Pending SMS interconnect rates will add at least another 11c to the cost of sending bulk messages, but the price hike is not expected to cut spam, because there will be more competition in the sector.
SA's third cellular provider, Cell C, has sent a letter to wireless application service providers (Wasps) indicating an SMS interconnect agreement has been signed, that will come into effect on 1 July, pushing up its cost to Wasps by between 17.5c and 14c, depending on how many SMSes are sent. Vodacom and MTN are still in the process of wrapping up agreements.
The new regime is expected to lead to more competition, as Wasps will be able to shop around for better deals from mobile operators.
The application-to-person (A2P) sector is worth about R1 billion a year, with about 300 million messages being sent a month. Based on BulkSMS pricing, which was recently discounted, companies pay between 38c and 23c per SMS, depending on how many are sent as discounts are offered for higher volumes.
Reaching consensus
Richard Boorman, executive head of corporate communications at Vodacom, says the operator is working on getting agreements signed with licence-holders, which will be bilateral deals, so there will not be an overarching agreement.
Vodacom will charge a rate of 11c an SMS, although Boorman notes this will not affect consumer messages, just bulk, or A2P texts. A2P SMS traffic includes one-time passwords, appointment reminders, transaction notifications and booking confirmations, as well as direct marketing communications and spam.
Boorman says this is good news for Wasps as it will avoid the situation whereby some licensees were terminating commercial messages on its network at no cost, which was to the detriment of other companies using commercial SMS services, and to Vodacom.
After the Electronic Communications Act came into effect, it became possible for more entities to obtain individual electronic communications network services licences, allowing companies to sign interconnect agreements and send SMSes without becoming WASPs. This led to a situation whereby A2P was being moved to the newer entrants, which fell outside the ambit of Waspa, and charged cheaper rates.
Robert Madzonga, chief corporate services officer at MTN SA, says it has an in-principle agreement with Cell C, which still has to be signed and then submitted to the Independent Communications Authority of SA.
"MTN believes the agreement has resulted in a suitable outcome. Furthermore, MTN is in the process of ensuring all operators sending SMSes to MTN are subject to the agreed termination rates."
Cell C declined to comment.
More competition
Pieter Streicher, MD of BulkSMS.com, believes the increase in SMS costs will, somewhat counter-intuitively, lead to lower prices. He adds the expected interconnect started being priced in from April in anticipation of agreements being signed.
"On the flipside, however, high SMS rates keep spam levels down as the return on investment simply isn't there for spammers. So falling SMS rates could lead to an increase in unwanted marketing SMSes for consumers," he notes.
The way telcos have historically operated - sending bulk SMSes through the network on which the targeted number terminated, avoiding the interconnect debate - has been referred to as a "gentleman's agreement" between the operators, which Cell C has been accused of breaching.
Cell C allegedly breached this understanding when it opened up its network to terminate A2P SMSes on other networks to one bulk SMS provider - CellFind. Cell C has argued it was not anti-competitive as the service was initially limited to one company as part of a trial.
However, the trial meant other networks would terminate SMSes, without receiving any revenue, although they incurred costs.
Streicher says Cell C's trial forced MTN and Vodacom to push for interconnect fees, and the new regime means operators no longer have an A2P monopoly on their networks. "Finally, competition in the A2P SMS space."
The new regime has led to a reduction in mobile network operator A2P SMS wholesale prices offered to Wasps, as mobile operators need to compete to maintain and gain market share as Wasps now have a choice of how to send their customers' messages, says Streicher. As a result, he adds, Wasps can pass on savings.
"BulkSMS.com customers are seeing savings of around 2c to 6c per message."
Streicher also expects the quality of service to improve as the SMS channel is beefed up to maintain and grow this traffic. However, he notes that grey routes are a separate issue and large operators moved to block these in 2011.
On average, in SA, the use of SMS - a two-decade-old cellular messaging technology - drops about 40% per user when they adopt smartphones, although this is in the person-to-person space and bulk SMS is still growing. There are currently over 10 million smartphones in SA, around a fifth of the total population.
SMSPortal MD Charles Stretch argues that the move should drop the levels of spam due to an increase in pricing. He says there is currently a lot of spam being sent via grey routes, which was cheaper, but once interconnect comes in, sending through this channel will no longer be viable.
Stretch says this is "great news" for Wasps as it will allow them to compete on service and quality.
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