Friday, August 26, 2011

Free Text Messaging Costs Violator $50,000

In a previous post about the fallacies of "free" text messaging we mentioned that there have been many cases of companies being penalized by the carriers for sending unapproved messages (which includes anything sent using the email-to-text method, otherwise known as an "SMTP gateway).  Little did we know that one of TextPower's own customers had the unfortunate experience of learning about this the hard way.

Before this midwest-based marketing company became a TextPower customer they attempted to use the "free" method of text messaging.  The result was a near-disastrous situation for them, nearly putting them out of business and ultimately costing them a lot of money.  They eventually migrated their business to TextPower, using a real SMS gateway and doing things properly and in accordance with carrier compliance requirements.

What follows, in their own words, is the real-life experience from this SMS application provider detailing the risks - and, ultimately, the penalties - of using an SMTP gateway for commercial text messaging:


We had a client in 2006 that had acquired a list of 10 million numbers that he claimed were "opt ins". We were novices in the SMS arena at that point, and had actually launched our first text marketing product, based on using SMTP protocols. The price that the client was willing to pay was attractive enough for us to take it on.
The client used our software to upload his number list and started sending. Everything was quiet for about 2 weeks, until the client called to tell us that he had received an injunction from Verizon in New Jersey, along with a lawsuit totalling in the millions of dollars!
Verizon's lawsuit cited all sorts of violations; federal Can Spam Act, New Jersey laws and regulations...a basket full of laws that were breached. The suit asked for penalty payments up to $500 per SMTP message. Verizon had all the statistics from their servers that detailed the traffic volume coming in to their SMTP servers, how many blocks, how many were processed before they started blocking. They cited the business disruption caused by the high message load, backed up by server stats.
We initially thought, "We're OK, Verizon is just going after the sending party". We were wrong.
A couple of days letter, we were also served by injunction and lawsuit, with similar penalties. Verizon, and the law, didn't differentiate between the sending party and the party providing the sending software. Fortunately, we had good legal counsel, and were eventually, after several rounds of painful negotiations, able to settle for around $50,000 in penalties. The final settlement called for our signed agreement to never again use SMTP messaging to Verizon.
So...what happened to the client? He fled the country, unwilling and unable to fight the legal battle. His company was shut down.
Although we later found that Verizon, of all the carriers, was the most agressive in its enforcement against "spam" texting, other carriers have since taken similar positions against the practice.
Painful lesson for all. The wireless industry in the U.S. is paranoid about spam text, and rightfully so. More to the point, anyone contemplating using SMTP messaging is completely missing the point. The success of text marketing is founded on the principle of choice, namely, opting in. If a business wants to engage its customer base using SMS, sending unsolicited text messages is NOT the way to do it. So...why do people still do it, why do they want to do it? Because it's cheap. Unfortunately, "cheap" is a mirage.
Spamming consumers with text messages damages the brand, generates almost zero results, and, as the above situation clearly demonstrates, the practice is fraught with possibly huge financial risk.
It's not often that someone is forthright enough to reveal a nearly-debilitating experience such as this one with the public and he has given us permission to share it with you.

The lesson here is that while "free" text messaging may be tempting, it is in direct violation of carrier regulations and messaging does, after all, use their networks.  (Whatever you may think about carriers it's only fair that they receive some compensation for the use of the facilities that they've built.)

Before engaging any company to send text messages that are either "unlimited" or "free" find out about their gateway and opt-in policies.  What appears to be free could later cost a whole lot of money.

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