February 01, 2012

Texting Is So Money (Or, Why Long Codes Have Become a Hotbed of Debate)

This article originally appeared in the Feb. 2012 issue of Next Gen Mobility

Are the CTIA’s recently issued inter carrier messaging guidelines an effort by the nation’s cellular service providers to protect the public against spam, or are they a move by those same companies to tamp down the prospects of long codes? The answer: It depends upon who you’re talking to.

David Diggs (News - Alert), vice president of wireless Internet development at CTIA, tells Next Gen Mobility magazine that the guidelines aren’t so much about distinguishing between short codes and long codes. Rather, he says, they aim to set industry rules around bulk messaging from A2P providers (the A stands for application) so customers are not inundated with unwanted and/or inappropriate text communications.

“You don’t get a lot of spam on SMS, and everyone’s focused on trying to keep it that way,” Diggs says, adding there is currently a lot of protection built in to short messaging.

“Where it gets interesting is where long codes get into bulk, high tonnage messaging,” he adds, confirming that the guidelines suggest A2P traffic can be blocked if the wireless carrier deems it as falling under the heading of deceptive marketing practices.

However, Noah Rafalko, CEO of TSG Global, a VoIP and SMS texting service provider, believes the large wireless service providers that are CTIA members are trying to limit long code technology with guidelines that treat SMS one way and long codes another. He’s also troubled by the fact that CTIA set the new guidelines in a closed meeting.

“If you’re not invited to your voting booth, what voice do you have?” says Rafalko. “It’s not like because McDonald’s sells the most hamburgers in the world, they have the right to dictate how all hamburgers are made.”

In this comment, Rafalko is referring to the significant market power of the nation’s big cellular providers. On the second page of the CTIA guidelines are the logos of AT&T, Cellcom (News - Alert), cricket, nTelos, Sprint, T-Mobile, U.S. Cellular and Verizon Wireless.

“The small guy deserves a chance too,” Rafalko says, adding that keeping newcomers out of the market hurts not only those companies but consumers as well.

Rafalko adds that while he believes CTIA is calling for existing long code providers (which are more consumer focused than business focused at the moment) like Google (News - Alert) Voice and GroupMe (which Skype plans to buy) to be grandfathered in, newcomers to the long code space such as wireline CLECs may face higher hurdles to market entry. (Diggs of CTIA indicates that isn’t the case.)

TSG Global isn’t alone in its interest of advancing long codes. Clickatell (News - Alert) is another company that is promoting its benefits."U.S. long codes have the ability to fill a significant gap in the SMS messaging space,” says Cliff Haas, senior director of connectivity and partner management North America for Clickatell. “Small to medium organizations will find the quick implementation and relative affordability to be key enablers in their making use of SMS for their communications needs.

He adds that Clickatell values the privacy rights of its mobile subscribers and recognizes thepotential that can exist for abuse in an unchecked implementation.

“With these concerns in mind,” he adds, “Clickatell has taken a lead in creating a paradigmin which the mobile user is protected while not unduly burdening the smalland medium organizations. Specifically we have implemented daily and monthlyvolume restrictions on long numbers. In addition we insert a ‘stop’ footerin every long code message advising the mobile how to stop receivingmessages from that sender. Should the mobile send ‘stop’ to our longnumbers, we block that sender from reaching the mobile again. Finally, wemonitor the ratio of sent MT messages to ‘stop’ commands received. If therate of ‘stop’ to sent messages is excessive, we reserve the right to ceasethat senders access to sending messages.”  Loïc Maestracci, marketing director of Zed USA, which offers multi-platform marketing solutions and value-added content services, meanwhile, tells Next Gen Mobility: “There is a potential for long codes in the current market, specifically for enterprise or M2M solutions that have long-term implementation, that require standard SMS charges to apply and/or international/roaming reception. Industries like health care, public services, call centers, business applications or even social media are the perfect candidates for long codes.

“The ease and lower cost of implementing long codes encourage many companies to use them,” Maestracci continues. “However, not many long codes have been advertised yet in the U.S. Long codes will bring new industries and usage type to message based interaction.”Whether or not there are any motivations to its recent inter carrier messaging guidelines the CTIA has not publicly expressed, it’s clear that association members have a nice business in SMS that they most certainly are keen to protect.

The worldwide mobile messaging industry currently is generating revenues in excess of $150 billion, and is forecast to exceed $233 billion by 2014, according to Portio Research. Meanwhile, The Wall Street Journal reports that AT&T and Verizon (News - Alert) Wireless charge between 20 cents per text to $20 a month for unlimited texting, and a dollar of texting revenue produces at least 80 cents of profit compared with about 35 cents of profit from $1 in wireless data or voice services. The piece indicates that while texting has been big business for cellular service providers in the past, and still is, the business is under pressure on multiple fronts. According to WSJ: “While U.S. cell phone users sent and received more than 1 trillion texts in the second half of 2010, according to CTIA, a wireless industry trade group, that was just an 8.7 percent increase from the prior six months. It was the slimmest gain since texting exploded last decade.”

Edited by Stefania Viscusi

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