A2P SMS: Interconnect Issue

I wrote an 11-part series on the issue of A2P SMS interconnect in September.  In the past week, the issues of SMS pricing and SMS interconnect charges have been at the centre of two big stories in Times of India (business lead) and Business Standard (front page):

  • Times of India (Nov 5):  “…the cost to your mobile service provider of delivering your message to another mobile network is less than 1 paisa…This revelation not only belies claims that India has among the lowest telecom tariffs in the world, it could also set the stage for SMS rates to fall sharply. Voice calls are already being offered at 1 paisa per second. As new entrants flood into the market, SMS tariffs could become the next major frontier of the pricing war now raging in the Indian mobile services industry…Trai has so far refused to regulate SMS tariffs along with some other tariffs under what is known as forbearance. Forbearance is usually adopted by regulators when they believe that competitive markets are working and tariffs reflect true costs. As it turns out, the true cost of sending an SMS would never have come to light if new entrants had not been forced to sign interconnection agreements with existing operators at a price that is far higher than the actual cost.”
  • Business Standard (Nov 6): “The regulator is also re-examining SMS tariffs, which have not fallen as steeply as voice calls. SMS tariffs are around 50 paisa, virtually the same as a one-minute voice call, suggesting there is scope for reduction.Trai is expected to come out with a consultation paper on SMS tariffs as well as on fixing termination charges on them ahead of final recommendations.The move to impose termination charges has arisen because many telecom companies took advantage of their absence to sign bulk SMS deals with companies that were sent to customers of other telecom operators, a practice that resulted in choking the system.”
  • Times of India (Nov 9): “Telecom regulator Trai has been besieged with representations from several quarters, including consumer activists and members of Parliament, asking it to abandon its policy of forbearance with regard to SMS tariffs.
  • Business Standard (Nov 9): “Since the IUC, for voice calls or SMSs, is based on the amount of the network that is being used, the size of the file being transmitted is critical. Well, a 160-character SMS has a size of around 1kb, while a voice call is around 16kb per second. Today, with voice calls priced at 1 paisa a second, this means that instead of the current 50 paise to a rupee, SMS tariffs should be a fraction of 1 paisa, and the IUC on them even less.”

A story on Medianama detailed the A2P SMS implications. “India’s push SMS industry is facing a challenge with operators Airtel and Tata Indicom increasing the interconnect charges applicable on application to person (A2P)  SMSs on each other’s network. A2P SMSs include marketing information text messages relayed by enterprises such as banks, airlines, theatres, or by content aggregators.”

So, what needs to happen? I will discuss this tomorrow.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.