Feb. 6, 2007 at 7:00 AM ET
You might carry your cell phone and your wallet in different pockets, but the distance between them keeps shrinking as companies figure out new ways for your phone to vacuum dollar bills out of your back pocket. Ignore them at your peril.
The price of basic, pay-as-you-go text messaging has jumped 50 percent at most carriers in recent months, which means everyone should have a bulk message plan now. But that should be the least of your worries.
Premium text messaging -- with prices that start at 49 cents but range up to $30 monthly subscriptions -- have exploded in popularity. The services allow consumers to participate in television game shows, receive daily horoscope messages and hundreds of other services. But consumer advocate Edgar Dworsky says many consumers are confused about the price they are paying for these simple messages, and the cell phone industry is at risk of repeating the 1-900 number fiasco that dogged telephone providers into the 1990s.
Then, consumers complained so much about unexpected charges from pay-per-call telephone lines showing up on phone bills that Congress eventually passed a law to reign in 900 number advertising.
Keeping the services clean is critical for television networks, which in the past 12 months have seized on premium texting as a critical new revenue source and tool for building viewer loyalty. Text messaging plays a crucial role in Fox’s hit show “American Idol,” NBC’s “Deal or No Deal,” CBS’s “Big Brother” and a host of other “unscripted” shows.
Consumers have yet to balk at one-time premium text fees they pay – which are generally about $1 – to play along with prime time TV game shows. But they are complaining about text messaging that automatically triggers subscription services.
Still, Dworsky, who runs a consumer protection Web site named MousePrint.org, is concerned that premium text message fees aren’t disclosed clearly enough In fact, many consumers may not have even heard of premium text messaging.
'No oral disclosure'
In some advertisements, Dworsky says, an announcer will urge consumers to send a quick text message to sign up for a service or play a game, while a large message on the TV screen displays the instructions. The premium fee is only shown on the bottom of the screen in fine print.
"There is no oral disclosure of the fee," he said. "And the visual disclosure isn't up long enough and isn't printed in large enough type for the average person to catch." Indeed, in some ads, the disclosure language slides up quickly, then disappears off the bottom of the screen just as quickly.
Dworsky points to one television ad that urges consumers to send the word "Love" to a 5-digit number. Daily love advice text messages follow, at a price of $30 a month. The cost is revealed only at the end of a 35-word disclaimer that runs across the bottom of the screen in small print that is a fraction of the size of the text message instructions.
And while the small print says subscribers under 16 must get consent from "the bill payer and/or parental approval," there is no practical way to keep kids from signing up.
Netherlands-based Glomobi.comruns the “love” text message service. Repeated attempts to contact the firm through its customer service e-mail address were unsucccessful. The site lists no contact phone number, other than an automated line used to cancel service.
But in the frequently-asked-questions section of Glomobi.com, the site addresses accusations that ads aren't clear.
"Glomobi never advertises with free content. Not in our adds on television and not on our website," it says in one section, in answer to the hypothetical comment, "I was billed for your content but your ad said it was free." And in another area, it indicates that "all the advertisement material(s) clearly state (either visually and/or verbally) that this concerns a subscription service."
Premium text message subscription services began getting a bad name last year, when consumers started reporting phantom charges on their cell phone bills after downloading what they thought were free ringtones.
That happened to Chris Lee, a software consultant who lives outside Boston. He discovered repeated $9.99 charges on his cell phone after downloading a set of ringtones that he thought were free. When he did, he was enrolled in multiple services and had a hard time disconnecting.
"These charges appear without any description … on the phone bill and it’s up to the consumer to figure out which company is billing them and how to cancel. It is up to the consumer to cancel each of these individually," he said. "It's like a credit card gone wild."
Verizon Wireless spokesman Jeffery Nelson said the company has received complaints from some consumers about premium text services, and some third-party providers have been banned. But he said other consumers are happy with premium texting.
"I think there's an expectation of a payment" when viewers vote for something they see on TV,” Nelson said. “But they don't expect to be billed forever.”
ITV: As simple as TXT
In the past two years, two technical hurdles have been cleared that opened the way to mainstream text message marketing campaigns. Most text message services now work across all cell phone carriers – in the past, consumers could only text within individual carriers. And the advent of “short codes” – those five-digit numbers -- has made marketing campaigns much simpler. Marketers can buy short codes that act as shortcuts for consumers who want to fire in a quick message, rather than forcing consumers to enter 10-digit telephone numbers. Vanity short codes (such as Pepsi, or 73774) are even available from the Common Short Code Administration for $1,000 per month.
The innovations have allowed premium texting to become the missing puzzle piece in the quest for the Holy Grail of interactive television. For nearly a decade, television networks have tried all manner of devices to get consumers to interact with their favorite television shows. It turns out that handy cell phones do the trick nicely.
“I have my cell phone with me like a remote control,” said John P. Roberts, vice president of digital media at GSN, which operates a popular game show based on text messaging called “Playmania.” Texting a message is far easier than telling consumers to head to their computer and log on to a Web page to participate, he said. Only 2 to 4 percent of watchers played along when they had to use the Web, he said, but 15 to 20 percent of Playmania viewers play along with their cell phones.
Last season, some 57 million people voted in “Deal or No Deal's” Lucky Case Game, according to the Wall Street Journal. Some of those entries were sent in for free via NBC's Web site, but a sizable chunk came from cell phone users paying 99 cents a pop. An NBC spokeswoman declined to offer a breakdown on how the votes were cast.
Text usage is up across the board. Some 12 billion text messages were sent in June of last year, up 100 percent from the previous year, according to the most recent statistics from industry group CTIA.
No comparable statistics on the number of premium text messages are available, but clearly more consumers are combining premium texting and TV watching. A survey by The Mobile Marketing Association of a consumer panel found that only 8 percent of consumers participated in interactive television texting campaigns in 2005. Last year, 29 percent did.
The MMA publishes guidelines for television marketers to follow when conducting premium text message campaigns. They call for the notice of the fee to be shown in 10-point type on the screen for 10 seconds. The charge also should be "clearly stated, both visually and verbally." Consumers also should receive a thank-you message indicating the fee paid, a bit like a receipt.
Executive director Laura Marriott said her agency has not received any complaints about game-show style TV-texting campaigns.
"The majority (of complaints) have been about the subscription services," she said.
At NBC, the company says it does all it can to make consumers aware of text messaging charges. (MSNBC.com is a joint venture between NBC’s parent company, GE, and Microsoft.)
"This concerns everybody. … It’s not good for the business," to confuse consumers, said Vivi Zigler, executive vice president of digital entertainment and new media. “We need to go as far as we can to be able to prevent that.” She acknowledged, however, that there isn’t much NBC can do to keep kids from sending premium text messages in response to shows.
Still, Dworsky says networks and stations aren’t doing enough. He says there is frequent omission of oral disclosure by narrators, leaving the only warning about fees to the small print at the bottom of the screen.
Just a game, or gambling?
He also is concerned that many of the games, which often include a cash prize giveaway, don't follow rules governing sweepstakes. Some share characteristics with gambling, he said.
GSN’s “Playmania” appears to be a raging success. It was recently expanded to six nights of live shows each week. Home contestants send text messages at the urging of a host for a chance to compete in on-air word puzzles for prizes of $100 or more. Contestants for each puzzle are picked at random, according to Roberts. Mobile phone text entries cost 99 cents apiece. Contestants can also enter for free using the GSN Web site. Those who pay to play also receive a “fun fact” or a game beamed to their mobile phone for their 99 cents.
On a bulletin board devoted to the game, some players criticize the program for stringing users along, convincing them that there are few players competing for the prize in order to solicit entries.
“I came to the realization that they're not rushing to put new players on so that people will get the impression that nobody else is calling and that they're practically guaranteed to get on and solve the puzzle and win some quick money, when all they're really doing is throwing their dollar bills at GSN like I did,” wrote one.
Roberts said his hosts don’t engage in those kinds of tactics, and in fact the show has gone to great pains to ensure its fee disclosures are clear and that there are free ways to play.
“People who enter for free have the same chance to get on as people who pay,” he said. “Being one of the first networks out there to do this, we really are cognizant that we (need to) do this right.”
Legal definition of an illegal lottery
The issue of how many people are playing has caused trouble for similar interactive games shows in the United Kingdom. In January, regulators in the U.K. issued a report warning text-in games shows that they might be running afoul of that nation's gaming laws. The report urged popular shows like "The Mint" to release odds information and warned the shows "generally look and feel like gambling." Regulators urged the show to disclose the odds of winning, which would generally involve sharing statistics on the number of players for each game.
In the United States, the difference between a promotional sweepstakes and gambling is fairly clear, says Joseph Lewczak, a lawyer who consults with marketers that operate sweepstakes games. Illegal lotteries have three characteristics, he said: prize, chance, and consideration. Take away any of those elements, and you have a legal promotional sweepstakes. Consideration essentially means entry fee, and chance means luck. By allowing free Web site entry, and by making the contest a game of skill, sweepstakes generally stay on the right side of the law.
"Choosing the winner based on chance would be considered an illegal lottery," he said.
He cautioned that the games must be true games of skill, however. He could imagine a situation where regulators might take a closer look at premium text games to make sure they "aren't just another form of gambling."
But Dworsky challenged the notion that these services genuinely provide a true free means of entry, however, because only three in four adult Americans have Internet access.
Dworsky wants U.S. regulators to get involved. The Federal Trade Commission sets rules for 1-900 numbers – including requirements of verbal disclaimers, and a chance to disconnect without fee during the first few moments of a call. But the agency has not yet set any rules for premium text messages, spokeswoman Claudia Bourne-Farrell said.
Parents who are worried that their kids might sign themselves up for expensive text subscriptions or vote too many times on television shows can call their wireless carrier and ask that premium text capabilities be turned off.
Verizon spokesman Nelson also recommends that consumers watch their bills carefully and call their carrier if unexpected charges appear.
“The carriers want to hear from you, and need to hear from you,” he said. “This is a new space, a new area. I don’t think the burden should be on the consumers. I think the burden is on (the carriers) who are opening up the gates to this.”