Six Reasons Mobile Operators Struggle With A2P Monetization

Guendalina Rossi

Cost bypass is a common expression in the mobile industry; in a cost bypass situation, the creditor cannot get paid the full amount due. This happens, for example, when message routing information is manipulated so the party in credit cannot perform billing, or when a fraudulent entity uses free SMS retail bundles to send bulk enterprise messages (SIM farms), or when roaming links with free termination are used for the same scope; in these cases the mobile network operator (MNO) won’t receive payments for that traffic.

Analysts estimate that fraud and cost bypass result in over $6 billion in application-to-person (A2P) revenue losses per year. Full enterprise messaging monetization seems to become a moving target.

Most enterprise cost bypass occurs on person-to-person (P2P) links, and we are a long way from adopting efficient measures to combat homogenous fraud.

This is caused by factors and challenges that MNOs face across all business areas. Obstacles to monetization can vary even between operators in the same country. Following are the six factors I find most relevant.

1. Wrong perception of risks: ‘You don’t know what you don’t see’

MNOs generally estimate A2P revenue leakage to be about 10% of their A2P revenues – in reality, most cases show higher losses. This incorrect perception is partly due to the lack of visibility MNOs have regarding their traffic. For example, it is not uncommon for an operator to monetize only 30% of its A2P potential because of poor protection on its international P2P links. P2P links are intended to transport personal communication only, but because these routes are usually cheaper or even free, they are often used to bypass costs.

2. Different business drivers

Believe it or not, corporate internal politics can cause enterprise revenue leakages. If you are responsible for P2P revenue, and you know that a portion of your revenue is generated by A2P SMS terminating over P2P links, as a consequence of locking or re-routing enterprise SMS in P2P traffic, P2P traffic and revenue will unavoidably decrease. P2P managers are therefore demotivated from prioritizing A2P monetization projects that impact their revenues.

3. Pricing strategies limitations and ‘Big Brother’

Leveraging A2P and P2P prices is a very basic but efficient means to control cost bypass. Applying similar rates to message termination, independent from SMS type, removes fraudsters’ motivation to bypass costs. However, the downside is that this practice would substantially restrict tariffing flexibility (no free SMS, etc.).

Furthermore, in countries with stringent regulations, P2P termination rates are typically capped at very low amounts (0.00X USD); A2P price leverage to such rates wouldn’t be commercially acceptable.

4. Weak legal regulations

Often, pre-existing contracts, typically with local competitors, don’t specifically forbid enterprise messaging termination over domestic P2P links. Where these domestic P2P links are cheaper than A2P rates, these routes will be used to reach the concerned operators due to the lower costs.

5. Inadequate technical solutions

Technical solutions are crucial to combat fraud and ensure revenues, but as much as 50% of MNOs worldwide have inadequate or no measures in place (source: ROCCO at MEF Nov. 18).

On the other side of the spectrum, antifraud solutions proliferate in the mobile market, but only a few providers can offer carrier-grade solutions. Successful fraud-busting MNOs implement a mix of in-house solutions with a third-party firewall. In addition, they often have an experienced team in place dedicated to messaging revenue assurance.

When implementing, enhancing, or replacing their antifraud system(s), there is a long list of features an operator should look into. I’ll talk more about this topic in a future blog.

6. Good tools… what about maintenance?

You might think that an operator has control over its messaging traffic when suitable tools are in place, but it is pretty common that bypass still persists or re-occurs soon after measures are implemented. Fraudsters’ tireless efforts to enhance bypass techniques are rarely opposed by equivalent measures on the operator’s side to combat this fraud. Firewall maintenance tasks, for example, require specialized personnel and daily attention but, in the era of 5G launches and trials, these requirements are often overlooked.

This article originally appeared on The Future of Customer Engagement and Commerce.

Guendalina Rossi

About Guendalina Rossi

Guendalina Rossi is a senior product expert at SAP.