SMS: The Evolutionary Path To 3G

VoicenData Bureau
New Update

Exactly a year ago, in November 2000, I had written an article on mobile

commerce. At the time when WAP and 3G were piping hot, and all operators and

software developers were falling head-over-heels to announce one thing or the

other about WAP, GPRS or 3G; I had questioned if WAP would survive? I had

predicted that at best WAP will co-exist with the other technologies. Well,

after one year, it appears that the best case predicted scenario shall prevail.


After the initial 3G scramble and a subsequent sanity that is prevailing; at

least two governments in EU, have indicated a cut in the 3G license fee. Other

governments will have to follow the suite.

Java (J2ME, Java 2 Micro Edition) capable PDAs are debuting the mobile

handset market; Nokia, with its 9210, Ericson, Handspring (with Trio), Symbol

(Palm-based PDA mobile), have all brought in Java-capable models, although they

support WAP as well.

SMS has overtaken WAP, both in terms of revenue source for the telecom

network operator and from the end-user utility view point. The SMS revenue

figures are between 10 percent to as high as 30 percent of the total earnings of

the telcos, worldwide.


Emboldened by the relative accuracy of my predictions on mobile commerce

market scenario, I feel confident to stick my neck out, while peering past the

haze and gloom surrounding the global economic outlook in general, and the state

of the software and telecom data market in particular.

I see the mobile data market evolving in three distinct phases, which may be

out of sync with the 2G, 2.5G and 3G technologies. As in all evolutionary

systems, at one point of time, all the three phases may co-exist in one or the

other geographical areas.

In the first phase of the SMS evolution, the operators in India are creating

an awareness among the users, about the utility of communicating via SMS even

when the voice option is available. This phase will see an increase in

person-to-person SMS, to the level of revenue, currently prevailing in Europe.

Thus in the first phase, SMS is being exchanged mainly between humans.


In the second phase, person-to-computer system interaction using SMS will

equal, if not exceed, person-to-person SMS traffic. The technology and systems

for human-to-computer system via SMS already exist, though the usage level is

infinitesimal, as compared to the overall SMS traffic. For example, most

operators allow news pull, railways and airline time tables. These are basically

enabled through Internet gateway at SMS Center (SMSC) of the network operator.

In the person-to-person SMS exchanges, the business model is simple. The

sender pays to operator a sum ranging from Rs 1 and Rs 2 per SMS. The receiver

gets it for free.

In the second phase, where a human and a computer system interact, the

computer will always respond. The quality and utility of the information

provided by the computer system, results in an increase in SMS traffic. The

operator gains by the way of increase in SMS traffic, which he is willing to

share with the content provider. Here, a content provider may or may not be

involved. For example, e-mail notification service, Internet chat and Internet

search services, are run by the operator. Most often than not the Internet

website does not get paid, but gains from residual advertisement and brand

recall gained by the use of their content.


However, business-savvy content providers like the Indian Railways, charge

the mobile operators a fixed and a per access charge for their content access.

One may argue that the Indian Railways have a monopoly over the information

pertaining to train and reservation information it provides. This privilege is

not conferred on the Internet content providers who have to often compete with

equally desperate competitors. Though not denying this, I would point out that

there are other brand leveraging strategies available with the content providers

to help them to distinguish from others. For example, the famous astrologer

Bejan Daruwalla, commands premium on astrology content, and therefore by this

strength may get paid for his SMS-based, pre-stored predictions, which can be

automatically accessed through a computer to SMSC interface. So, may be the case

of Reuters, which has a potential of being paid by the operator for its quality

content and brand goodwill.

Operators share the revenue with the quality content providers, ranging from

20 paisa to as much as 60 paisa per SMS, depending on parameters like

exclusivity, quality and potential for volume.


We, the mobile users, apart from being customers of the mobile operator, are

also customers of other services like air travel, courier services and financial

services. This makes us valuable for the corporate that competes with others to

provide us with such services which we need or desire to consume. An important

way of service distinction is the quality of the CRM. SMS provides a new and an

exciting way of communicating with the potential and existing customers.

SMS provides a brand new channel for CRM. This is the third business model of

the second phase of mobile data applications evolution.

Most of the banking and credit card providers are already using SMS as an

additional means of keeping in touch with their customers. I find Citibank’s

Citi Alert service very useful. Even my local neighborhood bank provides me

access to my bank account via SMS! Soon, logistics companies will follow the

suite. For example, DHL already provides a SMS-based tracking system to its

international customers.


In this model, corporates pay for the reply SMS sent by their

computer systems, in response to their customers querying their information

systems. However, the corporates get to pay only a fraction of the SMS tariff,

by availing bulk discounts from the mobile network operator.

Personally, as an user, I prefer SMS over Interactive Voice

Response (IVR) and human call center. In all cases, I might have to wait if I

need information during a busy hour. Yet after sending a SMS query, I can attend

to my work, while I wait for the information.

The best thing I like about SMS-based CRM, is that, I do not

have to hold the line nor am I forced to listen to a canned music punctured by

messages like "Your call is important for us, but all our officers are busy

attending to customers like you.


Thanking you for holding the line (keep wasting your

time)". As for IVR, listening to a canned voice and pressing innumerable

buttons after listening to each option, really drives me crazy! Every time I

call the credit card company, I have to endure the torture, just because someone

was trying the "Keep It Simple and Stupid" philosophy.

SMS provides an asynchronous and non-intrusive channel of

communication between the customers and the corporate information systems.

Thus to summarize, three business models prevail in the

second phase;

  • Operator run services, where operator keeps the SMS

    tariff charged

  • Operator shares a part of the SMS revenue with the

    content provider

  • An operator independent service provider, uses SMS as an

    added channel to CRM

The third phase, which is yet to take off, will see an

entirely different commercial orientation. This phase would precede 3G in India,

and may take off in a big way only after GPRS is introduced in the major metros.

However, certain applications are viable even with SMS (2+G).

In this phase, computers will communicate with one another.

This opens exciting possibilities, ranging from Wide Area Mobile Commerce Value

Added networks to PDA-enabled access to corporates’ ERP systems. As the GSM-enabled

PDAs are emerging fast, a few corporates will deploy mobile applications for

supporting their field staff, even before GPRS is available in all their

geographical operational arena.

Here are some of the application scenarios:

One of our corporate customers is already talking to us to

explore the possibility of a pilot project, using Nokia 9210 Communicator based

J2ME (Java 2 Micro Edition) application, to enable their sales staff to access

ERP systems (implemented using BAAN) over GSM SMS network. The goal set for this

pilot, to consider it to be successful, will be to cut down the time lag between

the raw data being available to the field staff and collated information ready

to be presented to the management for decision-making. The additional benefit,

is the savings rendered by way of eliminating duplication in data entry. The

field staff also feels empowered, because they can now directly interact with

the ERP system even while on the field.

By using open-ended protocols like Narrow Band Sockets (NBS)

and Java technologies, a seamless migration path from SMS to GPRS and finally,

to 3G will be provided. This will also take care of the migration period when

all the three technologies prevail in the operating domain, which covers

multiple operators. For example, the metros may have 3G network, the class ‘B’

cities may have GPRS deployed and the smaller towns would still be operating on

2+G SMS network. As far as the end-user is concerned, he or she may only notice

a slight deterioration in response times, as the J2ME and underlying NBS

infrastructure takes care of the protocol switching application message routing.

Another, application based on NBS is Value Added Secure

Mobile Commerce network for banking. As the IT 2000 Act comes into effect, a

cryptographically secured NBS over SMS can be deployed between banks, for

clearing cheques and inter-bank electronic money transfer. This infrastructure

is available in most of the banks, since all the banks have a SMS gateway in

place. All they need is an enabling software, which may be agreed upon some open

standards like Open Financial Exchange (OFX), EDI-XML or Secured Electronic

Transaction (SET).

Department of Post (DoP), can save a huge sum of tax-payers’

money, by deploying NBS over SMS wide area network for affecting message

interchange for ‘Telegram’ and ‘Money Order’. Currently, DoP is

deploying an expensive VPN using VSAT technology.

Many more applications are possible; any application that

needs to be always connected yet exchanges short messages, is ideal for

deployment using GSM SMS network. NBS provides a migration path from SMS to GPRS,

to UMTS systems.

In this business model, though the corporate pays for the

data traffic, the gains by the way of cost reduction and value additions, far

outweigh the cost.

To conclude, we mentioned that the operators and the content

providers gain directly from the increase in mobile data traffic. The mobile

user win by the way of improved quality-of-life. The corporate gains by an

increase of customer-retention and loyalty. The government gains by charging a

service tax and a spectrum license fee. The technology providers, like us, get

paid for the innovations in software technologies.

Ashish Banerjee, tech, director, Osprey Software

Technology Pvt Ltd