Cha-Cha CEO: We'll Drop T-Mobile over New Text 'Tax'


The CEO of ChaCha, a fast-growing digital startup that offers answers via text message, is threatening to drop T-Mobile's wireless service over the carrier's plan to impose a new one-quarter of one cent fee on text messages.

"We're dropping T-Mobile if they do this," says Scott Jones, the CEO of ChaCha. "T-Mobile is 'triple dipping' here. They already make money when they charge their customers, aggregators, and publishers."

Jones says that ChaCha's aggregator, OpenMarket, informed the company of T-Mobile's new fee hike, and said that because of its razor thin margins it had no choice but to pass on that fee to ChaCha, which is based in Indianapolis. (Aggregators are middlemen that stand between publishers like ChaCha, Twitter, Facebook and ESPN and the mobile subscribers they send content to.)

T-Mobile issued a statement saying it's "not accurate to characterize these business agreements as new or simply as a price increase," but declined to address ChaCha's threat.

Tax on Texts: "Completely Untenable"

Just how bad could such a tax be? Jones contends that T-Mobile's new fee, if applied across all wireless carriers, would force ChaCha to deploy its answer service through other channels such as the mobile web and mobile apps, rather then using the SMS channel. "It's completely untenable," Jones says. "There's no way we can be a profitable service on SMS under these conditions."

Here's why. ChaCha, which has a network of 50,000 mostly college students who respond to user queries, handles two million texts per day as part of the company's question and answer service. The vast majority of these answers are delivered by SMS text. Jones points out that T-Mobile is already getting paid by subscribers for these texts and they are paid something already by aggregators and publishers. "Now, they plan to impose an egregious and unacceptable tax," says Jones. " We don't see any reason for this, other than greed."

Jones argues that if the new fee is imposed on October 1, as planned, T-Mobile's 30 million-plus users would no longer be able to use his service. "We prefer that T-Mobile not take this step, but if they do, we will no longer provide our free SMS service to T-Mobile and shift the traffic to other carriers and platforms," Jones concluded. "It's unfortunate for T-Mobile subscribers since they will miss out on ChaCha and many free services because of this short-sighted move by T-Mobile."

Twitter Hasn't Received Notice

For its part, Twitter says it's not familiar with the new charge. "Twitter has direct deals with all U.S. carriers, including T-Mobile," a Twitter spokesman told DailyFinance. "We haven't received the notice that's being discussed."

Meanwhile, T-Mobile issued the following statement: "We don't disclose the details of our business relationships; however, it is important to note that wireless carriers have similar business relationships in place with content aggregators and that our model is in line with industry norms."

Consumer groups aren't happy about the new fee either. "Until the FCC makes it clear that it is willing to prevent carriers from exploiting their positions in the marketplace, carriers will continue to nickel and dime consumers, aggregators, and mobile service providers alike," Harold Feld, legal director of DC-based advocacy group Public Knowledge, said in a statement.

Update 7:15 p.m. EST: T-Mobile has issued the following statement:

While we don't disclose the details of our business relationships, we do want to clarify recent mischaracterizations. Business agreements with content aggregators, including messaging fees, have been common practice in the wireless industry for years. It is not accurate to characterize these business agreements as new or simply as a price increase. We believe our agreement in its entirety is a net positive for our partners.

At the end of the day, our goal is to ensure that the market for mobile data and access to mobile content thrives and that innovation can easily find its way to T-Mobile customers. We see nothing in our current business model that is counter to this goal.

Please note, there is no change to our consumer messaging or data plans.

Originally published