Mobile operators are facing as much as a $5 billion loss in annual revenues to the ‘grey route’ messaging market, claims Dialogue, an international SMS messaging firm.

An application-to-person (A2P) message delivered via a ‘grey route’ connection originates from a source outside of an operator’s network, typically using a channel ordinarily reserved for carrying P2P communications.

A grey route A2P message can be sent when access to P2P channels is open for third parties to deliver A2P messaging, often without the recipient network even realising this. As the P2P connections often carry no fee, they are extremely profitable for the third-party sender because they charge a transaction fee for each message they deliver to their customers, with no cost from the recipient operator.

Neha Dharia, a senior analyst for consumer services at Ovum, told Mobile World Live that grey routes have been a concern for some time now. However, with increased pressure on messaging revenues from OTT services such as WhatsApp, she said operators are trying to expand messaging revenue through A2P SMS services, which puts blocking grey routes on the top of their list of priorities.

“Not only are grey routes a drain on mobile operator messaging revenues, they can also hamper services that require a reliable and secure SMS connection, such as authentication and financial services. There has, therefore, been a wave of concern from mobile operators to find ways to monetise and improve their A2P SMS services.”

With the goal of 100 on-net SMS traffic delivery, Dialogue last week introduced what it calls a ‘secure monetisation of application related traffic’ (SMART) hub to address the revenue drain at GSMA’s billing and roaming event in Cancun, Mexico.

Dialogue CEO Perry Offer said 25 per cent of the world’s operators have already realised the benefits they can gain from managing this problem and are working to stop grey routes and monetise their A2P traffic.

He said an estimated 250 major operators worldwide haven’t yet addressed the grey messaging threat. He noted that in many cases, operators don’t realise the extent to which ‘grey route’ messaging passes through their network and the loss of income that it causes.

Offer said grey routes also encourage low pricing, damaging levels of spam and potential security threats, “all of which are sources of poor customer experience and increased churn”.