The journey to true monetization of business messaging

Although SMS A2P has been an important messaging communication channel for enterprises for over a decade, has it been monetized correctly by Mobile Network Operators (MNOs)? Can this channel be used to boost ARPU, and has it become relevant to MNO enterprise and wholesale business?

According to MobileSquared research, presented during the recent Mobile Ecosystem Forum (MEF) conference, the total value of the messaging market could reach $35B by 2025. This figure includes all different channels, but for its technology, simplicity and ubiquity, SMS will remain the principal communication method.

Currently, the messaging business has a limited impact on total MNO revenues for two reasons: low enterprise engagement and poor monetization practices.

MNOs are beginning to appreciate that monetization goes beyond a simple SMS firewall installation. It is a mindset change involving better security procedures, best practice, real time data analysis and perhaps most importantly, validation and testing of all the above.

True monetization

It is well established that the level of fraud in the messaging space is considerable. Some reports suggest figures in the region of $47B from 2020 to 2025 (source: MobileSquared).

Although grey traffic (avoiding network operator charges via bypass techniques) is decreasing year on year as a result of more robust security measures adopted by MNOs, ample potential for improvement remains. Official traffic growth is chiefly driven by the market (organic growth) but only in part down to correct monetization practices.

As an international carrier, Arelion plays an important role in the service chain, by providing MNOs with platforms and service analytics that can drive true traffic monetization.

True monetization requires 3 steps:

• Fraud control: the first and most common monetization practice applied in the market. Here, MNOs seek the right SMS firewall provider to be able to implement a security platform to identify and mitigate fraud. It is important to understand that this step alone does not secure good monetization outcomes in itself. Unfortunately, many MNOs declare that “the network is protected, and traffic is under control” once a firewall is installed, which will prove to be incorrect in the short to medium term.

• Traffic control and profiling: MNOs need to regain business control, in other words, to be sure that most (if not all) traffic is terminated on official routes, minimizing or hopefully eliminating grey termination altogether. For most operators, that will be the first time they enjoy visibility of the total business potential and understand their traffic and revenue profile. There are multiple ways to achieve this, but the simplest is to limit the number of aggregator connections by restricting international A2P termination to a few key partners. Selecting the right partner will positively impact the MNO in terms of no grey route exploitation, high service quality, no traffic dumping/trashing, enhanced user experience and consistent business growth.

• Validation and testing: These setups will likely produce good early results, but MNOs can encounter traffic decreases from one day to the next. This is intrinsic to the SMS firewall setup, as by definition a firewall is unable to alert what it cannot register, i.e., bypass will not trigger an alarm on the firewall. It is therefore critical to employ a second security layer to validate and control if the firewall is indeed blocking grey termination or identify the means of sending A2P SMS to subscribers that do not use the official routes.
  Constant penetration tests (pen tests) are currently the most effective way to validate the security setup implemented at MNO level.

This 3^rd step is the most complex as it is a constant monitoring effort requiring experienced, dedicated resources for messaging services, fraud scenarios, signaling engineering as well as commercial expertise.

Monetization results

We can illustrate with the example of one of our customers based in the Americas who was able to embark of the journey to true monetization.

An MNO believed they were amply protected by a firewall hosted by their long-standing SMS provider. Their internal expectations were secure traffic and a low level of grey termination.

Initial analysis performed by Arelion was able to detect SS7 grey termination, as well as the presence of local SIM boxes.

Traffic levels were at 140k messages/day. The systems in place lacked the necessary data analytics capability to provide a good understanding of the A2P traffic profile.

Arelion’s proposed solution was a best-in-class local firewall to control all entry points. Once the network protection was in place, detailed traffic profiling was started, allowing the MNO clear visibility of what was behind their international SMS traffic.

Strong rules were applied to guarantee against leakage.

Arelion could then begin the validation process and new routes were proactively identified. Security was also further enhanced following the findings of the penetration tests.

The results were outstanding, with a hugely positive trend in the first year of the project:

Traffic increased from 2M messages in Jan 2021 to 9.5M messages by Dec 2021.

So far in 2022, this growth has continued, with 10.4M messages recorded in May 2022:

These results are testament to well-planned action in conjunction with the MNO and the full engagement of technical and commercial teams from all involved parties.

Thanks to this project, Arelion managed to improve the SMS volumes by 2.5 times and messaging revenue for the operator by 4 times.

Arelion has provided the MNO with a long-term growth plan which also includes price planning for revenue improvement while avoiding volume erosion. It is vitally important to protect SMS traffic using good pricing strategies that are aligned with the rest of the market to avoid jeopardizing business and encouraging enterprises and OTTs to seek more cost-effective means of sending their activation codes (such as flash calls).

Summary

Business messaging is a very effective communication channel in the B2B and B2C markets and SMS will remain predominant during the coming years, even for networks implementing 5G technologies.

Mobile Network Operators must better understand their market and encourage local enterprises to increasingly adopt messaging as a valuable business tool.

MobileSquared made the valid observation that “in terms of business using messaging, their adoption has only just started”. In 2021 the average business spent only $1.5k per year on SMS – if just 30% of businesses used SMS based on this average spend, the market would worth $140.4 billion.

There is a big opportunity ahead.

Fabio Bottan, Senior Messaging Specialist