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Mobile network operators are losing US$15 billion a year because of business-led A2P SMS traffic


via Flickr © wuestenigel (CC BY 2.0)

  • More than half of all MNOs losing 50 per cent of potential revenue
  • SMS aggregators use 'grey routes' to bypass network charges
  • They increase their margins while the operators lose out
  • There have been allegations and we know who the alligators are

It's an astonishing assertion, but, according to the UK-headquartered Dialogue Communications, a company long-specialising in A2P (Applications to Person) SMS, more than half of mobile operators across the globe are actually losing more than 50 per cent of their potential revenue from business-led Application to Person (A2P) SMS traffic.

This is because SMS message aggregators, who are operating on behalf of a great many of the world's most powerful and recognisable brands, use so-called "grey routes" to get around network operator charges. Most of the messages are from specific sectors such as banks and finance houses, logistics and delivery firms, travel and leisure companies and big brands that periodically run competitions and other specific promotions.

The SMS aggregators use grey routes to inflate their margins whilst their customers are led to understand that they are paying a fair price for the services.

Dialogue's founder and CEO, Hugh Spear, says, “There are some firms out there that are effectively not only cheating the operators but also cheating their customers. Taking the grey route to by-pass operator charges increases the chance of non-delivery, provides a safe, profitable haven for the spammers, and risks damaging brand reputation both for the brands associated with the messages and the operators themselves."

He adds that by identifying, isolating and closing the various grey route loopholes MNO's could generate a further US$15 billion in lost revenues over the course of this year alone.

Dialogue bases its arguments on the results of tests it carried out last year on 199 mobile networks in 84 countries. A mere 23 per cent of the networks tested indicated that they were experiencing zero A2P SMS by-pass activity. Meanwhile, 51 per cent of networks had seen 'significant' activity wherein half of all messages has been diverted to grey routes. Worst of all, 28 of the MNOs tested were shown to be suffering an astounding 100 per cent by-pass!

Dialogue's research is bolstered by supportin evidence from another source. The prestigious mobile industry body, the GSMA, found partial or full grey-routing on 75 per cent of 816 operators it surveyed – including 271 of the largest and most influential mobile operator networks that, between them, serve more than half of the world’s mobile consumers.

A dawning realisation that there is a major opportunity at hand. Better late than never

As Paul Garner, Dialogue's Global Director of Sales points out, the gilt is being knocked off the gingerbread where mobile operator revenues are concerned as roaming departments increasingly feel the pinch and and apps make dents in P2P SMS income. Hence the new focus on A2P which the MNOs are now beginning regard as an opportunity to claw back lost revenue they tended either to ignore or discount back in the day when money was easier to make. It's a change of mindset that has been slow to take place but is now well under way.

As Paul Garner says, "The initial growth here was driven out of emerging markets like Cambodia, Indonesia and Bangladesh. Other network operators in other parts of the world, such as eastern Europe and Latin America, looked at what had happened in those places recognised that the lessons learned were applicable to their markets as well and now there is a general realisation that A2P is very important, not only from a revenue angle but also from the perspective of the subscriber. Awareness is evolving and we are about six months or so from reaching critical mass, at which point this market will explode."

Ever since it was first introduced SMS has been incredibly popular and its use has been very high. This is unsurprising given that text messaging on mobile handsets has always been regarded by subscribers as if not entirely free than at least so inexpensive as not to be a financial concern to them.

The sheer volume of duplex P2P SMS traffic generated meant that networks operated regimes of "mutual forgiveness" whereby neither side in a given transaction charged a fee for transmitting an SMS. That worked for quite a while but, eventually, small operators started reselling those connections to data aggregators and the door was opened to grey routes and revenue leakage.

Dialogue is an unusual-  perhaps even unique - player in this market in that it is not an aggregator, doesn't sell to brands and doesn't look to minimise cost via grey routing. What it does do is to guarantee to clients, be they aggregator or operator customer, that  it will safely deliver 100 per cent of A2P SMS traffic on net.

This, the company claims, levels the playing field for all the aggregators, ensures a fair split of revenue for the operator and also gives the best guarantee of delivery for the brands themselves.

Hugo Spear again: “Identifying grey-routes, blocking those messages and forcing them onto controlled networks should be a priority for operators. They will reap the cost of employing the technology to force a clean approach ten-times over in a single month. The cost does not change for the brands, it simply ensures the revenue is more fairly shared, the service delivery is guaranteed, and the operator knows what is happening on its network.”

Central to Dialogue's offer to the market is its Sentinel software product which sits in the operator network and identifies grey route traffic, blocks it and then forces it onto the managed operator network and shares the revenues at agreed rates.

Paul Garner says, "Immediately after installation Sentinel always delivers, and I do mean always delivers, marked and rapid increase in A2P SMS revenue. For example one operator that deployed Sentinel in 2016 now receives more than half a million dollars in A2P SMS derived revenue each and every month, having had zero beforehand. And the beauty of Sentinel is that it will work for every operator, everywhere. That's why we are going to aggressively drive Sentinel into a new range of markets over the course of this year."

Research undertaken by a variety of bodies indicates that the global A2P SMS market is worth some $55 billion today and that figure will rise to $70 billion by 2020.

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