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SMS Is Far From Dead

Alex Kinch
5/15/2014
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There have been a number of reports in recent years claiming that SMS is dying and that operators will be losing a huge amount of revenue as a result. This was compounded by the WhatsApp acquisition, which prompted a flurry of "the game's up" articles, spelling doom and gloom for the telecom industry. (See Facebook to Acquire WhatsApp for $16B and WhatsApp Threatens Carrier VoLTE.)

It's an undeniable fact that person-to-person (P2P) SMS revenue has massively decreased. OTT messaging apps have flooded the market and the remaining consumers that use SMS are getting them bundled into their standard monthly mobile package.

However, there has been an area of growth that has outpaced this revenue decline -- application-to-person (A2P) SMS, which has been increasing at a rate of 6% CAGR. Despite the association in the past with the growth of spam SMS, A2P messaging is now a key way for organizations to communicate with their customers.

Despite the availability of other contact methods, such as emails or phone calls, SMS is a discreet and ubiquitous method of reaching anyone with a mobile handset, with no requirement for access to data services or the latest model of iPhone, Android, or BlackBerry handset. SMS is now used for such wide-ranging applications as appointment reminders, payment confirmations, and more recently to deliver one-time passwords for two-factor authentication and provide real-time notification of potentially fraudulent credit card transactions.

This massive growth has led to its own set of problems for mobile operators, which had traditionally associated A2P messaging with spam, and had discouraged or even blocked such traffic. Such barriers included introduction of (sometimes very high) termination fees by way of GSM Association-mandated AA19 agreements, as well as technological solutions to completely block A2P messages originating outside their own network.

This puts operators in a difficult position. How do they encourage and monetize the good, transactional A2P traffic that customers want to receive, without opening the floodgates for a deluge of spam SMS?

Operators need to take a strategic, quality-driven approach to leverage A2P SMS. Instead of imposing blanket bans on all A2P SMS, operators should implement technology to intelligently monitor and control traffic. Companies such as Anam and Openmind offer sophisticated monitoring and filtering technologies, which means that spam messages and other "low quality" A2P traffic can be identified and blocked.

Secondly, operators need to change the way they work with aggregators. When A2P spam was at its height, many operators stopped directly working with aggregators altogether because they felt they were allowing mass marketing messages to be sent to their subscribers.

Now that there is so much "good" A2P SMS traffic, it's time to work again with the aggregators, but only with those that focus solely on high-quality transactional A2P traffic, and aren't in a "race to the bottom" to increase message volume by driving down market rates.

As operator ARPU is being squeezed, A2P SMS must be encouraged and monetized. But it must be done carefully, creating channels and processes that will create a valuable new revenue stream. Choosing quantity over quality could result in the return of the spammers, and in turn a customer backlash against A2P SMS.

— Alex Kinch, CEO, Ziron

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/20/2014 | 12:08:51 PM
Re: SMS to call the cops
This is flagrantly off-topic but on our first visit to the UK, after we'd been there a week, I realized we'd seen no British TV while there. I decided we should watch a little, just as part of the native experience. I turned on the little TV in our B&B and the first thing that popped up was an NYPD Blue rerun.
alexkinch
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alexkinch,
User Rank: Blogger
5/18/2014 | 10:26:15 AM
Re: SMS to call the cops
Correct, official UK equivalent is 999. 112 (the pan-European emergency number) also works, as does 911. I'd heard a rumour it was because people like me grew up on a diet of US TV imports, but I'm sure there's a more sensible reason to do with visitors to the UK not necessarily knowing the emergency number.

There is a similar service here in the UK, mainly aimed at those who are unable to make a regular phone call. More details here: http://emergencysms.org.uk/

 
alexkinch
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alexkinch,
User Rank: Blogger
5/18/2014 | 10:17:30 AM
Re: How will consumers be persuaded...?
Oh, and data is far from ubiquitous. There's a big problem in M2M right now that no one wants to talk about, and that is the reliability of data services and throughput. It's not just lack of coverage, it's overload - try getting reliable sustainable data throughput in certain parts of any major city during peak hours, and you'll know what I mean. That's why a lot of M2M applications are using SMS as a backup (or in some cases, primary) communication channel.

 
alexkinch
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alexkinch,
User Rank: Blogger
5/18/2014 | 10:14:28 AM
Re: How will consumers be persuaded...?
I agree Daniel that SMS spam has been a major turn off, but the 'so many other messaging options' you speak of only really cover person-to-person (P2P) messaging. Businesses wanting to reach people in a time-sensitive manner without calling them only really have SMS as an option - and the massive increase in A2P over the past few years in my opinion shows operators really should wake up and listen to the market demand.
alexkinch
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alexkinch,
User Rank: Blogger
5/18/2014 | 10:12:16 AM
Re: How will consumers be persuaded...?
I agree, the PPI spam and the 'accident compensation' spam have been a real annoyance. The voice calls don't help either, and despite the £440k fine issued by the Information Commissioners Office to Tetrus Telecom at the end of 2012, it still seems lucrative enough for some companies to take the risk.

I get the feeling they've moved from using aggregators to SIM farms with PAYG SIMs, but haven't dug deep enough to confirm.
alexkinch
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alexkinch,
User Rank: Blogger
5/18/2014 | 10:07:08 AM
Re: How will consumers be persuaded...?
Hi Gabriel,

Those examples are indeed A2P. Anything that originates from a computer application of some sort is A2P, and the reverse (if you're responding, for instance) is still technically A2P, but sometimes referred to as P2A. The other form of SMS is P2P - person to person - which is, as it suggests, two mobile users texting each other. That's definitely on the decline due to Whatsapp et al.

Alex
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/17/2014 | 4:21:25 PM
SMS to call the cops
Wireless Carriers Offer Text-to-911 Service (But Is Anybody Listening?)

911 is the emergency number to call emergency services in the US. It's the number you call when there's somebody breaking into your house, or it's on fire, or someone fell over with a heart attack and you need an ambulance. 

I think the equivalent in the UK is 999. 

Wireless carriers in the US are working with local law enforcement on letting people text 911 in situations when calling is impossible or dangerous (such as someone hiding from an intruder).

The headline raises an interesting question not addressed in the article: I was excited when I found a local pizza place that had good pizza and offered ordering-by-text. Because I love take-out and food delivery -- particularly pizza -- but I hate calling to order. So I texted my food order in and waited for a response. 

And waited. 

And waited. 

Should I call? Should I text again to see if they got the first text?

Finally I called and they said, yeah, well, calling is better. Often the order-by-text system isn't really monitored by the pizza place. 

The stakes are much higher with 911 than with pizza delivery. 
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
5/16/2014 | 4:15:27 AM
Re: How will consumers be persuaded...?
That is really a rather vanilla comment @danielcawrey.

I mean, you're not wrong, but... but...
danielcawrey
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danielcawrey,
User Rank: Light Sabre
5/16/2014 | 12:05:42 AM
Re: How will consumers be persuaded...?
I agree, I think that SMS spam has been a major turn-off for people. There are now so many other messaging options that operators no longer have a stranglehold on mobile communications. 

Because of this, I find it hard to believe that carriers are going to be able to find new ways to grow revenue from SMS. Its just like the decline of voice - data is what really matters now. 
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
5/15/2014 | 1:28:01 PM
Re: How will consumers be persuaded...?
You know it. The PPI spam in the UK has been really, truly, very annoying.
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