Mobile Content Takes A Hit
By Steve Wallage, Tue Apr 05 09:00:00 GMT 2005

Mobile content players are adopting a code of conduct in the hope of forgoing short-term greed for long-term gain and to avoid a consumer or regulatory backlash.

One thing that the mobile industry has always been very good at is copying successful ideas. As soon as demand for mobile content started to pick up, a host of new offerings flooded into the market with ringtones, screensavers and so on. Then some bright spark in the mobile content industry had an idea of making even more money -- why not turn these offerings from one-off sales into subscription services? Again, other companies loved this idea and soon the unwary consumer, thinking they had just bought one ringtone, was suddenly inundated with new ringtones -- and a hefty bill.

In the UK, the response from the mobile industry was to act quickly. Web sites such as grumbletext, which, as the name suggests logs user frustrations, were suddenly overwhelmed by subscribers complaining of unwanted mobile content and premium SMS charges. UK regulator ICSTIS, which had first drawn up regulations on premium SMS in 2002 (PDF), suddenly saw a massive growth in complaints at the end of 2004. As with any regulator, it was typically acting retrospectively, in response to complaints, and struggling under the burden of proving cases and finding the offending parties.

This is when the Mobile Entertainment Forum (MEF) decided that it needed to get involved. It drew up a code of conduct for the UK, which was released on January 15. According to Andrew Bud, regulatory head of the MEF and executive chairman of messaging firm Mblox, the aim was to "get the correct balance between consumers and the industry."

The MEF Code of Conduct

The MEF claims to have looked at regulatory experiences from around the world and gained wide industry input into their code of conduct. They are commendably short and sharp, and surprisingly free of legal speak. They are also surprisingly strict.

Among the key requirements, mobile content players must provide a free message detailing the cost and scope of their service. They must allow users to stop the service at any time, and ensure that simply texting "stop" is sufficient, rather than some precise form of words. They must also send a monthly reminder of the cost and details of the service. For services charging more than $30 a month, the requirements are more onerous.

The Impact of the Code

The timing of the code in the UK was rather fortunate, as only a week later mobile content became a political issue. Bud claims that if the MEF code of conduct had not been in place, the mobile content industry could have faced such political and regulatory intervention that the whole market may have been threatened.

In fact, the code of conduct did cause a hit to the mobile content market. The MEF estimates that mobile content revenues fell between 10-30% in February, as a result of users suddenly more aware of mobile content services and more easily able to cancel them, what the MEF claims it expected to happen. It expects this to be a one-off hit and, so far, revenue growth for March has supported this notion.

A further impact of the code of conduct has been the greater involvement of the operators as the policemen for the industry. Vodafone, which was particularly vocal in developing the code of conduct, and already had its own guidelines (PDF), has been leading this charge.

The net result has been that eight mobile content service providers have now been suspended in the UK for breaching the code of conduct. Another group, estimated by Bud at "around 40", have received a "yellow card". This, as in the football world, is the first warning of non compliance and a precursor to suspension.

The perceived success of the code of conduct in the UK has now persuaded the MEF to look to enforce the code in other countries.

Where To Go From Here?

The MEF is, not surprisingly, rather bullish about the prospects for the code of conduct around the world. They believe the code will be extended, not watered down, in other countries. The UK, for example, is looking at additional areas such as the requirements for different mobile content models, and how to incorporate such elements as postal welcome packs for new services.

An element which could lead to further tightening of the code in particular markets is legislation. The EU has long talked about further regulation in this area. Individual countries such as Australia have also developed their own regulations, while others such as Spain are working on it.

But the bottom line is how do you persuade individual mobile content providers to play by the rules? The MEF pushes the ethical case that it is for the long-term benefit of all in the industry, but this will hardly wash with all content providers. The national regulators are often too slow and too limited in their powers to really tackle the problem.

It seems to fall on the operators to solve the issue. It is the operators who the MEF is relying on to encourage different countries to adopt the code of conduct. It is then the operators who will really need to enforce the code, and suspend offending content players. This means that all operators need to support the MEF as, increasingly, do the aggregators who are an important provider of mobile content services to users.

One example of the challenges in all this is the relationship between mobile content players and operators. The MEF claims that a key reason it is much easier to stop supposedly rogue mobile content players is that they must register in that country, depending on national laws, to set up a service. This is in contrast to say rogue dialers, the scourge of the fixed telecom players, which can be established in a different country. Yet, already, the UK has seen mobile content players set up a company specifically to provide a service, and then start a new company if the first one is suspended.

The MEF code of conduct is a worthy effort and, if the operators are fully behind it, will have some effect. However, this is going to be an ongoing challenge for the mobile content industry and user education and awareness efforts need to be also stepped up. Even the MEF admits that, "the US market is a big concern."