Operators ‘losing $15bn’ on grey-route SMS

Alan Burkitt-Gray
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Enterprises are using ‘grey routes’ for application to person SMSs, says Dialogue Communications, losing the ‘white route’ industry up to $15bn

The industry is losing up to $15 billion a year in potential revenue because businesses are using so-called grey routes for SMS traffic, claims one specialist.

Dialogue Communications, which specialises in application-to-person (A2P) messages, says that many of its rivals are offering grey routes to enterprises so that they can cut the cost of SMSs.

“There are some firms out there that are effectively not only cheating the operators but also cheating their customers,” said Hugh Spear, the company’s co-founder and CEO.

He said that identifying and shutting the loopholes could generate as much as $15 billion in recovered operator revenue in 2017.

But, he admitted, many of the grey routes themselves are offered by mobile operators or by MVNOs running on operators’ networks. And they are widely used by large companies. “One aggregator has an agreement to send 300 million A2P messages a month via a small operator in the Caribbean,” said Paul Garner, global director of sales for Dialogue.

Such operators charge about 0.1-0.2ȼ per message, much less than others. “We pay 2.5ȼ per message and we resell for 3ȼ,” said Garner.

Many A2P messages are sent by social media sites as a way of authenticating new users, he said. Others come from banks, taxi firms and other enterprises.

“Taking the grey route to by-pass operator charges increases the chance of non-delivery, provides a safe, profitable haven for the spammers, and risks damaging brand reputation both for the brands associated with the messages and the operators themselves,” said.
Dialogue’s figures are based on tests it carried out on 199 mobile networks in 84 countries earlier this year. Only 23% of the networks tested showed no A2P SMS by-pass activity. Some 51% of networks however had significant by-pass activity ranging from just over half of all messages to a complete 100% by-pass for 28 of the operators tested.

“Some brands are only interested in the lowest possible cost by any means,” said Garner. “Others pay a white-route price and get grey-route connectivity.”