Skip to main content

In early February, members of our working group focused on International Commercial Models were invited to discuss how these models work and their ramifications for the future of A2P SMS. Mitchell Cutmore, LATAM Advisor at MEF shares the key takeaways from the discussion.

In recent years, mobile operators have sought new ways to monetize the A2P channel. One of the initiatives reappearing around the world is to separate national from international traffic and charge higher termination fees for the latter. Members of our working group highlight this change has been sudden in many markets and the price difference extreme – pushing enterprises to find new channels for their A2P needs.

Joining myself and moderator James Williams, Director of Programmes at MEF, were:

  • Waheed Adam, Executive Chair at iTouch
  • Pat Flynn, Director of Business Development at Nettzer
  • Vladimir Smal, Head of Sales for Global Messaging at Lanck Telecom
  • Rajiv Singla, CTO and Head of Messaging at Globeteleservices
  • Paul Ruppert, Global Point of View

Pat Flynn kicked off conversation by recapping SMS’s history from a simple voicemail notification system to the world’s go-to messaging channel. Now consumers have moved on to OTT apps for personal (P2P) use, yet many businesses (95% according to MobileSquared) are still waking up to the power of A2P SMS.

Waheed, a member of MEF’s Global Board and founding member of this working group, explained why this issue needs urgent attention. From experience at iTouch, he described the natural kickback from customers – taken aback by sudden price hikes where operators multiplied the SMS price up to 20 times. Waheed reinforced:

“MNOs are in a phase of their business where they are looking for opportunities to grow revenue aggressively and this is one of the identified opportunities therethat margins can just go [up] and you know whatthe aggregators are going to pay. The banks charge a fortune for the SMS anyway, so you know what, we’ll just take a bigger piece of that pie. But it’s a short sighted because it’s going to actually get the industry into a decline. And once you go there, there’s no coming back. Because once other technologies are found […] to deliver efficiently, there’s no coming back. So it’s a real threat to what we do.”  Waheed Adam, iTouch

Vladimir Smal, Head of Sales & Procurement at Lanck Telecom agreed sharing his experiences from working in the CIS region:

   the panel was unanimous that the implementation of international pricing remains very confusing since ‘each MMO seems to have a different set of rules’. Therefore, greater transparency and cross-operator consistency in each market regarding what ‘international’ means will be important so aggregators can communicate why enterprises might face higher prices.

“We can see it very well in those [CIS] destinations the rates growing, the uncontrolled and inexplicable inconsistent rate increases that are happening actually several times per year on the same network, which is almost impossible to explain to the customers. What is the reason behind it? It‘s also giving not only questions but giving big issues to to the enterprise customers, such as budgeting. […] but also to try grey routes or some kind of blended routes, this is a solution that that you know, the enterprises are currently asking for because, you know, the direct route is already way too expensive for them to use.” Vladimir Smal, Head of Sales & Procurement at Lanck

Vladimir cited a rough estimate of 20-30% anual price increases across the CIS region and gave the examples of Azerbaijan and Uzbekistan hitting the 14 euro cent mark. It was suggested that we may see SMS prices for as much as 20 euro cents in some markets by the end of 2022.

Rajiv, CTO and Head of Messaging at Globeteleservices flagged that operators might not be wholly responsible for SMS prices spiralling upwards. He concluded that the hefty minimum volume/revenue commitments often required by MNOs can put tier 1 aggregators (who invest heavily in direct connections) under immense pressure. Should they realise they’re on track to fall short of their volume commitments, they may choose to bump up prices to plug the gap. These increases are then passed on to Tier 2 aggregators as wholesale customers or directly to enterprises.

Pat reminded the panel that there is an ‘optimal price’ (slightly different in each market) that could maximise the lifespan of the SMS channel. While we don’t know exactly where that price lies, it became clear that our speakers, and many in the audience too, feel pricing of international models is way out of line with that sweet spot.

Talking of up-and-coming competition, Pat shared surprise that WhatsApp hadn’t been even more aggressive with their pricing given their lower cost base compared to MNOs. It’s presumed this was a conscious decision to avoid devaluing the customer experience through the risk of spam. Discussing alternatives, James underlined that rather than just a threat to SMS revenues Flash Calls could offer a smoother experience to consumers and a competitive price for enterprises.

Through the survey organised via MEF’s International Commercial Models working group, 50% of respondents affirmed they’d already lost traffic due to climbing prices – with specific mention of having moved to alternative authentication methods (voice especially). Banking traffic was singled out as being pushed away – seeking and implementing alternative authentication methods in a matter of months. Vladimir summarised: ‘raising the pricing is actually reducing overall traffic’.

Looking ahead, Pat suggested working closer with operators, potentially via whitepapers, to constructively influence a rethink on the MNOs current course of action. Commercially speaking, Waheed recommended MNOs revisit flat pricing for A2P SMS to drive fair competition, elaborating:

“If you have a different pricing model for a big aggregator versus the small shop, that’s trying to pick up the mums’ and pops’ shop, and therefore the volumes are a lot lower, there’s just no competition. So by having these sliding scales based on the size of your aggregator, you’re almost taking away the idea of business development, right. And as an entrepreneur, myself, I’m passionate about helping businesses grow, we cannot run economies where you got always the big five, you know, there’s always the big five that do everything in the world, we’ve got to allow small businesses to also thrive. And therefore, to me, the sliding scale should be addressed as part of the Corporate Social Responsibility programme, and not just the commercial model.” Waheed Adam, iTouch

To close, the panel was unanimous that the implementation of international pricing remains very confusing since ‘each MMO seems to have a different set of rules’. Therefore, greater transparency and cross-operator consistency in each market regarding what ‘international’ means will be important so aggregators can communicate why enterprises might face higher prices.

Mitchell Cutmore

MEF Advisor LATAM

  

Join The Discussion

MEF