Jamster Slammed for Mobile Selling Practices

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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 that 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 cost $1.99 each along with the mobile operator's standard per-message charge, according to the complaint brought by Charles Ford, who claims that his daughter was lured into the service. Ford's lawyers at Callahan, McCune & Willis filed the case on March 29 in the Superior Court of California for San Diego County, 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.

Gripes Start

The Jamster service was launched in the United States late last year, the complaint says. The suit follows gripes from consumers there and in Europe, some of which are posted on Web sites like Grumbletext. One disgruntled customer, Jared Humphrey, started an online petition against the company. However, some posts on these sites indicate that unhappy users have been able to cancel their subscriptions and get refunds from Jamster.

Jamster ads on TV and other media say that mobile customers can get a free ringtone if they send a text message to the number displayed in the ad. But people who sent the text message received multiple response messages notifying them that content was available for download, according to the complaint. And customers had to pay for the messages. Consumers contacting the company have reported monthly charges totaling as much as $75 for content they neither wanted nor downloaded, said Charles Russell, one of the attorneys representing Ford.

Revenue Generator

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 that more than half of respondents in Europe and about 25 percent in the United States 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 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 enables customers to pay for content by receiving a text message and then getting the charge for it on their regular monthly phone bills--is commonly used, analysts said. But it can be implemented in different ways. For example, Flycell, a unit of Rome-based Acotel Group, which 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 it offers customers the chance to opt out each month, according to Flycell's CEO 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. (Jamster also advertises on PC World.) The company depended on drawing young mobile users into the service and then having their parents pay the charges, which appear on the monthly cell phone bill, the suit alleges.

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