The high charges for mobile content and the open-ended nature of m-payment systems has resulted in customers ending up with very high bills, and this has resulted in literally hundreds of thousands of complaints from all around the world – in Australia alone close to 10,000. This, of course, has attracted political and regulatory attention and the industry was put under pressure to clean up its act, through a new Industry Code.
In what was certainly a genuine attempt to make the system more transparent and manageable for customers, most carriers began to promote subscription-based services, rather than the per-item charge that often resulted in bill shock for the customers. They ‘forced’ the PSMS to move their services to such models and currently three-quarters of all PSMS services are billed in this way.
Double ‘opt-in’ industry code
In the 2007/08 year, the Telecommunications Industry Ombudsman (TIO) received almost 14,000 complaints about PSMS, and 96% of them were about subscription services. Subscription services typically involve periodic text messages, with each message attracting an individual charge. Of particular concern was the fact that 97% of these complainants claimed they had not knowingly agreed to the subscription.
The TIO drew the following conclusions:
- consumers are confused about the notion of ‘subscription’ mobile premium services;
- ways of cancelling MPS are not readily available or easy to activate; and
- content suppliers and carriage service providers seem not to be addressing complaints about MPS promptly or efficiently.
This led to the introduction of a new Industry Code and additional buttressing measures from the Australian Communications and Media Authority (ACMA), aimed at tightening the rules around the provision of PSMS.
The service provider determination will:
- require all content providers to be registered; and
- require mobile carriage service providers to provide the option of barring PSMS on all plans by mid-2010, so that consumers can choose to block these services should they wish to do so.
The register will be set up by industry; however the service provider determination will also allow for content providers whose products do not comply with the new rules to be deregistered. This will effectively prevent them from supplying services to the Australian market.
The Code is designed to address community concerns regarding the operation and supply of PSMS, and imposes obligations on carriers and content providers that aim to iron out a range of problems with which the sector has seemingly become plagued.
These obligations include:
- procedures to be followed for subscribing to PSMS;
- the banning of advertisements targeted at children under 15;
- strict rules about how advertisements and charges are displayed; and
- improved complaints-handling obligations for companies supplying PSMS.
A very important development of the new Code is a ‘double opt-in’ mechanism which means that a prospective customer will need to give two independent confirmations of a request before they can be taken to have subscribed to an ongoing PSMS service.
However, the inherent flaws in the entire mobile media business model have not been addressed.
The mobile operators own a very powerful tool without which the content and service providers can’t operate their business. This monopolistic situation enables them to offer their m-payment system on a take-it-or-leave-it basis, ie, do a lucrative revenue sharing deal with me and I will let you charge your customers via the telephone bill.
This powerful tool allows operators to extract revenue payments of 40% and more from these content providers. As mentioned above, margins of this type are often only available in the adult entertainment market and in personal services such as horoscopes, games and gambling.
The nature of this business model is such that it also attracts dubious entrepreneurs, as well as true pioneers.
As the revenue-sharing deals required by the carriers are very expensive, the kind of services that can be offered are limited, and some companies are going to great lengths to find loopholes and other ways to make money. As these people are often clever entrepreneurs, and the carriers are rather slow-moving, some short-term benefits are achieved. They make a quick buck and then shut down (or are thrown off the service).
In the meantime they have done untold damage to the genuine players and to the market in general.
Mobile operators become the regulators
While the culprits are often caught and banned from access to the mobile operators’ billing systems, in the end it is the mobile operators who are blamed for the problems. In the courts they are often told in no uncertain terms that they have a responsibility to protect customers who are being ripped off through their mobile services.
More often the courts also cite the poor customer service offered by the operators as a key reason for the problems. Operators are making it very difficult for customers to complain – hour-long waiting times at call centres, lack of toll-free complaint numbers, lack of detailed billing information, and so on. In addition, and even more problematic, sometimes the operator blames the off-deck content provider and/or the aggregators, and vice versa, leaving the customer stranded in the middle.
Conflicts of interest
The fact that the carriers are becoming the defacto regulators complicates matters as they often don’t have a genuine interest in promoting the PSMS market. They compete with these players through their own proprietary portals.
Some carriers are more liberal than others, but such conflicts of interest make life very difficult for the independent content and services providers operating in the market.
This is an increasingly international market; most major players operate worldwide. There are, of course, advantages to this, but at the same time the complex regulatory system is forcing many of these players to become more involved in legal issues and bureaucracy than in the development of innovative new services, and this is hampering innovation.
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