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By Dr Pieter Streicher, MD of BulkSMS.com. Uploaded on: 06 April 2014.
The issue of SMS interconnect rates has been a hot-button topic of late among
mobile service providers and other industry players in South Africa, and is
undoubtedly one that will not be solved in the short term. It is also a complex
issue, and one that requires understanding on both a technical and conceptual
level. So first off, some background is needed.
Several SMS interconnect agreements have been negotiated and signed between the
various mobile operators in South Africa. Most, but not all, of these
agreements have been approved by ICASA, the industry regulator.
Essentially, these agreements all split A2P (Application-to-Person) traffic
from P2P (Person-to-Person) traffic, and applies an SMS interconnect fee of
approximately 11c - only to A2P traffic.
P2P messaging is handled on an SKA (sender keeps all) basis between operators
The aim of this structure is to ensure that most business
messaging/communications carried between operators are billed as A2P, while
messages sent by consumers between operators are not billed.
It is important to note that businesses typically send very large volumes of
traffic via high capacity application interfaces (SMPP, SS7 etc.).
On the other hand, individual consumers typically send low volumes from the
native SMS application on their mobile phones.
According to the incumbent MNOs (mobile network operators), business messaging
carries a high risk of spam, and therefore requires additional costs to manage
this traffic – using measures such as SMS firewalls, load balancing, etc - and
additional indirect costs to manage the associated complaints.
To address these issues, ICASA recently held an industry workshop dealing with
SMS interconnect rates. Valid concerns were raised by the various industry
Incumbent operators and WASPs argued that the current situation where ICASA has
approved some SMS interconnect agreements, but not all, creates a situation
where some ECA licensees are paying for A2P SMS messages - while others are
refusing to pay.
As a result, they contend, there is price discrimination in the market.
On the other hand, the new ECA licensees stated that A2P and P2P messaging
should not be split, as the cost to deliver both types of messages are the
same. The licensees argued that price cannot be based on the “entity” that is
sending the message, eg. business or consumer, or the “content” of the message,
eg. personal conversation vs. marketing message.
In addition, they stated that incumbent operators have a monopoly on messaging
to their own subscribers, so new ECA licensees have no choice but to accept the
price set by incumbent operators. They proposed that because the agreed
interconnect fee is ‘inflated’, the fee should rather be set by ICASA –and
based on a thorough market analysis of the actual costs of delivery of SMS
These are all critical and rather complex decisions that ICASA has to make. In
the short term and in the interim, ICASA has to create a level playing field.
In my opinion, the only way to achieve this is to approve all the existing SMS
interconnect agreements as is. In the long term ICASA has to consider whether
A2P and P2P SMS messaging should be treated separately or not. Lastly ICASA has
to set an appropriate SMS interconnect fee based on a thorough market analysis.
Should the regulator decide that A2P SMS messaging should not be split from P2P
SMS messaging, the SMS interconnect fee is likely to be very low.
This is because an ‘inflated’ SMS interconnect fee on P2P messaging could
inflate SMS prices for consumers. However, a very low SMS interconnect rate on
A2P SMS traffic could result in a serious spam problem.
Ultimately, the regulator will have to find a middle ground, where the rights
of all players ie. new entrants, incumbent operators,consumers and businesses
are honoured and protected, and whereby the various industry players share in
the costs and profits fairly.
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