21 Dec How the Wrynecks of telecom ended up selling SMS Firewalls
Recently I’ve noted an abundance of SMS aggregators, traditionally known for exploiting system loopholes for their own benefit, begin to promote network firewalls. Draw your own parallels, but this made me think of the bird species is known as a “Wryneck” because of its ability to turn its head by 180 degrees. Subsequently associated, political opportunists during the German reunification were often referred to as “Wendehals” literally translated means “turning neck”.
The direction for SMS monetisation gets clearer
MNOs face a difficult future in finding new high profit services. While this is no real news to the telecoms audience, when it comes to SMS monetization there is a chance that operators aren’t able to “see the forest for the trees”. Or are they?
Let’s take a step back to examine a couple examples of seemingly short sighted behaviour. For instance, many operators in developing markets, imposing higher mobile data or LTE tariff is a commonplace tactic. But in this time of already fierce competition and with WiFi connectivity spreading quickly, what are the ramifications of that doing so? Further; with many residential customers benefitting from OTT services that continue to cover most P2P communication needs, Enterprises continue to prosper from ever increasing competition between MNOs, FNOs, CLECs and even MVNOs— all of whom are trying to secure their slice of the pie by offering tailored service bundles to said Enterprises! What result can be expected of such inbred behaviour?
It’s precisely in this context that A2P SMS services, largely thanks to its interoperability, cost-efficiency and effectiveness to increase security through 2FA (Two Factor Authentication), continued to play a key role and eventually become a “trendy” service which coddles Enterprises.
Beyond assessment: what about market prices?
SMS historically remained low-priced mainly as a result of mutual forgiveness agreements. These agreements were originally designed to support balanced P2P SMS traffic streams, but concealed the piggyback termination of A2P SMS traffic. Consequently, the phenomenon of SMS grey routes was born and the response of operators imposing interworking rates – in some markets – didn’t take long. So, contrary to traditional P2P services, where prices came down due to increasing competition, OTT services or regulatory pressure, SMS A2P wholesale costs which started close to zero, increased over time.
Did the industry experience an increase in demand and lowered price offering because of this? It’s my belief that it did, but could only manage to sustain it for a limited period. Even neoclassical economics teach us that such a situation cannot successfully preserve market equilibrium.
In fact, in the last 15 years, SMS aggregators had a relatively easy game of exploiting the A2P SMS market opportunity. Conversely, slow moving operators faced severe lack of market expertise combined with technical and regulatory restrictions. Fair price setting measures pushed by operators took quite a while to show effectiveness, but these times seem to have come to an end in many markets.
So the result is that operators may have a happy ending after all. But what does that indicate a dead end for SMS aggregators? Not really. A stalemate for Enterprises? While they might not like increasing SMS prices, Enterprises will most likely balk at the prospect of paying more.
So what’s happening now on the operator’s side?
Current market dynamics and growing operator knowledge gained through commercial awareness and the exposure to the “dark forces” of exploiting operator’s network assets, have been pushing operators towards a maximum focus on SMS monetization, and for some industry players, much like the Wrynecks, to switch sides altogether.
Based on my history of trading International Voice Services to Mobile Payments when VoIP services like Skype, started setting the limit for revenue growth despite of continuously increasing traffic or from Mobile Payments to A2P Messaging right after Apple’s IPhone and ITunes conquered the European market of mobile content with credit cards payments 2008-2009, it’s clear that I’m the first to subscribe to industry opportunism. While I condone it, I also believe that it must be done with consideration, care and the right partnering to enable positive long term effects.
Stay tuned, Reader. As a companion to the recently published guideline to select an SMS platform provider, we’ll be following up with equally impartial guideline and insider information to enable operators to select the best SMS Firewall provider.
GTC makes it possible for Operators, Carriers and OTT Pros to optimize existing or select and integrate new SMS Platform services. Using experience and an unbiased approach, the telco consultation firm headed up by José García, enables companies to access the growth and revenue generating potential of A2P messaging. With individual assessment, GTC brings end-to-end custom tailored solutions to maximize SMS Services and the revenue uplift that it can provide.
– originally posted by Jose on Linkedin-