how telecom operators are beginning to shift their focus to A2P sms

For mobile network operators (MNOs) understanding and setting the right price-point for Application-to-Person (A2P) messaging on their network is a vital stage in any messaging project, especially when the messaging market is maturing, says Richard Dodds of Dialogue Group.

With the SMS market expected to reach a value of US$70.32 billion by 2020, MNOs are now beginning to look at their A2P messaging models in order to monetise their traffic and regain control of their networks. Setting the wrong price point can essentially lead to a project failure in the short term and if it is continually set too high, can result in a decline in the usage of A2P SMS as a communication channel for businesses/enterprises.

Across the globe MNOs have set a vast range of pricing for the termination of application related messages, making it hard to understand exactly where the optimal point lies. There are huge regional variances in pricing across the globe, reflecting the diversity in regional and national markets. We have found that Western Europe and Oceania have some of the highest prices for A2P messages, compared to less developed markets that have the lowest prices.

A2P SMS is a highly commoditised service in the sense that billions of transactions are processed each month, so pricing for A2P messaging is therefore rising.

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A great proportion of this increase is attributed to the steep prices imposed bythose operators suddenly gaining control over low cost A2P SMS routes as opposed to those operators already charging for A2P SMS. From our experience and insights we have outlined some important factors that Mobile Operators should consider when setting A2P messaging rates in order to succeed in this market.

Using the right benchmark

Right now, operators have a unique opportunity to set the A2P SMS rate, however to achieve this they need to establish the right message price for their region/market. To put it bluntly, on one hand they need to make sure they do not sell themselves too short, and on the other hand they do not want to price themselves out of the market. As with all business activities, spend requires a return on investment, and from our experience one of the common mistakes by MNOs when setting A2P SMS pricing is to look at networks from vastly different regions and base their pricing on their rates instead of aligning rates with their local market.

Striking a good balance

With A2P SMS volumes expected to grow 6.6% per annum until 2018, should MNOs price their network above this rate, they will greatly accelerate the point at which A2P SMS usage will begin to decline. Pricing cannot continue to be set at price points that do not reflect the derived value these messages deliver to the sender. The challenge for operators is to find the balance between maximising their revenues, while also keeping bulk senders on board and ensuring that end users receive the messages they want. This will help achieve the optimal price point and maintain a sustainable market of giant volumes for the long term.

Keeping the challengers at bay!

The final decision sits with the MNO, however it is important to be aware that overpricing SMS has arguably established the emergence and dominance of OTT messaging apps that are already crippling P2P SMS revenues globally.

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