As OTT channels reshape the messaging landscape, MNOs must rethink pricing, tackle fraud, and adapt strategies to secure their share of the A2P messaging market.
OTT messaging channels like WhatsApp, Viber, and RCS are reshaping the A2P SMS market. These services offer businesses low-cost or free alternatives, forcing MNOs to confront mounting competition and re-evaluate their pricing strategies.
The Challenging Landscape for A2P SMS Revenues
Declining International SMS Traffic
International A2P SMS traffic, particularly for one-time passcodes (OTPs), is declining faster than expected. Tech giants such as Apple, Google, Amazon, and Meta are moving away from SMS-based authentication, contributing to significant revenue losses for MNOs.
Rising Termination Rates and Cost Pressures
In recent years, MNOs have sharply increased international SMS termination rates, effectively doubling average costs. This has driven major brands to explore more affordable alternatives like WhatsApp, flash calling, and passkeys. The resulting erosion of trust and reliance on SMS has further destabilized its position as the go-to business messaging channel.
AIT Fraud
Higher prices have incentivized fraudulent practices, where artificially-inflated traffic is injected into networks. Enterprises end up paying inflated bills for illegitimate messages, compounding cost concerns and eroding confidence in SMS.
Navigating the Price War
MNOs must recognize the ongoing price war in the A2P messaging space. OTT platforms, with their minimal or zero termination costs, continue to challenge operators to refine SMS pricing strategies in order to safeguard revenues and remain competitive.
Understanding Message Value
A differentiated pricing strategy based on message type and urgency is essential:
Identifying where each message fits on the spectrum can help MNOs set fair yet profitable rates.
Striking a Balance
To remain competitive, MNOs must find a pricing “sweet spot” by:
Regulatory Considerations
Local regulations often impose constraints, such as price caps and interconnect fees, that affect pricing strategies. Compliance is essential to avoid legal challenges and preserve trust.
Strategic Positioning
Despite the complexities, effective A2P SMS pricing strategies can unlock opportunities for MNOs. By aligning pricing with perceived message value, leveraging regulations smartly, and offering stable plans, operators can protect and even grow their share in a shifting market.
Mixed Views on SMS’s Future
Calls for a “Price Reset”
Messaging platforms and major brands are urging MNOs to reconsider high termination rates. Lowering costs could reduce fraud incentives, restore SMS’s competitiveness, and slow the shift to OTT platforms. However, without collective industry action, declining SMS volumes are likely to continue.
Industry Adaptation
To stay relevant, messaging providers are diversifying their portfolios to include alternatives like RCS while maintaining SMS where it remains viable. Industry groups such as the Mobile Ecosystem Forum (MEF) are working to combat fraud and encourage unified pricing approaches.
Conclusion
The future of international A2P SMS depends on MNOs’ ability to manage costs, address fraud, and keep the channel competitively priced. Without these measures, enterprises will increasingly turn to alternative messaging methods, further diminishing SMS’s role in the business communication ecosystem. However, with strategic adjustments, MNOs can stabilize and even thrive in this evolving market.
To learn more about the topics covered in this article, or to discuss how Openmind Networks can help you navigate the future of RCS Business Messaging, please get in touch or contact our team of messaging experts online here.
