Operator A2P SMS – it’s all about strategy (and some technology)

Posted Friday, March 4th, 2016 by Ian Waller

Let’s get one fact straight, A2P SMS is by far the most preferred and efficient B2C communication tool used today. When I write this I mean THE VERY MOST EFFICIENT way of communication. So why is that? Here are some fundamental facts and please have WhatsApp, and their 1 billion subscribers, in mind when you read this;

•   SMS is platform independent
•   SMS is network independent
•   SMS is non-proprietary
•   SMS is app independent (no need to have an app in order to communicate)
•   SMS does not require a data subscription (roaming scenarios for example)
•   SMS is by far the most standardized messaging technology

One of the biggest challenge mobile operators are facing, is to embrace A2P SMS and understand the eco system. Many operators I talk to, at first, sees no difference between P2P (telephone-to-telephone SMS) and A2P (enterprise-to-consumer). Apart from the two are using the same technology there are no other similarities whatsoever. It would be like claiming a bike and a juggernaut are the same thing, as they both are using the road getting from point A to point B!

But let’s gets practical and hand on! Fundamentally an operator needs to overcome four main issues to become an attractive and preferred A2P operator. Once you have the following in place you will become a market leader in your country:

  1. Stop the revenue leakage – In order to create value, you need to stop unsolicited traffic from being terminated for free in your network. Every message sneaking in without being paid for is diluting your market value and it becomes less attractive reselling your capacity – and believe me when I say this, you will need help from partners (aggregators) reselling your network capacity. When were you last at a retail marketing exhibition? Well it’s from there A2P SMS originates from.
    Bottom line is that it is impossible to resell something that in general is considered to be for free.
    Apart from that network leakage is a technical problem causing unnecessary strain on your network, it is most of all a financial problem than eventually will lead to subscriber churn and loss of revenue.
    Securing your network means installing a SMS firewall. The SMS Defence from Cellusys has all the bells and whistles you need. Apart from applying home routing to your network stopping it from leaking sensitive information like MSC and IMSI information, it monitors and filters both international (roaming) and domestic (interconnect) traffic. The sophisticated rule and reporting engine will advise you automatically when you need to take action.
  2. Your offering – You need to offer full country coverage in the country you operate in including the MVNOs. On-net is simply not good enough since enterprises are not telecom experts and they don’t have time for lengthy contract negotiations with plus 6 operators per country. Roaming/Wholesale/VAS departments need to respect the fact that sending SMS doesn’t mean a company’s core business is telecom, in fact, they are totally network agnostic. They look to you, as an operator, to fix their needs and if you can’t solve them they will go to your national competitor.
    Here is where many operators are failing. Ask yourself what problems you have solved by only offering on-net termination?
  3. Easy integration – Offer SMPP connectivity and/or HTTP API – We are living in the era of convergence where old Telecom has to adapt to Internet and not the other way around. Your customers are on the Internet. SIGTRAN and SS7 are not something you offer to the masses. If you don’t want to invest in a gateway yourself there are plenty of managed solutions. They have highly sophisticated gateways with all the functionality you can think of, including API’s. With gateway like these in place including our partner’s connectivity you can start offering your existing enterprise clients a full-blown A2P solution. At the moment you are not the natural go-to partner for SMS even though you are providing the telecom services. I am sorry but looking at this from the outside, I would say mobile operators has failed with their A2P SMS offering.
  4. Don’t be greedy – The 0,055-dollar cent per SMS era is over. Forget it and deal with it. Some operators I talk to believe that maximizing the price is a good thing. In fact, you might end up in serious problems where you involuntarily created a SIM-box market in your country. The price level you picked is in fact so off the charts it doesn’t correlate with reality, whereas companies are “forced” to use alternative ways to terminate their messages.
    Actually I am prepared to go as far as saying, if you have a SIM-box problem your finger should point towards the product and marketing department rather than to the core network security guys. It is cheaper to fix the product offering than eliminating SIM-Boxes. Trust me when I say this.
    Last but not least, a large price delta between international and domestic price will create problems whereas you will scratch your head wondering where all the international traffic went and why the lower priced domestic traffic is growing, in volume but not in revenue. Your international resellers will be unhappy because they are losing traffic to domestic players. From a technical point there are means to separate the two traffic types and with SMS Defence we can maintain a slightly higher international price, but once the delta becomes too large no system in the world can prevent international traffic from transforming into domestic. That’s how great the power of the market is.

Due to the fact that P2P SMS has taken a real hit from much better technologies like Line, KakaoTalk and Messenger some operators look at “SMS” with resignation, despair and a lost case. Well guys, the good news is that A2P SMS, the big juggernaut, is booming like never before due to the fundamental facts I pointed out in the beginning of this article. According to the latest reports from Zion Research, it tells us:

“..Global demand for A2P SMS market was valued at around USD 55.0 billion in 2014, and is expected to reach USD 70.00 billion in 2020, growing at a CAGR of around 4.0% between 2015 and 2020.”

“The A2P SMS market was dominated by Asia Pacific with over 40% share of the total revenue generated in 2014. Strong demand from emerging economies such as China and India is a major driving force for growth of A2P SMS market in the region. North America and Europe are other important regional markets for A2P SMS market. Latin America and Middle East & Africa are also expected to witness significant growth in A2P SMS market in the years to come.”

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Global A2P SMS Market Revenue, Source: Zion Research Analysis 2015

When you think about SMS strategy next time do yourself a favour by not mixing the bicycle with the juggernaut. Dear operators, it is time to act and act now. Use the very technical fundamentals of A2P SMS to your advantage and start securing your network. Well done, you just invented a money printing machine!

For more hands-on strategy tips on A2P SMS please also read “9 steps how an operator will succeed with its A2P SMS strategy”.

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