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6 reasons mobile operators struggle with A2P monetization

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Cost bypass is a common expression in the mobile industry; in a cost bypass situation, the creditor is not able to get paid part or the full amount due. This happens for example when message routing information is manipulated so that 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, the MNO in credit won’t receive payments for that traffic.

Analysts estimate that fraud and costs bypass result in over $6b A2P revenue losses per year. Full enterprise messaging monetization seems to become a moving target.

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

This all is due to several factors and challenges that Mobile Network Operators (MNOs) face across all business areas. Obstacles to monetization can vary even between operators in the same country, I’ll summarize below the ones that I find most relevant.

Six barriers to A2P monetization

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

MNOs generally estimate A2P revenues 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 that an operator only monetizes 30% of their 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.

  • Different Business Drivers

Believe it or not, corporate internal politics can cause enterprise revenue leakages. If you are responsible for the P2P revenues and you know that a portion of your revenues 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 revenues will unavoidably decrease. P2P Managers are therefore, demotivated from prioritizing A2P monetization projects impacting on their revenues.

  • Pricing strategies limitations and the 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 in place, P2P termination rates are typically capped to very low amounts (0,00X USD), A2P prices leverage to such rates wouldn’t be commercially acceptable.

  • Weak Legal Regulations

It often occurs that 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.

  • Inadequate Technical Solutions

Last but not least, technical solutions are crucial to combat fraud and assure revenues but as much as about 50% of MNOs worldwide have inadequate or no measures in place (source ROCCO at MEF Nov. 18).

On the other side of the spectrum, anti-fraud 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 3rd party Firewall. In addition, they often have an experienced team in place dedicated to Messaging Revenue Assurance.

When implementing, enhancing or replacing their anti-fraud system(s) there is a long list of features an Operator should look into. If you’re interested, please keep tuned as I’ll talk about this topic in a future blog.

  • Good tools… what about maintenance?

You might think that an operator has control over it’s 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.

For strategic advice and technical solutions to combat fraud and achieve monetization in the operators messaging services area, learn more here

Guendalina Rossi
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Guendalina Rossi

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