Popularity of iMessage, WhatsApp could see less regulation of SMS charges

The Australian Competition and Consumer Commission (ACCC) says that the growth in ‘over the top’ (OTT) messaging services such as iMessage and WhatsApp means it believes it is no longer necessary to regulate SMS text messaging.

The ACCC today issued a draft report on the Domestic Mobile Terminating Access Service (MTAS): A framework whereby the ACCC regulates voice and SMS termination fees.

The MTAS was originally established in 1997 and regulated voice call termination charges on mobile networks. In 2014, the MTAS was expanded to cover SMS services.

A mobile network operator charges a termination fee to the originating telco when a customer on the MNO’s network receives a call or text message.

The ACCC’s draft decision would see it continue to regulate voice termination fees for at least another five years. However, it would let regulation of SMS services lapse.

The ACCC said that it had come to a draft position that, as yet, “there are no effective substitutes for voice calls for which voice MTAS is an essential input”.

“While OTT voice calls are increasingly used by end-users, their effectiveness as a substitute is limited due to both functionality and consumer behaviour,” the draft report said.

“Therefore, in the absence of regulation, MNOs have the ability and potentially an incentive to exercise their market power in the wholesale markets to deny the provision of this input on reasonable terms, or to set the price of access to inefficiently high levels.”

However, the ACCC said that there are fewer barriers to consumers substituting SMS messaging for alternative services.

“The markets have changed considerably since SMS termination was declared in 2014,” the draft report said. “In particular, smartphone penetration and the use of non-SMS messaging services have increased significantly. For example, OTT services such as Facebook Messenger, iMessage, WeChat and WhatsApp are widely used and do not rely on MTAS to access other end-users.”

“Our decision to regulate SMS appears to have had the desired effect,” said ACCC chair Rod Sims.

“We are therefore proposing to remove regulation of MTAS for SMS services as we do not think continued regulation is necessary to promote competition.”

“However, over-the-top voice services are not yet substitutes for mobile voice calls as they do not offer the same quality or access to services such as Triple Zero,” Sims said. “We are therefore proposing to continue declaration of MTAS for voice services.”