The last two years have seen significant changes in A2P messaging prices – with operators and aggregators alike implementing price hikes in response to their own business and market needs.

The average international A2P termination rate has more than doubled during this period, increasing from slightly over $0.03 to over $0.06 per message. This global rise of 66% in termination rates has been even more pronounced in specific countries and regions, surpassing 100%. This trend has inevitably left a significant impact on the A2P messaging industry as a whole.

From Joanna’s perspective, one of the most immediate impacts of these price hikes has been a consequent shift in business behaviour and authentication preferences.

She emphasised that the elevated pricing has spurred a noticeable increase in bypass attempts through grey routes, especially leveraging grey route sim boxes.

She added that is is important therefore that MNO’s protect their networks with the latest next gen firewalls – not just to protect revenue streams and minimise leakage, but also more critically, to protect subscribers and associated perceptions of brand strength.

Additionally, as prices have soared, some businesses have explored alternative communication channels beyond SMS.

Voice-based channels, such as voice OTP authentication and flash call authentication, are gaining prominence in the market. The transition to these channels is also being observed in non-SMS, non-voice avenues, such as over-the-top (OTT) platforms like WhatsApp.

The incredible market dominance of some of these channels in their markets – whether WhatsApp or Telegram or Messenger – coupled with high SMS prices is driving a massive surge in their usage as alternatives for A2P services – thanks to their established user bases.

A second significant outcome of the price surge has been the realignment of use cases. In markets where termination rates have experienced significant hikes, certain lower-priority use cases, including generic marketing, have dwindled, resulting in a reduction in overall message volume.

An interesting parallel trend from all this has been the transformation of the international A2P market’s landscape. The dominant use case has shifted considerable, with authentication and verification services taking centre stage. A staggering 90% of international A2P traffic is now attributed to these types of services, an insight emphasised by recent findings from Mobile Squared.

This concentrated reliance on a single type of service has brought about both opportunities and challenges for industry players. Monetisation of this service has been easy – it’s still heavily relied upon given the universality of SMS. But, businesses using it – especially banks – continue to explore other options like in-app verification… threatening the future of this specific revenue stream. Increase the prices too high – and you could lose the traffic entirely.

For Ron, another consequence of escalating pricing is the impact on brands and their A2P SMS spending. As messaging costs surge, brands are faced with the dilemma of allocating resources efficiently. With the backdrop of economic uncertainty, the strain on brand budgets becomes palpable, particularly when the cost per message escalates. The tightening of budgets in the face of soaring costs has led enterprises to reevaluate their use cases and potentially curtail traffic to specific A2P services.

Curtailing is one impact, but transitioning is another. Ron highlights how price hikes are closely intertwined with the emergence of new forms of messaging – like non-revenue generating authentication mechanisms. Flash calls – one such mechanism – are a particular issue for MNOs, as they effectively allow other brands to drive their own monetisation strategies around messaging and authentication, without any value share whatsoever. Brands using flash utilise the assets of the MNO – the network and mobile numbers – without in any way paying for this access. But it’s a casual issue in a way – inflate message pricing too much, and businesses will look for ways to bypass… it’s an understandable reaction.

So what’s the right way to do price increases – how can you effectively monetise your channel, without cannibalising your business?

We’ll come onto that in our next article coming soon.

Meanwhile, feel free to reach out to HAUD below to find out more about price increases in your region and the best strategy for doing it sustainably.