Ofcom and UK Mobile Providers Agree on Wholesale Price of Bulk Biz Texts

Ofcom has today announced that they’ve secured “voluntary commitments” from mobile operators including EE, O2, Sky and VodafoneThree (Vodafone and Three UK) to help stabilise the wholesale prices of automated text (SMS) messages that organisations send to people (A2P – application-to-person); these are widely used by organisations across the public and private sectors.

Such messages are often sent, for example, by the NHS when issuing medical appointment reminders, as well as parcel delivery notifications, and one-time passcodes etc. The regulator states that over 20 billion A2P messages like this were sent in 2023-24 and are worth around £400 million a year to mobile operators.

The market for these particular text messages is complex, as businesses do not usually buy them directly from mobile operators (MCP) and will instead go through intermediaries. A business will first contract with a Messaging Service Provider (MSP), with whom they have a direct relationship. The MSP will often then use the services of an Aggregator, who contracts with the main mobile operators for delivery (‘termination’) of the text messages.

The problem is that wholesale prices for the termination of these messages (A2P SMS termination rates) have increased significantly in recent years, jumping as much as 70% since 2021 (Ofcom expressed this as a range from 15% to 75%). Naturally, this is translating into increases in retail prices (i.e. the prices charged by MSPs to business senders for sending A2P SMS), which recently prompted the regulator to examine competition within this space (an area they haven’t previously regulated).

At the start of this year Ofcom concluded that mobile operators had Significant Market Power (SMP) in this area, including the “ability and incentive to increase their termination prices to an excessively high level“. The regulator then proposed to respond to this by imposing a price cap (here), which would run until the end of 2028. But it appears this may no longer be necessary.

What’s been decided?

As a result of Ofcom’s review, the aforementioned mobile operators have since made voluntary commitments relating to their wholesale prices, and the frequency, notice periods and timing of price increases. The commitments last until the end of 2028, and Ofcom estimate they collectively cover more than 90% of A2P SMS sold to Aggregators.

“Given these developments, we have taken an administrative priority decision not to continue with the market review at this time,” said Ofcom (i.e. the voluntary commitments achieve enough of their goals without needing a deeper intervention).

Ofcom Statement

Our decision reflects the following factors:

• Increased uncertainty over future competitive constraints:

Market developments since the publication of our consultation, including recent price cuts for some WhatsApp for Business services (an alternative business messaging service), suggest there is currently increased uncertainty regarding the potential for competitive constraints to develop during the proposed three-year market review period.

Whilst it is not clear that there has been a material change in competitive constraints since our consultation, we observed some potential signals of greater willingness by some larger business senders to consider switching partially or wholly to alternatives in order to bring down their costs, with MSPs potentially facilitating this by offering alternatives to A2P SMS.

• Voluntary commitments that reduce the risk of our competition concerns being realised:

Each of the commitments submitted by the four large operators have been unilaterally determined and their contents cover aspects relating to any increases in the maximum standard prices for A2P SMS termination charged to their Aggregator customers until 31 December 2028 (the end of our proposed market review period). These aspects relate to (a) pricing levels; (b) frequency and timing of price increases each year; (c) notice periods for Aggregators before implementing increases; and (d) notifications to Ofcom before implementing increases.

Taken as a whole, and given these operators cover most of the market, we consider that these voluntary commitments significantly reduce the risk of our competition concerns being realised. In addition, these commitments are likely to contribute to the promotion of effective competition by giving Aggregators greater pricing stability and potentially increasing their ability to meet the demands from business sender customers for longer contracts at fixed prices for A2P SMS messaging services.

• Bias against intervention:

Under our regulatory principles, we operate with a bias against intervention but with a willingness to intervene promptly and effectively where required. We have decided this is not the right time for us to consider introducing ex ante regulation. This is consistent with our statutory duty to have regard in all cases to the principle that regulatory activities should be targeted only at cases in which action is needed, and it frees up Ofcom resource to work on other matters of greater relative priority.

Despite the decision, Ofcom do still intend to periodically monitor the market, including adherence to the voluntary commitments and pricing behaviour by those MCPs who did not submit pricing commitments. “This will enable us to intervene promptly, if we consider that the risk of the competition concerns, we provisionally identified as arising, increases,” added the regulator.