Solving the SMS Revenue Leakage Challenge

Whitepaper
Solving the SMS Revenue
Leakage Challenge
Table of Contents
1
Background
2
SMS fraud technical overview
3
Affected parties
4
Common methodologies
5
Ways to control the different
types of SMS fraud
Background
As mobile device usage became ubiquitous, marketing efforts to reach this population
segment exploded. Companies burst onto the mobile marketing scene attempting to carve
out a unique position, niche or vertical. Venture Capital funds fuelled such a growth of players
in this arena so that keeping track of who was doing what became difficult. The “Lumascape”
below from Luma Partners illustrates this sudden complexity in the mobile advertising or
mobile marketing ecosystem.
Figure 1 Sample of the complexity of companies in the mobile marketing ecosystem
SMS messages are typically read almost immediately and responded to very quickly which is normal
user behaviour on the mobile. However, for mobile marketers, this makes SMS-based marketing
a very powerful tool to exploit. As a result, there has been a wide range of activity to provide SMS
based marketing across the entire mobile marketing ecosystem. The majority of this activity has
been legitimate and within acceptable standards of behaviour, but sometimes it crosses the line of
legitimacy or blurs the distinction of what is acceptable and what is not. This is especially true when
it comes to the area of low-cost, bulk SMS delivery.
1
Solving the SMS Revenue Leakage Challenge
Low-cost SMS delivery providers are known as SMS aggregators and there are many legitimate
companies in this area. Their primary business model is to send message traffic at a lower price that
the network operator’s themselves offer. Typically, these companies partner with existing mobile
operators to purchase wholesale SMS services at a reduced price that they can then offer to their
customers. Mobile operators get a new revenue stream by selling bandwidth on their SS7 network
to SMS aggregators and the SMS aggregators re-sell that bandwidth to their customers. The quality
of service (such as SMS delivery success rate) is not always guaranteed, as these companies offer
different levels of price/performance, depending on the type of connection and agreement they have
with the mobile operators. This puts tremendous pricing pressure on the aggregators to seek every
opportunity to ‘optimise’ wherever they can. While this does not always result in illegal activities,
sometimes the pressure does result in pushing the boundaries of what is lawfully allowed.
Figure 2 Bulk SMS equipment for sale on Alibaba
SMS fraud technical overview
Let’s outline the technical aspects behind SMS fraud to help set the stage on how it occurs and
can be addressed.
At the highest quality level, SMS aggregators may have a “direct connection” to the mobile
operator’s SS7 network via a special signalling gateway. This direct connection to the SS7 network
is what enables SMS aggregators to provide a level of quality assurance to their customers.
SMS aggregators may also have an “indirect connection” to the SS7 network via a mobile operator’s
SMS centre. This kind of SMS connection is typically less expensive than a ‘direct connection’ but
provides a lower delivery rate or less delivery assurance.
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2
Solving the SMS Revenue Leakage Challenge
Affected parties
As a result of the tremendous pricing pressure on the aggregators to be able to provide up to
75% discount SMS pricing or even free SMS, some SMS aggregators rely on “indirect connectivity”
known as grey routes or make use of SIM farms. The SIM farm is explained a bit further on.
SMS marketers may be lured into using an SMS aggregator that may not have a proven track
record or simply provide low quality services.
For the SMS marketers, the consequences of using an unproven aggregator may be:
• Marketing funds might result in messages not being sent and the funds be unrecoverable if the
SMS service provider is secretly blocked for fraudulent activities
• The SMS delivery rate may not be constant or even worse, sporadic if the service provider is not
able to provide a service level guarantee that they can deliver
• The SMS service provider may actually pirate the marketer’s own customer list and expose them
to uncontrolled fake, fraud or spam activity.
Mobile operators, on the other side, might also suffer depending on network infrastructure and
interconnect agreements with consequences such as:
• An imbalance in SMS interconnect traffic, resulting in high costs caused by the volume of
targeted subscribers exceeding the volume of the operator’s subscriber base
• SMS revenue leakage as a result of SMS traffic not being properly charged due to the exploited
interconnect routes
• Negatively affected brand image caused by unsolicited volumes of SMS traffic addressed to either
its own subscribers or towards the other mobile operators.
The subscriber or end-user is also negatively affected by:
• Unsolicited messages in the form of fakes; fraud or spam is considered harassment and intimidation
• Fraudulent fees or charges by mistakenly engaging “premium rate” services
• Mistakenly led to divulge or make use of the subscriber’s contact list
• Having the subscriber’s handset taken out of service by being flooded or subjected to denial-ofservice techniques.
The two major vectors of fraud in the SMS world are where the majority of activity and headaches
originate are grey routes attacks and SIM farms attacks.
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3
Solving the SMS Revenue Leakage Challenge
Common methodologies
SIM Farms
By definition, a SIM Farm is a computer connected to a bank of hundreds of mobile phones SIM
cards. Each of the SIM cards is an account on mobile network operator that offers the tariff needed
by the SMS service provider. Routinely the
tariff exploited is an “unlimited SMS” bundle.
The SIM farm computer then cycles through
the bank of SIM cards to send bulk the SMS
traffic exploiting the operator’s consumer
based tariffs.
Figure 3 Sample SIM farm appliance
The use of SIM Farms is an example of how bulk SMS service providers push the limits of the
law. This method of SMS delivery is not technically illegal but clearly a breach of the operator’s
intent with a consumer based tariff. In many cases, the term and conditions forbid “unlimited
SMS” bundles being used for advertising, marketing or bulk delivery campaigns. But, the low
prices of these tariffs make it attractive for intermediate entities to provide bulk SMS delivery
service to SMS aggregators.
Grey Routes
Mobile operators in different countries use a variety of international telecoms routes to send
traffic to each over. These can be grouped into three types known as white routes, black routes
and grey routes.
White Route – A white route is where both the source and destination are standardised legally
agreed upon terminations. This generally means the operators have an agreement which outlines
the charges and the manner in which SMS traffic will be conveyed over their networks.
Black Route – Opposed to a white route, a black route is illegal on both source and destination
ends. This means that there has not been a contractual agreement between the parties involved to
provide SMS traffic and traffic from either party is therefore unlawful over such a route.
Grey Route – The last route type is referred to as grey route but also referred to as “special carrier
arrangements”, “settlement by-pass” or other unclear terms used by different groups. A grey route is
generally defined as a legal connection on one end but prohibited at the other end i.e. origination
or termination. Grey routes are another way that bulk SMS service providers push the limits of the
law. Not only do they present legal issues, they are difficult to evaluate, monitor and control and
come with a number of hidden costs. But, due to the low costs involved, they are very appealing to
bulk SMS providers.
Grey routes are non-interconnected routes currently unused and typically owned by
telecommunication providers. Bulk SMS providers exploit the difference in settlement rates, and
route traffic via intermediate networks while also re-originating the message to the network it
terminates in, making the message appear as national as opposed to international. This allows the
bulk SMS provider to incur the lowest cost possible and achieve their delivery needs.
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4
Solving the SMS Revenue Leakage Challenge
In order to achieve the price advertised through a grey route, dispatches are run on a single delivery
option with no back up, which can ultimately compromise both the message quality and successful
delivery. These routes are used without the telecommunications company’s knowledge and as a
result can be terminated and turned off at any time. This means that any other traffic carried along
these routes, even if it is legitimate, may not be delivered to the recipients.
Grey routes also present an even bigger threat to business – a risk to customer data. Due to the
temporary nature of grey routes, it is impossible to guarantee the security of customer data or to
track any data breaches. Essentially using a grey route compromises your customer database and
puts your company at risk of breaching the data protection act.
Ways to control the different types of SMS fraud
Understanding the complexity of the mobile marketing ecosystem, Acision provides a holistic
approach to address the multitude of SMS fraud techniques. The comprehensive solution
provides 16 levels of fraud, fakes, spoof and spam control that range from basic functionalities
such as blacklisting and whitelisting of originators identifications on various layers of SS7
protocols, to more sophisticated engines that address the volumetric control of SMS traffic based
on multiple message parameters.
Acision’s solution also offers intelligent analytical tools based on traffic patterns detection to help
operators minimise their revenue leakage. This allows the operator to quickly respond to the
continuous exploitation of weaknesses in the mobile network and mobile devices,
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An important element of the mechanisms offered with Acision’s SMS Revenue Assurance
proposition is the accuracy of fraud detection, reducing the chance of false positives. Improving
accuracy further that is achieved via online detection, off-line reporting gives additional insights.
Using both the off and online detection mechanisms, provides a comprehensive protection from
revenue leakage.
Operator experience and our research clearly demonstrate that closing fraudulent access allows the
operator to:
• Minimise direct revenue leakage
• Encourage legitimate channels improving revenue potential
• Ensure market pricing is enforced and maintained
Revenue potential is greatly improved when SMS marketers interested in quality of service start
accessing the network infrastructure directly.
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