SMS can still earn up to 30% of an operator's data revenue

Though voice
call tariff rates have become equal to SMS, consumers rely on text message for
certain types of communications like seasonal greetings, reminders, business
cards, television show voting, etc, as it has certain unique advantages. Due to
the increased penetration of mobile services, the SMS based services are
increasing day-by-day. Most of the services require reliable SMS delivery which
has become the biggest challenge for every operator. SMSs some times do not
reach customers, especially during festive seasons like new year and diwali, and
during normal peak hours also.

In the overall service providers' revenue,
SMS based revenues are estimated to be about 4-6% of their total revenues in
both P2P and P2A2P SMS categories. In FY 2008-09 cellular service revenue was Rs
95,271 crore, and SMS revenue was about Rs 3,811 crore (V&D estimates). SMS
segment is very important for SPs already, and it will assume a greater
significance especially when enterprise SMS applications have a huge potential
to mint money. It is critical that network operators realize this and understand
the issues involved in making SMS delivery reliable.

The ARPU Enhancer

If SMS business is managed properly, it can represent up to 30% of an
operator's data revenue, and thus represents a significant part of the
operators' overall revenues. Tarvinder Singh, director, marketing & product
management, home & networks mobility business, Motorola India says, "The success
or failure of SMSs can mean loss of opportunity for the service providers. When
compared to voice calls, SMS uses the air interface for a fixed duration of
typically less than one second. Thus, from the utilization standpoint, more the
number of SMSs sent, more are the chances of higher revenue over one hour's
time. This is the reason tariff packages from operators encourage SMS usage,
because it works out as a win-win situation for both subscribers and operators."
Udit Shanker, vice president, South Asia, Acision says, "Ensuring the
reliability of SMS will encourage subscribers to continue using SMS, resulting
in higher ARPU for operators."

Mobile operators can really take advantage
of providing a lot of critical enterprise applications, if they can make SMS
reliable and guarantee the delivery within a certain time period. Imagine a
customer service department receiving alarms directly from all their products
deployed worldwide in the form of SMS to their mobiles. Praveen Nallapothula,
managing director and CEO, TeleDNA says, "Enterprise SMS can be a huge traffic,
and enterprises will be willing to pay a premium on these kind of services, as
it can reduce their huge network operations center costs dramatically and
provide instant support to their customers. It is ideal for mobile operators to
have a dedicated short message service center (SMSC) for reliable SMS traffic
that cater to some critical enterprise applications." Lalit Chowdhary, director,
sales, Alcatel-Lucent echoes a similar thought, "Enterprises are dependent on
SMS for its workflow automation and improving their offering to their customers
through regular alerts and infomercials. It further increases the revenue
opportunity for network operators."

Advertisements on SMSs is another revenue generation
avenue for operators. There are other applications like LBS which use SMS as an
enabler. When such services are launched in India, it will increase the use of
the SMS resources, further increasing the revenues.

Build Your Capacity

The reliability of SMS delivery is questionable during the festive seasons
and peak hours. This is mainly due to under-dimensioning of network elements in
the path of SMS delivery. SMSC is the main equipment that receives the SMS
request from the sender, processes it, and delivers it to the destination
mobile. SMS, however, has to traverse through a tower to a switch (MSC-mobile
switching center) to a signaling transfer point (STP) or a signaling gateway to
reach the SMSC, and vice versa back to the end customer. SMSC also has to make a
query to the HLR (home location register) to find the destination mobile
location area. Any intermittent failure on any of this equipment can cause SMS
to fail, and any delay in any of this equipment will delay the SMS delivery.

SMSC is the equipment that mobile service
providers purchase to provide SMS to their end customers. This equipment should
be capable of handling traffic during the busy hours also. Challenges-including
air interface congestion, signaling bottlenecks, capacity limitations, and
prepaid charging capacity limits in the network-need to be resolved. Praveen
Nallapothula, managing director and CEO, TeleDNA says, "Mobile service providers
need to purchase and provision adequate capacities in terms of transactions per
second (tps) of SMSC that can handle peak SMS traffic during these peak seasons.
Lack of such capacities will queue the messages, and the delivery can get
delayed by even twenty-four to forty-eight hours."

Another big reason for the delayed
delivery or non-delivery of SMS is that the network elements and the data
network involved in the path of delivery of an SMS can also fail or lead to
congestion. These network elements are often not equipped with necessary
capacities to cater to the SMS traffic. They are usually dimensioned for voice
traffic and signaling only. For example, if a MSC/STP/SG or an intelligent
network (IN) does not have enough capacity to respond to a query from SMSC, then
this can also delay the delivery of a SMS. Hence, it is not the SMSC alone that
needs to be equipped with enough capacity, but also the neighboring network
elements that SMSC needs to interface with to deliver a SMS to the end customer.

Udit Shanker, vice president, South Asia,
Acision says, "It is critical that the SMSC system implemented by the operator
is sized appropriately according to the operator's forecast of subscriber growth
and subsequent SMS usage, and for the specific SMS volume spikes during festive
seasons." Lalit Chowdhary, director, sales, Alcatel-Lucent says, "During festive
seasons, SMS traffic becomes around twenty times more than normal. It is
difficult for SPs to design capacity for so much elasticity in demand for SMS
service. They have taken number of steps to circumvent this problem, and provide
good customer experience during the peak period. There are a number of features
like multi-casting, suppression of retries based on congestion, first attempt
delivery, etc, to reduce the delay."

Prepaid SMS

The way a prepaid SMS gets delivered and postpaid SMS delivery differs. For
example, postpaid tariffing works in batch mode, and can typically be delayed
until the traffic peaks are over, as the bill is only sent once a month to the
subscribers. This makes the handling of charging easier, and keeps delays in
delivery to a minimum.

handling typically works by first
assessing the service fees, and only afterwards delivering an SMS. While this
charging method as such already causes some delays, it is more importantly a big
challenge to the maximum throughput capacity of the payment handling
infrastructure. Prepaid solutions are therefore typically more of a bottleneck,
and prepaid SMS delivery time becomes more delayed compared to postpaid SMS. CR
Rao, head, consulting and systems integration, Nokia Siemens Networks India
says, "The challenge is to optimize the infrastructure for peak traffic during
large scale events which typically last for a relatively short period of time,
and therefore build the right level of investment for predicted over capacity
rather than have costly and redundant capacity over a long period of time."

For a prepaid customer, SMSC needs to
query the IN to find if there is enough balance to process the SMS. Nallapothula
says, "In many cases, prepay IN servers are not dimensioned considering the
requests from SMSC which is no more negligible (90% of total SMS traffic is from
prepaid subscribers). Moreover, the bandwidth allocated from SMSC to IN is also
not dedicated as required. This is posing serious threat to SMS reliability."

Infrastructure capacity needs to be built
according to the requirement by an individual operator's network. Otherwise, as
Singh says, "If there is a technique where a higher paying or a high usage
subscriber would be allowed to jump the queue, or SMS messages could be tagged
according to their importance or urgency, then there could be more efficient
delivery."

Reducing Congestion

Making SMS delivery reliable also helps reducing the network congestions.
Nallapothula says that most critical enterprise applications can use SMS rather
than making a data call, which requires more network resources than an SMS.
Also, as Chowdhary says, "Reliable SMS can reduce the retries and extensive
traffic policing that needs to be implemented. The better approach to reduce
congestion is to introduce intelligence on the application servers. These
application servers can provide SMS concierge services. A distributed
integration of application server with SMS can ensure reliability and richness
of services." Rao observes that during the past years, in some countries, voice
calls got blocked due to high SMS usage, and our flexible and dynamic base
station software helped solving these issues.

SMSs can help reduce network congestion in
many ways, as the voice channel is still available. For example, if a bank wants
to communicate a message to its customer, it is better for the network operator
and the bank to communicate the same over SMS, so that the bank can optimize and
save on customer care resources to take care of other relevant and critical
customer queries that may not be as user friendly or easy to automate. This
essentially means that it is a win-win situation for the bank and the operator.
A resource is freed up at the bank's end, while the operator can make additional
revenue from an existing deployed resource by increasing its usage. In this
example, the operator saved a voice resource (customer calling up a bank)
without foregoing the opportunity to earn revenue from a SMS transaction, while
reusing the freed up voice channel to serve another customer.

In the SMS space, the next logical step to
text messages is the voice SMS. SPs are already beginning to offer many such
variants of SMS delivery to make it even more user friendly for the end
consumer. This technology could use up some of the unused bandwidth in the
operator's data network; and improve the voice, data, and SMS usage in the
networks. There are also innovative services such as delivery of email via SMS
on ordinary handsets without any dependence on the handset type, and without the
need to subscribe to a data services plan from the SPs. All this goes to show
that SMS will continue to play a key role in the way users communicate; and SPs
will continue to innovate to enrich this experience, and continuously increase
its relevance and utility for their consumers. Singh says, "Voice SMS could be
part of the differentiation strategy that each operator will need to have to
build stickiness, and attract new users to choose their services over other
available alternatives."

So, service providers cannot ignore this
segment, and need to make SMS a reliable means of communication. Operators'
spend on SMS infrastructure is just 4-6% of their total revenues. For example,
Aircel revenues for FY 2008-09 was about Rs 3,425 crore, and if we assume 4% as
SMS based revenues, then it will be Rs 137 crore. Reportedly, Aircel spent less
than 10% that year on capex for procuring SMS infrastructure. Reportedly, BSNL
spent about 5% on the SMS infrastructure. SP's total revenue in mobile services
was Rs 95,271 crore; and SMS revenue was Rs 3,811 crore (V&D estimates).

If SPs increase the spending on the SMS
infrastructure, then the reliability of SMS also can be increased. This can
further bring them high paid enterprise customers, and can see the revenues from
the enterprise segment growing. This can withstand the tariff wars from an
average end consumer.

Also, with the impending implementation of
MNP, it becomes even more important to pay attention to every possible way to
ensure the network quality and service quality including the reliable and prompt
delivery of SMSs. This will retain and attract more customers for an operator.
Another option recommended is to charge some customer segments more to offer
them higher quality of service guarantees for SMS services. Obviously, this
level of service quality would also involve investments in infrastructure and
services on the operator's side.

Moreover, reduction in SMS pricing will
unleash the potential for additional services which have not been thought of
today, as the industry is witnessing a trend towards a greater collaboration
between web 2.0 applications wanting to use the reach of SMS.

Kannan K

kannan@cybermedia.co.in