Businesses win thanks to the intro of an SMS interconnect fee

Somewhat counter-intuitively, the arrival of an SMS interconnect fee generally results in lowered prices and exactly that has happened in South Africa.

July 8, 2013

By Pieter Streicher, Managing Director BulkSMS.com

Businesses that shrugged their shoulders in resignation at the thought of an increase in SMS costs thanks to the introduction of an A2P SMS interconnect fee are in for a pleasant surprise. Somewhat counter-intuitively, the arrival of an SMS interconnect fee generally results in lowered prices, and exactly that has happened in South Africa. In addition, businesses can expect SMS quality to improve as well.

How did this come about? Let’s take a step back to 2012 when Cell C broke the gentlemen’s agreement between the mobile operators that they would not terminate A2P traffic on each other’s networks. Cell C’s breaking ranks forced Vodacom and MTN to push for interconnect fees. This means that for the first time, network operators don’t have a monopoly on the A2P traffic on their networks. An A2P message can be sent via MTN and terminated on the Vodacom network, for instance.

Finally, competition in the A2P SMS space.
This new interconnect pricing regime, while eroding some network operator profits, has in fact resulted in a reduction in mobile network operator A2P SMS wholesale prices offered to WASPs. This is because mobile operators now need to compete to maintain and gain market share, now that WASPs have a choice of how to send their customers’ messages.

This means that in turn WASPs can pass on these savings to their customers. BulkSMS.com customers are seeing savings of around two to six cents per message. As a result, although SMS remains a premium communications channel, businesses can expect a higher return on investment on their mobile messaging campaigns, thanks to the introduction of the SMS interconnect fee.

What’s more, because mobile operators are now competing for your SMS traffic, we’re likely to see an improvement in quality as the SMS channel is beefed up to maintain and grow this – still lucrative for the operators – traffic.