Sms authentication as a new source of revenue for telcos

What’s the easiest way for an OTT to authenticate a new user?

Facebook was one of the first players to understand this need and started exposing his APIs to third parties on a large scale.

For certain types of sensitive applications a stronger level it’s required:  basic login APIs are not enough safe for banking, personal messaging, transportation and several other fields.

For activities that needs a higher level of authentication, OTT started asking for mobile phone numbers.

Behind a mobile telephone number there’s always a person or a company liable for his actions with a complete set of data.

In Italy, for example, it’s not possible to activate a new mobile telephone number without providing IDs and face to face recognition . Every Telco operator has a big database and expensive POS network to comply with this regulations.

In this way there are no fake accounts and it’s always possible to frame someone involved in illegal activities.

Uber and Lift rely on telcos to trust new passengers. It’s not possible to have a ride or rent a room on AirbnB without a mobile number.

Even Facebook requires a mobile telephone number for some activities related to the profile.

Services like WhatsApp or Telegram are directly based on sms authentication and would never work without it.

Several OTT players achieve this goal by buying bulk sms and sending a one-time password to the user.

They basically rely indirectly to the trust given by telcos and to the security of their network.

For this service they pay a small amount of money (the same for sending a p2p message) but they get a great value. Sometimes they don’t even pay for every single message sent since they rely on a SMS inclusive plan SIM interfaced with a PC.

OTT are able to generate big incomes delegating for free the effort of user authentication.

Sometimes their business is in direct competition with telcos and, given their lean structure of costs, able to destroy an entire stream of revenue like what WhatsApp did in several countries with sms.

By now Telco operators are still trying to compete with OTT on the same services  instead of understanding their role of simple data transfer facilities and they are not looking yet into this opportunity that would allow them to work together in a fair market.

They don’t have much time since soon blockchain identification systems will replace the actual system of trust between the parties.