SMS pricing change for SA looming?
A change in how Cell C is terminating application-to-person (A2P) SMS messaging resulted in industry players considering the introduction of a termination rate for SMSs. There is currently no interconnect (termination) fee on SMS messages.
There was previously a “gentleman’s agreement” between mobile network operators not to compete on A2P SMS messaging. What this 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.
This “gentleman’s agreement” resulted in higher SMS prices for A2P SMS messages, benefiting the network operators and the WASPs, but negatively impacting on the communication costs of businesses.
Cell C has now broken this “gentleman’s agreement”, and began allowing all WASPs to terminate A2P SMS messages onto other networks.
However, BulkSMS CEO Pieter Streicher highlights that Cell C has enabled a reply path to these messages to only one WASP. “At this stage, only Cellfind was identified as receiving replies to these messages from consumers,” said Streicher.
Creating an uneven playing field
The bulk SMS market (A2P SMS) is a high volume, low margin business, which means that 1c per message can make a big difference to a bulk SMS provider.
When Cell C started to offer SMS termination on all networks at slightly lower rates than its competitors, it made sense for WASPs to rather go the Cell C route than use Vodacom or MTN.
This has created a scenario where one WASP, in this case Cellfind, can act as a wholesaler and create a cheaper way for WASPs to reach Vodacom and MTN subscribers than going through Vodacom and MTN themselves.
It is understood that many WASPs are unhappy about this situation, which has sparked debate on how to create a level playing field in the A2P SMS market.
Pieter Streicher
Introducing an SMS termination rate
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.
The gentleman’s agreement has serious challenges, including that it can be seen as price fixing.
“What happened several years ago is that the operators signed a gentleman’s agreement, effectively dividing the A2P SMS market amongst themselves so that they do not compete against each other in this market,” said Streicher.
“As far as I am aware, this agreement did not involve ICASA. Such a gentleman’s agreement also has the same effect as price fixing, but without the oversight of a regulator.”
A set rate for A2P SMSs is another option, but this set rate is essentially price fixing which does not create a competitive environment.
Introducing an SMS termination rate
Introducing a termination rate for SMSs is supported by many industry players, including Streicher. “I am in favour of a termination rate for SMS messages provided it is based on the actual cost of carrying the messages, plus a reasonable profit for the network operator,” said Streicher.
“It would be unreasonable to expect a destination network operator to deliver an unlimited number of SMS messages for free, while the originating operator pockets the full selling price of A2P SMS messages. “
He added that the Electronic Communication Act (ECA) allows for such a fee, but highlighted that such a fee would have to be approved by ICASA.
The introduction of an SMS termination rate can, however, directly impact consumer SMS pricing. SMS termination is currently free, and introducing a termination rate for SMSs may result in higher retail prices.
It will also become challenging for operators to bundle free SMSs with mobile contracts, which can further impact customers.
Related articles
Cell C SMS change opens can of worms
Waspa, Buongiorno engaged in legal discussions
Click and you may pay R5 a day
Local SMS spammers named and fined
Loading ...