Tuesday, May 4, 2010

PSMS and Operators...c'mon lets get it together!

Last month T-Mobile deployed its 3PG (third party gateway) network to counteract the regulations of premium SMS (PSMS) making it harder to monetize from this model. One can argue that this is better for the consumer, but is also a great deal of headache for companies that build their strategy on PSMS. T-Mobile followed the footsteps of Verizon and AT&T. 3PG is a "billing platform" which provides a two phase charging (initiate/authorize & charge) to avoid spam or fraudulent transactions in mobile SMS.

The problem is that billing transactions in the US are through MT (mobile terminated) rather than MO (mobile originated). This means that if a customer wants to purchase a ringtone, the end-user will be charged once he receives the message/ringtone. This model, contrast to most Latin America and European market, has one flaw: spam. Individuals can potentially spam PSMS. The solution is through a validation process or a "two phase charging" process. This means that if the SMS has a tariff, it will be subjected to some validation.

As per December 2009 study, the US operator market share is composed with the following:
  1. Verizon : 31.2%
  2. AT&T : 25.0%
  3. T-Mobile : 12.1%
  4. Sprint : 12.1%
  5. Tracfone : 4.8%
  6. MetroPCS : 2.3%
  7. US Cellular : 2.2%
  8. Boost Mobile : 2.1%
  9. Cricket : 1.7%
  10. Virgin Mobile : 1.7%
  11. Others : 5.0%
Currently each of the top three operators have different platforms. Verizon has OIOO, AT&T has OPPC, and now T-Mobile has 3PG. All these platforms are different and they all tackle the same problem. In reality, all these operators are trying to develop a better mousetrap. Marketing companies are aware of this problems and agreed that something should be done. However, the operators or the government need to actually sit down and come up with some type of standardization.

In conclusion, marketing companies whose strategy are based on PSMS needs to really look at this model and considered if its worth it. In the book Good to Great, Jim Collins devoted an entire chapter on "confronting the brutal facts". Collins stated, that a "great" company cannot make a series of good decisions without confronting the brutal facts. At the end of the day, if you want to deal with PSMS you have to know that:
  1. You have to maintain different type of platforms specially if you just want to have the top three US operators
  2. The industry is becoming more and more regulated from both the carriers and the marketing companies to initiate campaigns
The choice is yours.

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