Two major trends presently define the A2P market for carriers. Firstly, international operators are seeking to consolidate A2P services at a group level. Secondly, they are handling an increasing amount of the A2P traffic that previously used to bypass them into national operator networks or be handled by aggregators. Carriers are looking to handle hundreds of wholesale relationships rather than maybe one to 10.
Orange, for example, plans to launch a new A2P service platform for mobile operators and application providers at its International Carriers division in October, facilitating hubbing services for A2P SMS.
“It’s logical for us to be in this market,” says Christian Boucher, head of roaming and messaging services in the marketing division at Orange International Carriers. He explains that the existing P2P platform uses a different type of interconnection, with the new service helping Orange to provide customers with high-quality routing.
Boucher says the platform is in line with other products that Orange provides to mobile operators. The company currently connects with more than 200 operators for other mobile services, so he says it is quite natural to add an A2P platform to help partners increase value, capture more business and enhance quality and control in their offerings.
Tata Communications had similar aims in launching its Mobile Messaging Exchange service last October, aimed at enabling OTT providers and SMS aggregators to connect to a broad base of mobile network operators that the company is linked to worldwide, helping carriers to monetise SMS traffic.
“For us, there’s a very compelling market opportunity and set of capabilities and assets we have that we can leverage,” says Jeff Bak, VP of mobility solutions, Tata.
Daniel Mavrakis, VP of the core network and roaming division at Gemalto, says that brands can seek to gain reach for A2P by partnering with aggregators that have direct connections with numerous operators, such as Gemalto’s Netsize division.
Other types of providers are also launching offerings that can help carriers to capitalise on the market, with carrier exchange platform RTX launching its SMS Exchange this January. The platform allows wholesale providers to exchange capacity and seek profitable SMS routes in a financially secure environment backed by major international banking institutions, a sector that represents one of the major growth areas for A2P.
Neil Kitcher, MD of RTX, says that other providers tend to treat exchanges separately, rather than tying them into the banking system. “We don’t have a rival as a global exchange with secure banking,” says Kitcher. “We’re very much clearing up bad debt in voice, and now SMS.”
Quality control
As well as such methods giving carriers greater scope in the A2P market, they help to overcome some major bugbears by providing them with greater control. One issue that frequently comes up among carriers is the need to block and monetise “grey routes”, which are traffic routes for messaging that can be used to circumvent interconnection payments. As well as often offering low quality, these mean that carriers can miss out on a significant chunk of potential revenues.
“The revenue potential is substantial for operators” that can deal with this, says Alex Duncan, CEO of messaging platform Openmind Networks. “There are lots of grey routes that are not being policed.”
Global transaction company Syniverse points out that users of these routes can charge very low prices by avoiding termination charges, often delivering messages at 10-20% of prices charged through a direct connection with a legitimate mobile service provider.
The company has noted a 15% growth in detection of grey routes in the past year and expects to see this figure rise to 25% or more this year, saying that the industry is moving towards more advanced automated detection methods rather than the previous manual mechanisms to combat them.
Bak says that carriers and enterprises are overall seeking more valuable messaging partners that provide reliable routes, explaining that the SS7 protocol the company uses for its Mobile Messaging Exchange helps in this respect.
“At Tata Communications, we are looking to leverage our higher-quality SS7 signalling interconnects to facilitate a more transparent business relationship between the A2P providers and the MNOs that creates sustainable value for the A2P messaging ecosystem,” says Bak.
He explains that some A2P providers use the IP-based SMPP protocol as an alternative method over direct or “hubbed” routes and that this has a lower cost of delivery than SS7, but there is less control in terms of quality and performance metrics. Others exploit the much lower wholesale prices of legacy P2P routes to offer A2P, but Bak says that this often creates traffic imbalances through the extra messages sent.
Bart Vandekerckhove – head of mobile messaging at Belgacom’s wholesale division BICS – notes how the market is shifting in terms of A2P message delivery.
“They’re going from grey routes to a more structured environment with hubs like BICS,” says Vandekerckhove, adding that the company is closing off grey routes and has a huge reach, with links to 350 mobile operators enabling effective delivery of A2P traffic.
“More and more operators are aware of the missed revenue potential and are reliant on hubs to aggregate and pay out termination charges,” he adds.
Antonio Baldassarra, director of marketing for mobile services at Telecom Italia Sparkle, says that mobile operators have tended to migrate SMS to several hub destinations to simplify the operational management of bilateral roaming agreements, while the market is seeking a higher level of service in areas such as tracking delivery information and developing interaction with the end user.
Market players are also seeking to introduce firewall services to identify grey routes and block unwanted SMS traffic and spam, which users have traditionally been suspicious of and the industry is now fighting to control.
“A large number of users are annoyed to receive unsolicited messages on their mobile phones,” says Gemalto’s Mavrakis. “To monetise this A2P opportunity, operators should open a communication channel between the companies and their customers, while avoiding their subscribers being spammed. And from a consumer’s point of view, opt-in and clear opt-out options are vital.”
Priced out
There is still room for carriers to do a lot more to facilitate A2P traffic flow, not least in the area of pricing for termination. Some argue that European carriers could seek more differentiation in pricing for enterprises, for example, charging discount termination rates for those that move SMS messages in bulk through their networks. Many also contend that basic prices are generally still too high.
Indeed, Boucher says that differentiated pricing is one thing that Orange is looking into alongside its new A2P offer. “Our objective always is to adapt our solution for specific demands,” he says. At the same time, he points out that “nothing is free” and that mobile operators ultimately also need to receive cash for traffic.
Rob Malcolm, general manager for the EMEA region at mobile-messaging company mBlox, says that the company has been carrying out an A2P pricing study and that some carriers are charging too much to maximise uptake. Operators have often been able to charge whatever they want for interconnection because they are “captive networks”, says Malcolm. But the problem is that this will not help to secure the adoption they want. “We’re trying to better understand price elasticity and which operators are having revenue leakage,” he says.
New models
There is also opportunity to work alongside OTT players, which present potential new A2P models for carriers. For example, Tyntec offers a service known as tt.One, which provides virtual mobile numbers to partners such as social networks and application providers. Trapp says these numbers are connected to mobile operators, meaning that traffic goes through them and they can therefore collect termination charges if they link up with providers.
Baldassarra says: “We are experiencing an ever-increasing interest of social networks in complementing their services with SMS,” as well as higher levels of enterprise interaction with the end user. “OTT applications are cannibalising P2P traffic, especially international SMS traffic, and as a consequence the SMS hub itself,” he adds. “We believe that wholesalers and retail operators could co-operate to compensate part of this loss by increasing social-messaging A2P traffic.”
