SMS pricing: MTN, Vodacom hit back at Cell C
Vodacom and MTN have hit back at Cell C regarding the potential introduction of an SMS termination rate, saying that it is Cell C who is to blame for mess.
There is currently no termination rate for SMSs in South Africa, and to keep it that way the mobile operators have agreed to not send bulk SMSs to other operators.
What this “gentleman’s agreement” meant was that Wireless Application Service Providers (WASPs) which provided bulk SMS message sending services, had to send all their Vodacom messages via Vodacom, MTN messages via MTN, and Cell C messages via Cell C.
However, Cell C has broken this “gentleman’s agreement” by allowing all WASPs to terminate A2P SMS messages onto other networks.
A further concern to WASPs is that Cell C is not providing this service to all service providers at the same rate. This means that service providers with a favorable deal from Cell C has a massive competitive advantage over its competitors.
SMS termination rate considered
Alan Knott-Craig
After Cell C’s decision to allow the termination of A2P SMS messages onto other networks, the industry has been looking at ways to create a level playing field.
To create a level playing field, mobile operators can revert back to the gentleman’s agreement, create a set rate for A2P SMS messages or introduce a termination rate for SMSs.
However, Cell C has lashed out at the potential introduction of an SMS termination rate.
Cell C CEO Alan Knott-Craig says that the operator is being bullied by Vodacom and MTN into accepting interconnect on SMS.
Knott-Craig added that the operator will only support an SMS interconnect rate under three conditions:
- Firstly, the rate must reflect the actual cost of terminating an SMS;
- Secondly, the price to consumers cannot increase due to this new cost;
- Thirdly, there must be asymmetry for smaller players.
MTN strikes back
MTN SA’s general manager for regulatory, Graham de Vries said that he is surprised by the statements of Cell C and other interested parties quoted in the SMS termination rate articles.
De Vries said that the commentators and Cell C are confusing two radically different services:
- Reciprocal (i.e. “two way” or “person to person” SMS) interconnection between network operators, where broadly balanced traffic is exchanged from their respective end-customers
- One-way traffic from third parties (i.e. bulk SMS or application generated SMS), without a commensurate customer base, wishing to access the infrastructure and customer base of a mobile operator for commercial purposes (advertising, information services, etc.).
De Vries explains the situation as follows:
Operators in South Africa have historically passed SMS traffic (i.e. two way interconnection traffic which is broadly balanced between their respective customers) at a zero rate.
This “sender keeps all” regime was not an unusual practice in the telecommunications sector, but has since fallen out of favour as it is subject to abuse. Sender keeps all arrangements are adopted when broadly balanced traffic means no party is financially harmed.
At the time that the first interconnection agreements were signed there were significant billing complexities and reconciliation issues to overcome (and still exist) with respect to implementing SMS interconnection rates. In addition, bulk SMS traffic or application generated SMS was not envisaged and person to person traffic (P2P) was broadly in balance.
As third party bulk SMS traffic developed, what became clear is that these two services are distinguishable and required different treatment in order to ensure the sender keeps all system is not abused by third parties for the purposes of terminating their bulk SMS messages (which have both a network cost and commercial value), for free.
The basis for charging bulk SMS was to ensure that the cost and value of accessing a customer base on an asymmetrical basis, for commercial purposes, could be appropriately recouped. MTN could also ensure that through this mechanism spam to its customers could be prevented.
However, now, Cell C appears to also want to terminate bulk SMS traffic for free, and so free-ride on MTN’s network and customer investment.
One way to normalise this situation, as is done in the vast majority of other countries, is to set a rate for all traffic that terminates on a network, allowing that network operator to recover legitimate costs, including customer investment, for bulk SMS traffic.
Discussions on this issue are now taking place and are not yet finalised. Contrary to what has been suggested by various commentators, MTN does not expect these discussions to lead to higher retail SMS prices for its subscribers.
Vodacom also points to misunderstanding
Richard Boorman
Vodacom spokesperson Richard Boorman also pointed to a “fundamental misunderstanding about SMS interconnect and what precipitated the discussion of introducing SMS termination rates”.
“Up until recently, A2P and P2P SMS traffic was handled in such a fashion that the wholesale charge for P2P SMS traffic between operators was zero rated while each operator terminated their own A2P SMS at commercial negotiated rates,” Boorman explained.
“Some operators [Cell C] then decided to start sending A2P traffic destined for other operators via the P2P interconnection route.”
“The result of this was that operators receiving no income from these SMSs are now forced to look at implementing SMS termination rates. This could introduce a wholesale charge for all SMSs between networks which may impact the price of SMS and Please Call Me messages for consumers.”
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