CROSS-CARRIER VIRAL INFECTION

When short message service launched in Europe three years ago, Robin Hearn used it heavily, seamlessly and happily. However, today he lives in the U.S., where sending text messages seems rather pointless. That's because Hearn first has to find out whether the recipient is in his network and owns a text-capable device.

Indeed, SMS viability remains a huge question mark while coverage is limited and limiting.

“I'm not optimistic for the market,” said Hearn, senior analyst for Ovum. There are just too many SMS stumbling blocks that need resolution, he said as he ticked off the problems facing U.S. carriers: interoperability, segmentation, pricing, calling party pays issues and a lack of critical mass of SMS-efficient phones.

Yet throughout North America, companies now are banking on interoperability as the remedy to cure SMS ills. Andrew Tobin, for one, is bullish on U.S. SMS and said that interoperability is the cure.

“The most effective change carriers can make is to set up interworking for SMS between each other,” said Tobin, director of new ventures for Logica. After that, as in other parts of the world, growth will be viral, he predicted.

Last month, Tobin met many of his SMS peers at the SMS Forum on Interoperability to identify ways to replicate the European growth percentages. There, Logica introduced its Global Interconnect Network. And to Tobin's delight, carriers universally agreed to do whatever it takes to fix SMS.

Their motivation is clear: Text messaging makes up 10% to 15% of revenues for carriers in other parts of the world, Tobin said. Adding double-digit revenue increases to a carrier's bottom line is compelling, particularly at a time when U.S. subscriber growth is slowing.

But in order to achieve those revenues, U.S. carriers must cooperate with their competitors, something that doesn't come easily. Here in the U.S., carriers are accustomed to getting as many customers as possible within their proprietarily designed, walled garden services at the expense of their competitors. However, intercarrier SMS will require them to open up their networks to other carriers, which parallels the challenge of setting up intercarrier roaming agreements in the 1980s.

“Coming from Europe, it's so obvious how interconnect increases messaging growth,” Tobin said. “We've seen it so many times across the world.”

Crossing Over

December was a very good month for SMS in Europe. The GSM Association reported that five times the number of SMS messages were sent — 15 billion messages compared with the normal rate of 3 billion.

In the U.S., however, the numbers pale by comparison. For example, AT&T Wireless, which launched its intercarrier messaging service in November, averaged about 1 million messages a day.

As the strategic thinking goes, once AT&T links its customers with the likes of Cingular, Verizon, Sprint PCS and so on, and, more importantly, those carriers link with it, text messaging will take off. The growth could continue exponentially as the intercarrier connections reach beyond the continental U.S. into the Canadian and South American markets.

Got ‘em Surrounded

In November, Canada's four largest carriers — Bell Mobility, Microcell, Rogers AT&T and Telus — launched the first North American effort to exchange intercarrier text messages over multiple networks. The carriers are using CMG Wireless Data Solutions to provide its Inter-SMSC Router (ISR) service to manage the SMS cross-carrier traffic. The service bridges CDMA, GSM, iDEN and TDMA and is scalable for global carriers.

Already in three months, the carriers there have witnessed a surge in SMS traffic, although none was able to provide actual figures.

The SMS growth rate is estimated to be 250% annually in South America, and in terms of market volume, Venezuela is the sixth-largest SMS market. Venezuelan carrier Movilnet is participating in an SMS trial with TSI Message Manager and intends to launch the service once beta testing is complete.

“We'll be able to deploy TSI's service bureau solution very quickly once testing is complete,” said Jose Gill, director of business development at Movilnet. Message Manager is a gateway solution that provides SMS routing and interoperability translations between different networks.

Carriers can send subscribers' mobile-originated SMS messages to other carriers' networks by routing the SMS to the messaging management platform. The platform receives the SMS from the originating network via a secure IP connection.

The platform determines valid routing based on the address in the SMS and the preference of the destination network. It delivers via SS7, SMPP or SMTP. This routing information is maintained in a global routing database. In instances where a carrier is reachable through another SMS gateway provider, TSI accepts a mobile-originated SMS or delivers the mobile-terminated SMS to the gateway provider indicated by the destination operator.

While solutions such as this provide the capability to conduct intercarrier SMS exchanges, what if they don't provide the necessary boost for getting service off the ground in the U.S.? Logica's Tobin seems baffled at the suggestion, reiterating the explosive growth in the United Kingdom.

“There was a 700% increase in traffic when interconnect was introduced in 1999. We know that's the same sort of situation in many other parts of the world. People have seen up to a 17-fold increase in traffic as interconnect gets introduced.”

Judging from carrier feedback, interoperability is the definitive prescription. “In terms of the benefits they get from doing it, they far outweigh the fairly minimal costs they would incur to effect interconnection. The time is right for U.S. interconnection to take place,” Tobin insists.

Even doubters such as Ovum's Hearn hold hope for SMS to catch on.

“I'm not sure that the door isn't closely quite quickly on SMS as being a Trojan horse for the U.S. market,” Hearn said. “I'm rather hoping they can tag it on to something like maybe instant messaging in an SMS kind of environment which tags the desktop to the mobile device.

Bill to Keep?

If interoperability issues iron themselves out as carriers connect with each other through various clearing mechanisms, the billing model for SMS is still an issue. AT&T Wireless' introductory plan, for example, offered unlimited text messaging. However, after this month, subscribers can pay as they go for 2¢ per message to receive and 10¢ per message to send messages, or select bundled plans for $2.99 per month for 100 messages, $3.99 per month for 200 messages and $7.99 per month for 600 messages sent or received.

Complex billing plans such as these harken back to the first days of roaming. Expecting subscribers to keep track of messages that are sent and received will backfire, said Robin Hearn, senior analyst for Ovum. Customers are selective about who they share their wireless phone numbers with today because they don't want to pay for incoming calls. The same will apply with text messaging, he warned.

Connecting Carriers

SMS proponents such as CMG, Logica, TCS and TSI recently have unveiled charters for solving SMS interoperability. All of the solutions are clearinghouse or gateway functions that allow carriers to share and process SMS traffic across disparate networks as well as reconcile billing and settlement issues.

The broadest solution comes from Logica, which claims to handle 50% of the world's SMS traffic. Logica's Global Interconnect Network, introduced at the SMS Forum, links more than 400 carriers globally and allows exchange of SMS messages across all of those networks.

Using the Global Interconnect Network, if a Verizon subscriber wants to send a message to a Vodafone customer in another country, the message routes to the Verizon short message center. If Verizon can't route the message directly, such as intra-network, it goes to the Global Interconnect Network in SMPP format. Logica then routes the message directly to the U.K. Vodafone network. If the subscriber is roaming in Hong Kong, for instance, the network queries Vodafone, finds out where the subscriber is roaming and then routes the message to the Hong Kong carrier.

The other half of the internetwork equation is the clearing and settlement among all of the carriers and roaming partners.

With Logica's solution, if Verizon connects to the Global Interconnect Network and it passed messages to, say, 200 carriers and passed messages from those carriers back to Verizon, Verizon would get either one credit or debit because Logica pays the termination fees to the destination operators.

“When we pass a message to an operator, we will pay them a termination fee for handling that. Let's say Verizon paid us 3¢,” said Andrew Tobin, Logica director of new ventures. “We would then take 1¢ of that and pass 2¢ on to the distance operator as a termination fee. That gets around a lot of problems with interconnect charging and opening up of networks and so on.”

Logica divides the world into different zones. Each zone has a standard fee to send each message. These rates are based on interconnect charges. For example, France and Spain have high interconnect charges and termination fees — the higher the charges to the distance operator, the higher the charges within the zone.

Another company that's offering a solution is TeleCommunications Systems (TCS). It recently announced its Message Distribution Center in collaboration with Cibernet's Mobile Xchange Protocol. TCS's carrier-grade text messaging technology is currently operational in 16 carrier networks and eight countries and reconciles compensation between carriers for message transmission.

With a billing component, these solutions seem to have a chance to work, said Chris Knotts, TCS director of marketing.

“The problem standing in front of full interoperability is the business model. Carriers have started to implement intercarrier messaging. AT&T was the first with a simple ‘Bill & Keep’ method,” Knotts said. “They have no formal relationships with other carriers. They take care of their own customers. The next step will be to implement a system more akin to roaming. You will see that in six months.”

Solutions Testbed

SMS solutions are many, but will they eventually work together? That's where new ventures such as the partnering of The Management Network Group and inCode Telecom Group come in handy. The two companies have formed an independent next-generation testing lab that will allow carriers to test interoperability.

The lab will be managed by inCode and will be overseen by an advisory council in which both inCode and TMNG have a seat. One priority of the lab's advisory council, which is comprised of C-level execs at the top service providers, is to fix SMS, said Ron Agner, TMNG partner. Carriers not only view SMS as a revenue generator if it is fixed, but they count on a huge pent-up consumer demand.

TMNG and inCode are focused on developing not only compatibility testing (in a neutral environment), but also a sort of clearinghouse that combines the routing and settlements functions.

This will strongly benefit the Tier II players by letting them provide intercompany SMS with a modest investment and on a pay-per-byte basis.

Angner said the preliminary work is at the intracompany level, where the “Cingulars of the world” — which grew through acquisition — are facing serious interoperability issues. Things have gotten so bad that even if a message gets through, it doesn't necessarily mean they'll be able to bill for it.