Pagcor Seeks Payment from Text Messaging Services in Philippines

Mix about 1 billion text messages a month at a cost of anywhere from 5 to 50 cents each, a pair of telecoms trying to generate as much revenue as possible off their system and a government monopoly that claims jurisdiction over text messaging used for games and it's not surprising tensions are high in the Philippines as companies try to capitalize on text messaging.

Filipinos are already widely known in the wireless world for their love of text messaging, and the 13.8 million wireless subscribers in what is often regarding as the gateway to the Asian market for western companies have helped create the world's text capital.

As more and more companies try to use the text-messaging craze to promote their product, many text-messaging campaigns have incorporated games. The Philippine Amusement and Gaming Corp. (Pagcor) argued that those activities fall under its mandate and is seeking payment from companies involved in what Pagcor officials consider is "gambling" via text messaging.

The main target for Pagcor has been the two leading telecoms in the Philippines: Globe Telecoms and Smart Communications.

The Philippine market has also been on the cutting edge of text messaging. Users clamor for services not offered in other markets. Users can access everything from breaking news and real time traffic reports by simply keying in a series of pre-set numbers and letters on their keypad. The "texting" services are fee based, but that hasn't stopped Filipinos from signing up for them in record numbers.

Pagcor first called attention to the texting issue last year when it informed both of the telecoms that they were in violation of business practices because they hadn't obtained the proper permits for operating raffles via text messaging. Pagcor argued that because the raffles were a form of gambling, the text-messaging services should fall under its jurisdiction.

The claims sparked an inquiry by the Lower House into the mechanics of the text games. The legislature reported back that indeed the text-messaging systems were considered games of chance (many of the contests didn't demand skill or ability) and that Pagcor was due a cut of the action.

With the ruling from the Lower House in hand, Pagcor was embolden and threatened to take its battle to the courts by filing complaints against the two telcoms for violating the law on illegal gambling.

Pagcor cited about 50 text-based games, including Game K N B?, Weakest Link, Who Wants To Be A Millionaire, imGAME’s True or False, Trivia Trivia, Bible Answerman, Celebrity Secrets, MVP Challenge, Health is Wealth and Travel Quest.

Globe Telecoms and Smart Communications don't think the issue is as cut and dry as the government and Pagcor make it out to be.

They argue that the text-massaging contests are strictly for entertainment, advertising and promotional purposes and should be regulated the same way raffles offered by other companies are. They feel there is a clear line between the text gaming and interactive gambling and they have a government entity of their own to back up their claims.

They argue that their activities don't fall under the gambling umbrella covering Pagcor's gambling business in the Philippines and claim their business is already regulated by the Department of Trade and Industry (DTI) and the National Telecommunications Commission (NTC).

Regardless of who wins this battle, someone is going to end up with the lion's share of revenue from a booming text-messaging market.

Popular TV game shows, which use text messaging heavily to cross-promote their programming, charge anywhere from P2 to P10 (US$0.03-$0.08) per text message. The revenues brought in from such campaigns are then split between the telecom firm and the broadcast network.

A Filipino radio station charted as much as P25 to P50 (US$0.45-$0.90) to listeners who wanted a specific ring tone sent to them for their phones. With that kind of cost being incurred, and with nearly 1 billion text messages a month, it is understandable that Pagcor is trying to muscle its way into the business.

They are demanding a 20 percent cut from the revenues generated fro the telcom's through text games and are seeking regulatory fees from all companies involved in text-based games in which a prize is at stake and players have to wager money for a random chance to win.

In addition to the fees, Pagcor is requesting that the cellular firms submit the mechanics of their text games for a review by the gaming body. Pagcor could hold the upper hand after entering into a memorandum of agreement with a host of government agencies in an effort to regulate text-based games and sales promotions.

As part of the memorandum, the DTI would review all applications and mechanics of text-based sales promotions, Pagcor would approve text-based games or sales promotions that have wagering schemes such as chance and prize money, the Movie and Television Review and Classification Board would control advertisements of text-based sales promotions and games and NTC would police major telecoms in the transmission of text-based games and sales.

Pagcor was able to get government support for its plan as more and more consumers have expressed concern over the use of cellular networks in the Philippines. DTI admitted the Consumer Act of 1992 is already outdated and urgently needs refinement to reflect recent changes in the digital age.

The Consumer Act that empowered the DTI to address all consumer-related concerns failed to cover wireless and Web-based technologies like cellular phones and the Internet.

Pagcor and government officials hope to have a plan in place by the end of the year giving them a better idea on how the text-based games will be regulated, until then, the millions of Filipino wireless users will be sought after by marketing companies through the use of text-messaging.