Application-to-person (A2P) messaging SMS could be the operator opportunity of 2014.

Alex Kinch

May 15, 2014

3 Min Read
SMS Is Far From Dead

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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About the Author(s)

Alex Kinch

Alex has over 17 years of experience in both technical and business roles within the internet and telecommunications sector. He started his career by co-founding LONAP, which is now one of the largest internet exchange points in the world. He then went on to become of the most prolific Cisco network architects in the UK, building Cisco-based IP networks for the likes of BSkyB and Versatel, before taking a career sabbatical to launch a dance music radio station on Sky.He then specialised in messaging, building SMS platforms for business applications and consulting for the likes of Truphone, Infobip and JT. His most recent venture is Ziron, a next-generation telecommunications operator.

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