Premium Rate SMS describes a service whereby a user is charged a fee for receiving content to their mobile phone, wherein that fee is divided between the provider of the content and the mobile phone company who delivers the content to the user’s handset.
As a service, it has great potential, as it allows providers of content to bill users via their mobile phones bills rather than requiring them to provide credit card information.
However, its also fraught with problems, not least because it opens up the potential for abuse, which means its receives incredible scrutiny from regulatory agencies like Regtel.
Its also dogged by the fact that the mobile phone companies tend to keep the lion’s share of the revenue, which means that margins for providers of content are very tight, which means that its only suitable for a small number of content offerings.
Back when all this kicked off, lots of companies jumped into the market and started offering aggregation services to providers of content.
For content providers, it was very difficult to tell how reliable or durable these companies were, as all they were providing was an API through which developers could interact with the networks of the mobile phone companies. This was always an issue for developers, as it was clear that these companies were operating on razor thin margins, and that they might collapse into themselves at any given point in time.
I’ve had an experience of this nature with a company called Zong over recent months.
When Zong started out, they offered a fabulous service. They didn’t charge any upfront fees, and you could access Premium Rate SMS services provided by numerous mobile phone companies across several EU countries, and even the US.
This was great for a while, but pretty soon, it all started to go pear shaped.
First off, Zong shut down their US service (and didn’t tell any one at the time) because they found that content providers were breaching regulatory rules re. Premium Rate in the US, and that if they didn’t shut it down, they would be exposed to huge fines.
This seemed to provide a signal to Zong that perhaps Premium Rate SMS wasn’t going to be the cash cow they thought it would be, and from that point on, the service started to suck.
They stopped looking after their infrastructure for starters, and after a while, their servers became so overloaded that they became impossible to use in any meaningful way.
Then, they shut down the ability to send out bulk SMS messages, which is critical to any Premium Rate SMS service, and again didn’t give any body any notice. They literally just shut the thing off and left developers to figure it out for themselves.
Before long, they had stopped relying to emails to their support email address and had stopped replying to posts on their discussion forum, obviously hoping that content providers who had built commercial services on their platform would eventually just get the message and go away.
At this point, the Zong service still works, but I’ve stopped using it. I expect that some day some Sys Admin will be instructed to go into the Zong server room and just switch the Zong Premium Rate SMS servers, and not check his email for a few days thereafter.
What’s worse is that Zong are back out there now offering new services, which again involve the use of mobile phones but not on a premium rate basis. My advice to anyone considering using Zong to built a commercial platform would be to do so at their peril.
Update: Zong shut down their SMS Premium Rate service as of May 31st 2010