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A2P: Telemedia’s hidden boom market

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Messaging using good old SMS is set to continue to be boon to telemedia companies, network operators and VAS providers as it looks likely to underpin the burgeoning world of A2P and A2A messaging in the next five years.

Driven by the rise of IoT, the connected home and smart devices, value-added SMS services look to have a healthy future as they are underpinning the messaging between these devices and their user’s apps. And it is big business.

Globally some 1.67million A2P (application to person) messages were sent in 2017 – rising to 2.8trillion in 2022 and creating a $2.6billion market, believes Mobilesquared – and many telemedia companies are starting to take note of this massive market.

“Soon we will all be directing our lives from smartphones and laptops and SMS is still huge and growing as a result and we will be enabling this,” says Johan van der Lijcke, COO and co-owner of Telserv. “[SMS] is still huge in authorisation. If you want to connect an app to a platform from somewhere in the world they would like to identify you. They can do that with phone number, but they also want to know you are holding it – so they can send a text with a passcode.”

This is becoming standard practice in Europe and the US to authenticate users of everything from Google and YouTube, to making bank transactions and more.

“We are buying blocks of SMS enabled numbers across Europe so that US companies can start to use SMS for authorisation in Europe, which often tends to use WhatsApp,” adds Marco Dunhof, the other co-owner of Telserv.

But the role of these VAS services using telemedia tech goes further. Adoption of Unified Communications Services (Ucas) is growing, with companies that work off app, such as say Uber, looking at how to run messaging and voice to and from those apps to offer the full comms suite to their drivers and customers. This is where telemedia VAS services get interesting.

Two way voice fore Ucas requires local terminations for services – so that they end on a local number, explains van der Lijcke. To this end, Telserv is int eh process of signing a raft of partnership agreements with Tier One telcos around the world to offer such services. Recently it inked a deal with Telefonica, which will see this happen in LatAm and other Spanish-speaking markets. Others are set to follow in the coming months.

“Through partnerships with telcos such as Telefonica, this can now be made possible in our offering,” says van der Lijcke.

“This is all part of the massive ‘hidden market’ for SMS,” says Martyn Lambert, SVP, products and technology at ZephyrTel. “There is a ballooning of machines talking to each other and talking to apps on people’s smartphones and this all centres around SMS – it is the lowest common denominator that is proven to work and which everyone understands.”

The more connected devices there are and the more people want to control them with apps, the more A2P and even A2A SMS there is going to be. Adding in voice elements as well starts to shift where telemedia has been from a people business to underpinning the next generation of internet services.

Threats abound

However, there are issues. Mobilesquared’s report highlights two potential threats to the continued growth of the A2P SMS Market. One is the launch of so-called Rich Communications Services (RCS) scheduled for later this year, which could see up to 10% of A2P message traffic switch from SMS to RCS.

The other threat to growth is the continued security weakness in the SS7 signalling system used by all operators to interconnect mobiles. Fraudsters and hackers are known to be able to access the SS7 network to track, hack or divert calls and messages. In Germany last year, criminals successfully used an overnight SS7 attack to successfully hijack 2FA messages and drain consumer bank accounts.

“The threat of an SS7 attack is well known, but at the end of 2017 only 6% of operators had installed a specialist firewall to protect their consumers from those fraudulent diverts,” says Gavin Patterson, Chief Data Analyst at Mobilesquared. “While we expect that number to double during 2018, the absence of stronger security represents a significant risk to operator income from 2FA messaging.”

“While we think RCS will take about 8-10% of traffic away from the A2P market, and have factored that into our forecasts,” Nick Lane, founder and chief analyst adds. “If enterprises fully adopt RCS and banks and others lose faith in 2FA SMS, then as much as a further 20 per cent of A2P SMS revenues – worth some $5 billion in 2022 – could be lost to RCS.”

The GDPR effect

As seen, A2P messages are a mixture of two-factor authentication services, validation services and marketing services – and each of these will have a different value to the enterprise sending them.

GDPR is already making opt-in messaging more important for many marketers and so these messages can be charged for at a premium over, say, bog standard marketing messages.

Similarly, two-factor authentication messages are also a ‘premium VAS’ SMS service and again can command a higher value than, say, basic A2A command messages.

“The more that technology is used to identify the kinds of messages being sent, the more telcos and services providers can build charges around these messages,” says Mobilesquared’s Lane. “It is about making sure that operators are central to these ecosystem.”

And it is in partnering with telemedia companies such as that between Telserv and Telefonica that this ecosystem is going to be built – building the next generation of telemedia VAS in the process.

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