May 2, 2005 12:34 PM PDT
Teens dialing up ring tone trouble
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At work is a teenager's penchant for reckless spending, helped along by advertising from ring tone providers, which some critics label as unclear, others as deceptive.
Some of the friction began six months ago, when at least one ring tone vendor, Jamster, began selling ring tones in bulk, in exchange for a weekly or monthly fee, in addition to offering a single tone at a time. Some consumers didn't notice the changes, and thought they were buying a single tone when they were really buying a week's or month's worth. Jamster, however, says its pricing is clear.
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Still, a crackdown of sorts has begun. A handful of North American and European operators are now at work on a code of conduct for ring tone sellers, due for release in 30 days, according to Paul Palmieri, executive director of business development and programming for Verizon Wireless.
Some operators aren't waiting. Cingular Wireless, the top U.S. operator, increased on Monday the number of approvals ring tone sellers must get from customers before finalizing any sale.
"Operators have been caught off guard by activities of several companies selling ring tones," said Verizon's Palmieri. "We're now trying to arrive at a code around price transparency and clear disclosure around things like subscriptions."
The issue is the subject of a lawsuit filed by California parents earlier this year against Cingular Wireless, T-Mobile USA and Jamster, which is a subsidiary of security specialist VeriSign. The suit alleges the defendants did not clearly state that people were signing up for Jamster's $6-a-month service.
By contrast, a single ring tone costs $1.99, according to Jamster's Web site.
Jamster, marketed in Europe under the brand name Jamba, plays to a teenage audience and advertises on MTV, Nickelodeon and Web sites popular with teens.
A Jamster representative called the suit "frivolous" and rigorously defended the company's advertising and sales tactics.
"We believe we clearly state that you are entering into a monthly plan, and many of the alleged facts in the lawsuit are erroneous," said Jamster spokesman Brian O'Shaughnessy.
A Cingular representative had no comment on the suit. T-Mobile also had no comment.
The overall impact of consumer confusion is unclear. Palmieri, Cingular spokesman Clay Owen, and Albert Lin, an analyst for American Technology Research who earlier this week released a report on ring tones and pricing, couldn't quantify the number of people that purchased a monthly ring tone subscription believing they were buying just a single tone. Lin called it a "significant" amount.
Owen said Cingular has taken dozens of complaints about huge ring tone bills. Many are from parents noticing the charges on their child's cell phone bills, which they pay for, Owen said. The bills sometimes suggest teens are overzealously spending on tones, as some young people do on phone calls and short text messages. Some parents contacted by CNET News.com on Monday say that typically their child's cell phone bills feature mysterious charges of up to $10 a month for ring tones.
Lin notes that the problem has been severe enough for carriers to take action, mostly because it's reflecting negatively on them, deservedly or not.
"Carriers don't want unhappy customers feeling they were slammed into buying something they didn't want," Lin wrote in his report. "The scrutiny that is being applied to sales practices which may create such episodes is intensifying."
The hullabaloo spotlights flaws in the important partnership between carriers and independent cell phone software vendors, which the carriers are counting on for the next killer application and margin-boosting business model. When things go awry, consumers can be adversely affected and operators taken by surprise.
Independent ring tone vendors do most of the work of creating the tones: They sign the artists, produce the tones and distribute them directly to customers. The ring tone vendors also keep a large share of the revenues, with wireless operators keeping a small piece for giving the companies access to their subscribers and for handling the billing.
Now, according to Lin, there are growing signs of an operator crackdown, not just in regard to ring tones but also in regard to the games, wallpaper and other add-ons operators sell.
"While we see a healthy growth industry remaining after this examination, we believe that segment of the industry will experience a slowdown which may feel like a train wreck compared with the recent months of hypergrowth," Lin wrote in his report.
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