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O2 overlord looking to push payments-via-mobile-bill model

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Telefonica is gunning for carrier billing, publicly declaring that its UK operation, O2, will give merchants a bigger cut, and signing a deal integrating its BlueVia API with Telenor for cross-operating billing.

The increased cut should encourage more transactions to be processed through the mobile-phone billing platform, as O2 won't be taking so much money from each payment, while the sharing of the billing API should let developers create applications with in-app billing that work across the two operators and should encourage others to sign up - perhaps achieving what the WAC conspicuously failed to do.

The Wireless Application Community (WAC) was originally a standardised runtime environment, based on AJAX, but when that failed it was reinvented as a standard billing API and eventually vanished in a flurry of politically-motivated bureaucracy only to be folded into the GSMA where it could be quietly dispatched. But the idea is a good one, especially when combined with the lower rates O2 is proposing in the UK.

The UK already has a cross-operator billing platform, called PayForIt, which provides a standard API for billing events and works across the UK's network operators. PayForIt requires merchants to sign up with a processing party who collects the money from the operators who, in turn, collect it from their customers, with both processing party and network operator taking a cut along the way.

The cuts vary widely: a £10 sale on Virgin processed through Bango (one of the larger processing companies) will net the seller £4.50, while the same content sold to an O2 customer will put £8.60 in the seller's pocket. Bango takes a smidgen, while more than 95 per cent of the cut goes to the network operator, and it's this portion that O2 has promised to cut.

And so they should: credit card companies provide free insurance on purchases and, critically, they provide credit, so are entitled to a bigger cut. Network operators have a monthly bill, and can withhold service if its not paid, or they've already got the cash (in the cash of pre-paid) so there's no excuse for high charges beyond "what the market will accept".

Bango's CEO, Ray Anderson, makes the point that right now neither credit cards nor PayForIt make sense for selling music tracks, in most cases they are a loss-leader or aggregated to make processing worthwhile, but there's no reason why operator billing shouldn't be able to make micro-payments practical.

Facebook's desktop incarnation already accepts PayForIt for those who want a few more bubbles to burst, and the company has just signed with Bango to extend that capability into its mobile client where it desperately needs to generate some revenue.

The BlueVia deal with Telenor could make PayForIt redundant if it were widely adopted, but its unlikely Bango will be losing any sleep over that right now. The idea of being able to trigger billing events from mobile apps is obvious and intuitive, but getting operators to agree to anything is really tough even if one of them is pushing just as hard as it can. ®

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