Artificial Inflation of Traffic Blamed for Dismal SMS Forecasts

Juniper Research says the market for SMS authentication traffic will only grow by 4 percent in 2024, compared to annual growth of 10 percent in every year since 2019, and they believe the artificial inflation of traffic (AIT) is central to explaining why.

The rise of AIT, where enterprises pay for SMS authentication traffic for users that do not exist, will be a key driver of rising SMS prices. This is leading enterprises to explore alternative authentication technologies, such as one-time passwords over OTT messaging apps and flash calling.

Juniper is not alone in ringing alarm bells about the damage being done to the SMS market. Mobilesquared, who describe themselves as the global leaders in business messaging intelligence, warns that enterprises are planning to exit the A2P SMS market because of high costs and AIT. The impact of AIT is especially severe on major brands which rely on one-time passwords sent by SMS to authenticate online users. Criminals use bots to simulate the online behavior of genuine users just to profit from the authentication messages generated in response. According to Mobilesquared’s research, artificial inflation of SMS traffic will cost brands USD2.4bn between 2022 and 2024.

Enterprises that rely heavily on SMS messages are now suffering a double whammy. They have to pay for the artificially generated messages they failed to prevent, and then they suffer higher costs per message as mobile operators seek to exploit the traffic. Per Mobilesquared’s analysis, over a third of mobile operators have put up their international SMS termination rates by more than 100 percent since 2021.

It is not hard to find criminals who openly abuse enterprises by using them to generate SMS traffic. Michael Power of the Mobile Ecosystem Forum recently highlighted a LinkedIn advert created by fraudsters with the promise that their software would generate traffic that “look 100% real”. The advert listed 287 brands who they claimed to be able to exploit, including: Airbnb, Alipay, Amazon, Citibank, eBay, Facebook, Federal Express, HSBC, Instagram, Samsung, TikTok and Uber.

I am instinctively wary of government intervention but failures within the private sector inevitably sharpen demands for more government oversight. This may then be followed by further calls for businesses to be taken into public ownership. In economic terms, telcos increasingly look like the water and energy utilities they have long tried to differentiate themselves from. They have even started begging for more subsidies, just like other utilities. We should not forget that there was a time when most telcos were owned by governments; the pendulum has started to swing back in that direction and gross market failures will accelerate the trend towards public control. Part of the justification for that trend lies in the short-sighted greed of the people who run comms providers. Telcos have done a lousy job of maintaining law and order within their ecosystem. This has become so blatant that even a layperson can see evidence of it. Criminals are openly advertising on the internet about their ability to use cheap bots to fleece enterprises whilst supposedly legitimate operators cash in by ramping up the prices for terminating bogus traffic.

There is a shamelessness in the telco community lobbying governments for subsidies from big tech businesses whilst they quietly profit from frauds committed against those same businesses. It is even more shameless that the same telcos then try to position themselves as ‘trusted’ businesses. Some telco execs believe they can compete with Amazon at retail sales of electronics and they can compete with Palo Alto Networks at enterprise sales of cybersecurity. But they cannot even be trusted to tackle scam and spam traffic because everyone assumes they are addicted to making money from it. Smart businesses are going to switch from authenticating users with SMS to using cheaper methods like flash calls. And if telcos try to block flash calls, then businesses will find another alternative instead. They will do it because telcos have given them the motivation to do it. When corporate greed aligns itself to criminality then the victims of crime will switch to businesses and services that they can genuinely trust.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.