Business Today

Spammed!

The thriving business of sending promotional SMSes and mails means the menace is unlikely to vanish.
By Manu Kaushik   Delhi     Print Edition: August 28, 2016
The thriving business of sending promotional SMSes and mails means the menace is unlikely to vanish.

SMS Text:

Turkish Full Body Massage

With 2 beautiful Girls @1499,

Single body MSSG @999/-

Venaz Thai Spa Jacuzzi Rooms,

Noida Sec- 18, Call:

+919811643471, 919811643481

The SMS above is a sample of the tens of promotional calls and messages that most of us get on any given day. But there has been a change of late. The numbers have seen a sudden spurt, after a relatively quiet phase following crackdown by the Telecom Regulatory Authority of India, or TRAI, starting with the Do Not Call, or DNC, guidelines in 2007. These were followed by more detailed norms in 2010. TRAI has changed the regulations 17 times. To little effect. Even the DNC registry - a system under which one can register one's number for prohibiting any telemarketer from calling or sending promotional messages - is of little help as telemarketers have devised ways to skirt the rules. The number of complaints against spam calls and messages grew from 39,636 in quarter ended December 2015 to 51,540 in quarter ended June 2016. The phone numbers disconnected rose from 23,540 to 34,412 during the period.

The reasons for the spurt in unwanted calls/SMEes and emails include loopholes in rules, lack of awareness, rising mobile penetration, backing from some telecom operators, and rise of e-commerce and services companies. The biggest, however, is affordability. Telemarketers have to pay just 8 paisa to telcos (the selling price is 9-11 paisa), whereas bulk emails require buying of server space in data centres that costs between Rs 20,000 and Rs 40,000 per server per year. The cost of an email is one paisa. It is sold for 2-4 paisa.

Though there is no official estimate, experts say telemarketing is around a Rs 1,500-crore industry. TRAI says India has 10,888 registered telemarketers. The unregistered space is even bigger. In the past two years, TRAI has blacklisted about 317,000 unregistered telemarketers.

Advantage Spammers

The system to monitor commercial calls and messages is not watertight. TRAI issues licences to telemarketing companies for five years. After getting the licences, telemarketers tie up with telecom companies, which assign them dedicated SMPP pipes for sending SMSes. SMPP is a protocol that allows non-mobile players to use services of telecom companies for sending and receiving SMSes.

Most registered telemarketers abide by the rules. The problem is non-registered telemarketers who buy bulk SIM cards off the shelf and bombard users with spam SMSes. However, the rules, as they are, handicap the licensed player, who can contact only those who are not on the DNC registry as in case of a violation the penalty can be as high as Rs 2.5 lakh. At last count, 234.3 million subscribers had registered their numbers in the National Customer Preference Register out of the total mobile subscriber base of 1,034 million. In contrast, non-registered telemarketers can spam whoever they want to. This means their reach is wider. Two, if an unlicensed telemarketer is caught, there are no penalties. TRAI can only disable the SIM card used for sending the messages. "They buy SIM cards in bulk, send SMSes, and then dispose of these cards. When we receive complaints, we disconnect the numbers. We cannot do more," says Sudhir Gupta, Secretary, TRAI. Registered telemarketers have to deposit Rs 50,000 as security with the telecom operator for deducting the penalty amount in case of a violation.

Illustration by: Ajay Thakuri
Another reason for the proliferation of unlicensed telemarketers is lack of strict rules for getting a phone connection. As per the rules, an individual can buy up to 10 SIM cards. But a few telemarketers BT spoke with said there are ways by which people can buy hundreds of SIM cards in their names. If one SIM card is deactivated, more can be issued in their names or in names of employees and relatives.

"There are some fly-by-night operators who are creating problems. The guy who wants to scam the system will always find a way," says Rajan Mathews, Director-General of the Cellular Operators' Association of India, the GSM industry body.

The process of filing complaint through SMS is also tedious. Users have to send SMS "the unsolicited commercial communication, XXXXXXXXXX, dd/mm/yy, Time hh:mm" to 1909, where XXXXXXXXXX is the phone number or the message header of the unsolicited call or message. A unique complaint number is generated. Users are informed about the action taken within seven days.

"On paper, telecom companies may have the identity of each SIM owner, but when it comes to violation it's difficult for TRAI or telecom companies to track SIM factories," says Kalpit Jain, CEO of netCORE, a Mumbai-based mobile marketing company. Unlicensed telemarketers are called SIM factories in industry parlance.

TRAI, however, says that the spike in spam SMSes/calls and emails has got to do a lot with the rise in the number of users. "It's not that the framework we have put is not working. It is just that more people are using SMSes for promotion," says Gupta.

TRAI says it has asked telecom companies to block SMSes from unlicensed operators (unregistered telemarketers use regular 10-digit mobile numbers whereas licensed ones use alpha-numerics). "Telecom companies are not allowed to read SMSes. However, we have asked them to find identical SMSes that number beyond a limit and block them on their own," says Gupta. This means every telecom player keeps a directory of key promotional words and blocks bulk SMSes that have these words. But some unregulated telemarketers have found a way out of this too. For instance, they replace "LOAN" with "L0AN" (with 0 digit).

TRAI had imposed a limit of 200 SMSes per day per SIM card in 2011. This reduced spamming to an extent. In 2012, the Delhi High Court removed the cap. Later, it increased the cost of sending more than 100 messages to 50 paisa per message, higher than the average of 10 paisa. But this has not helped much either.

Flying High

There are many reasons for the proliferation of telemarketers. First, the cost of setting up operations is minimal. Ram Kailash, 26, worked for about 18 months with a digital marketing company before starting a telemarketing firm, Hind Adsoft Pvt Ltd, in 2013. Kailash and his partner, Sanjay Baghel, operate out of a small first-floor office in New Delhi's Laxmi Nagar and employ 12 people. Baghel and Kailash used Rs 4 lakh savings to start the business. Kailash says within three months they were earning as much as their monthly pay checks. That's not all. The business is growing at 30-40 per cent a year. Both take home Rs 1.5 lakh each per month. "The business is thriving thanks to demand from real estate, e-commerce, banking and services companies. We process close to one crore messages every month," says Kailash. They have served over 1,000 clients across the country, including Andhra Bank, Honda Motorcycle And Scooter India, IFFCO and Union Bank of India.

Baghel's business card reads Sales Manager. He says this helps them get payment upfront. "If we tell new clients that we are the owners, they may ask us for trial. In this business, client satisfaction can never be guaranteed. Sometimes when a client doesn't get good RoI (return on investment), it holds back payments," he says.

Hind Adsoft is a small player in a market dominated by netCORE, ValueFirst Digital Media, SMSCountry and mGage. netCORE was started by Rajesh Jain, who managed Prime Minister Narendra Modi's social media campaign in the 2014 general elections. It processes close to 1.8 billion SMSes per month and also offers a host of other services such as IVR (interactive voice response), outbound dialling, missed call and bulk emails. So, when the prime minister calls you up and asks you to give up LPG subsidy, the call has most likely originated from netCORE's outbound dialling facility. The company claims to be a market leader in spam emails. It sends four-five billion emails from its 400 servers in a month.

Kalpit Jain, CEO, NETCORE

"In case of a violation, it's difficult for Trai or telcos to track sim factories"

However, remember that not all SMSes are spams - they can be classified into promotional and transactional. Online transactions, one-time passwords and reminders are transactional messages, a fast-growing category in the spam economy.

"We connect with seven billion customers in a month, which makes us the largest player in this business," says Jain. Telemarketers such as netCORE are now entering push notifications, short messages sent by e-commerce apps to promote special offers.

Rajan S Mathews, Director General, COAI

"The guy who wants to scam the system will always find a way"

What is driving the business is affordability, in spite of strict DNC rules increasing costs. In 2013, TRAI introduced a termination charge of 5 paisa on each transactional SMS and 2 paisa on each normal SMS on operators from whose network the message originates. Earlier, the total cost was 1.5-2 paisa. "Still, in comparison to other channels such as TV and hoardings, SMS is an affordable medium. It's effective as well. People usually read each SMS. They may not watch all TV commercials. Also, SMSes reach the target audience," says a telemarketer.

Several countries, including Australia, US, Japan, New Zealand and Canada, have strict rules on unsolicited calls and messages. In the US, for instance, many states framed their DNC regulations much before the federal government drafted national guidelines. Some states such as California operate their own DNC registries. Australian regulator ACMA joined hands with regulators from 11 countries to form the International Do Not Call Network in 2012.

Thriving Biz

The spam economy is thriving. Billions of messages and call minutes generate decent revenues. Though the margins are thin, good volumes ensure steady income.

COAI's Mathews says telecom companies by and large obey DNC rules. "For most large operators, it contributes less than 1 per cent to revenues. Smaller operators with excess capacity may feel compelled to grow this side of the business," he says, adding that "some telcos with around 60 per cent utilisation may be using their capacity for such services."

TRAI's June report shows that VLR (visitor location register) of four telecom companies - MTS, Videocon, MTNL and Quadrant - was around 60 per cent. VLR is the number of active subscribers compared to the subscriber base. A low number suggests telecom companies have high unutilised capacity.

Intelligent Spamming

The spamming industry, like others, is becoming smarter. The clients are demanding higher RoIs, that is, higher conversion rates - the number of people who enquire about or buy the product or service as a proportion of those spammed. There are no industry standards but 1 per cent RoI is considered good.

As stricter DNC guidelines have hit RoI, telemarketers are offering clients smart solutions. For instance, email is cost-effective, but not many people read all their emails. So, the marketers are using systems that track how many people clicked on an email (or the weblink in the SMS) and how many made the purchase.

"Spamming software are becoming intelligent and doing behaviour-based marketing," says netCORE's Jain. For instance, there are software that look at the behaviour of the user and then decide what message to send next. So, if the user buys a mobile phone from Flipkart, he is likely to receive SMSes for mobile accessories over the next few days.

With constant spamming, telemarketers are invading privacy. The serious business models being built around this make it even more difficult for the regulator to come down heavily on them. For consumers, it seems there is no sign of the end to suffering.

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