ART launches an analysis of wholesale SMS termination services on mobile networks

Paris, 29 July 2004

Autorité de régulation des télécommunications (ART) has launched an analysis in order to better understand the SMS economy, and in particular, competition issues related to wholesale SMS termination on mobile networks.

It has drafted a questionnaire, to which all interested parties are invited to submit their responses before 30 September 2004.

SMS termination and the market analysis process in the mobile sector

ART has initiated the electronic communications market analysis required by Eureopan directives adopted in 2002.

This process requires that regulators analyse the degree of competition on telecommunications markets. If necessary, they must then designate operators having significant market power as defined by the new Community directives, and finally, impose specific obligations which are appropriate and proportionate to the competition problems observed.

The European Commission established an initial list of 18 so-called "relevant" markets, i.e. which might be subject to ex ante sector regulation to guarantee full competition, in addition to any action by the Conseil de la concurrence which acts ex post.

For the mobile sector, the Commission identified three wholesale markets: access and call origination, voice termination on mobile networks and international roaming. The SMS market was not identified by the Commission in its recommendation as being one of the 18 relevant markets.

However, in the survey conducted by ART in 2003 and 2004, some players felt that the need for ex ante regulation on the SMS termination market on mobile networks should be examined, as voice termination had already been. So, at this point, ART needs to gather information in order to analyse any competition issues raised by SMS termination and to determine whether an appropriate relevant market should be created.

SMS termination on mobile networks

The termination service is part of the global routing economy for SMS.

A retail SMS is produced using two wholesale services: SMS call origination on a mobile network and SMS call termination on either the same network ("on-net" SMS) or on a third-party network ("off-net" SMS). SMS call termination also makes it possible to deliver an SMS to a mobile network from a fixed network, from an electronic messaging service or an SMS+ service platform.

Although we do not presume to know the results of the complete analysis still to be done, it is possible that the SMS termination service, which is currently billed by mobile operators, might raise competition concerns comparable to those identified for voice termination on mobile networks, as discussed in the public consultation launched by ART on 16^th April for the relevant market analysis.

In particular, the issue of the price of this wholesale service is important since it affects not only the retail price of mobile-to-mobile SMS but also the development of SMS sent and received on fixed networks or on electronic messaging services.

SMS have developed strongly in France in recent years, and close to 8.5 billion SMS were sent on mobile networks last year, compared with 3.2 billion in 2001, generating sales of close to €1 billion and €382 million, respectively.