from FierceWireless: 

Cingular: Aggregators offering PayPal will be shut off

Cingular has tightened control of its aggregators' billing practices by prohibiting credit card, PayPal-like services or any billing service other than the Direct Bill option. According to a memo sent to Cingular's aggregator partners and obtained by FierceMobileContent: "…the current Cingular Wireless Customer Experience Policy…prohibit[s] the options of credit card and/or Paypal services for payment of content to Cingular Wireless customers. Please be aware that Cingular customers should always and only be offered the Direct Bill option for payment of content and/or services. Any programs that offer Paypal and/or credit card options to Cingular Wireless customers will be escalated and reviewed by Cingular Wireless for possible immediate shut off." While Cingular wouldn't comment on the leaked memo, Jay Emmet, president-Americas for mBlox, said, "We are aligning ourselves with Cingular's new requirements."

The crackdown on third-party billing options comes close on the heels of PayPal's recent launch of its Text2Buy program, and the memo references PayPal by name more than once. However, PayPal says that program enables users to purchase hard goods like t-shirts, posters, etc. and not "content" or a "service." The crackdown then mostly speaks to the larger issues of revenue leakage and the potential bypassing of carriers' billing mechanisms as off-deck content continues to gain momentum in the U.S. "Revenue leakage" refers to lost revenue from the sales of content or services because of faults in billing procedures. Obviously, being the sole billing mechanism gives Cingular a greater ability to stop revenue leakage. T-Mobile's policy on third party billing has always been that they are cool with it, for the most part, as long as they still get a cut–they charge their aggregators a small percentage for any transaction that goes through a third party.

this is very disappointing, but not surprising since the carriers see a real threat from paypal and the credit card companies.

the carriers charge off-deck (i.e. companies selling content/services directly to the end-users and not through the carrier's own portal) content providers 30%-40% of the transaction value for processing payments and presenting them on the user's phone bill.  by comparison paypal, google and the credit card companies charge low single digit percentage (ebay/google ~ 2%).

they are afraid that paypal and the cc companies will make it easy for content providers to charge their users directly, bypassing the carrier's billing system and paying a much more reasonable fee.

the greediness of the carriers is bad for the mobile content industry. naturally the real innovation is taking place outside the carrier's walled garden. by charging such a high fee just for processing payments the carriers are making it much harder for companies to make money from selling mobile content, thus limiting the amount of dollars that can be invested in further innovation, and preventing certain business models from working.

blocking paypal and other payment mechanisms is similar to ISPs saying that all payments must go through them, and that users can not use paypal on the Internet. sounds crazy right?

i don't believe it is never a good policy (in the long term) to try and stifle innovation and limit end-users options. instead of spending their time trying to block the competition, they should focus on making their payment processing more affordable and user-friendly, so companies will continue to work with them. the carriers currently have the advantage (certainly in terms of user experience), but their greed might cause them to drive both the companies and the end-users away.