Jamster slammed for mobile selling practices

Jamster, a service owned by VeriSign that sells ringtones and other content to mobile phone subscribers, is under attack for allegedly misleading young consumers into paying for expensive text messages.

A lawsuit filed last week in San Diego accuses Jamster of fraud and false advertising, saying it falsely advertises that mobile customers can get a free ringtone by sending a text message to the company. In reality, those customers then get text messages from Jamster that each cost $1.99 plus the mobile operator’s standard per-message charge, according to the complaint brought by Charles Ford, who claims his daughter was lured into the service. Ford’s lawyers at Callahan, McCune & Willis filed the case last Tuesday in Superior Court of California, County of San Diego, and are seeking to make it a class action on behalf of Jamster customers around the world.

Jamster is the U.S. name of Jamba, a German mobile content provider that VeriSign acquired in June 2004. The suit names VeriSign, Jamster, Jamba, and three U.S. mobile operators that Jamster says carry the service: T-Mobile USA, AT&T Wireless Services, and Cingular Wireless. VeriSign and T-Mobile declined to comment on the suit. Cingular, which now also owns AT&T Wireless, could not be reached for comment.

The Jamster service was launched in the U.S. late last year, the complaint says. The suit follows numerous gripes from consumers in the U.S. and Europe, some posted on Web sites. One disgruntled customer has started an online petition against the company. However, some posts indicate unhappy users have been able to cancel their subscriptions and get refunds from Jamster.

Jamster advertises on TV and other media that mobile customers can get a free ringtone if they send a text message to the number displayed on the ad. In fact, those who sent the text message got multiple messages back notifying them that content was available for download, according to the complaint. The customers had to pay for all those messages. Consumers who have contacted the company have reported monthly charges totalling as much as $75 for content they didn’t want or even download, said Charles Russell, one of the attorneys representing Ford.

Downloads of content, especially ringtones and games, are a bright spot for mobile operators seeking to boost revenue. An IDC survey of mobile users last year found more than half of respondents in Europe and about 25 percent in the U.S. had downloaded a ringtone. However, additional services that unexpectedly jack up the monthly bill could hurt the wireless industry if consumers get fed up, said Current Analysis Inc. analyst Eddie Hold. Mobile operators may get a per-message charge of a few cents but end up alienating confused subscribers, he said.

“There’s no such thing as an easy-to-read wireless bill,” Hold said. “The short-term revenue gain for three to six months … or a year ends up biting them at the end of the contract when the customer believes they’re paying too much for wireless service.”

Premium text messaging, which can allow customers to pay for content by receiving a text message and then get the charge on their regular monthly phone bills, is commonly used, analysts said. However, it can be implemented in different ways. For example, Flycell, a unit of Rome-based Acotel Group that provides ringtones and other content with payment via premium text messages, sells monthly subscriptions to a selection of content. It gives customers two chances to opt in to the service before they pay for any content and offers a chance to opt out each month, according to Flycell Chief Executive Officer and General Manager Alberto Montesi. Flycell uses premium text messaging because it is more convenient to the mobile consumer than payment by credit card, he said.

In the case of Jamster, the service is advertised heavily on TV channels such as Nickelodeon that are aimed at children, according to the suit. The company depended on young mobile users getting drawn into the service and on their parents paying the charges, which appear on the monthly cell phone bill, it alleges.