campaigns individually to assist them in the migration.

1. Weekly billing is no longer allowed. You can continue to use daily or monthly billing.

2. Chat pricing is capped at $0.99 per message.

3. Monthly subscription campaigns are capped at $20 per month.

Recycled Numbers Lawsuits

Quios has learned that several law suits have been initiated against wireless carriers regarding deactivated numbers. The complaints in these suits have to do with recipients allegedly being billed for services and content based upon authorizations received by the PREVIOUS owner of that phone number.

As detailed in a previous post (Mo. June 19, 2006) deactivated numbers are typically recycled by carriers after 3 months. Carriers provide us with lists of deactivated numbers. We provide those lists to our customers through an ftp site. Please contact us for details.

It is extremely important for all content providers to diligently take the proper actions after receiving the new disconnect list. Failure to do so may lead to consumer complaints, shut down of the short code by the carrier, or even legal action.

Alltel increases spending limits, adds support for pre-paid

As of March 7, 2007 Alltel has increased the monthly spending limit for premium services from $35 to $75. This spending limit is applied by Alltel on a PER USER basis and covers all premium SMS usage by that user in a given month. Alltel is enforcing the limit. Content providers do not need to make any changes.

At the same time, Alltel announces support for prepaid phones. The subscriber must have sufficient funds in his account for a premium transaction to succeed.

We believe that both measures will help to increase the overall SBR (Success Billing Ratio) of Alltel's network. Quios' average SBR on Alltel for 2006 was a low 45.5%, compared to an average SBR across all US carriers of 87.9%.

T-Mobile reduces impact of recent changes

T-Mobile announces today that it has made changes to its campaign provisioning fee structure as well as its refund driven outpayment penalty structure. The changes are implemented retroactively from Feb 1st, 2007 onwards.

1. The one-time campaign provisioning fee is reduced from $1,000 to $500.

2. The new outpayment penalty structure now provides an incentive in addition to penalizing customers for excessive refunds. If the refund ratio is 5% or lower, T-Mobile will increase the outpayment to customers by 2%. However, the penalties for having high refunds have increased. The new structure is detailed below:

T-Mobile Refund Table

Refund Rate	T-Mobile Revenue Share Change (%)
0%-5%	+2%
5%-7.5%	0%
7.6%-10.9%	-4.6%
11%-14.9%	-18.25%
15% or greater	-100%

We applaud the reduction of the campaign provisioning fee. We feel it's important to keep the barriers to entry as low as possible since that will result in more campaigns, more services, and more innovation.

While it's positive that the new refund related structure now has an incentive in addition to a penalty, we still feel that these measures are ill conceived because they penalize all content providers of a certain aggregator in the same way regardless of the specific refund % of any one specific content provider. Secondly, content providers have no direct control over carrier refund policies. We would think that the typical carrier margins of 35-40% on premium SMS outpayments would be sufficient to deal with refund problems. And if not, carriers always have the option to cancel a certain campaign if refunds prove to be too high or costly.