Page 201 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

6.2 Competition Aspects

6.2.1 Overview

Key to providing STK-based services is that the MNO provides access to its STK gateway; allows the SPs menu
to be placed on the MNO SIM; allows Over The Air (OTA) updating of the SIM menus as needed; and that the
MNO provides the DFS SP with short codes the SP’s customers will use to access the SPs DFS service. 145

6.2.2 Access to STK Gateway

It is self-evident that for third party SPs to provide STK-based services to their customers, the MNO must provide
these third parties access to their STK gateway. If this is refused, the third party may need to use another
access bearer such as USSD, Near Sound Data Transfer (NSDT), Java applets, Wireless Application Protocol
(WAP)-based access, or Over The Top (OTT) smartphone apps. Some of these alternate access mechanisms,
however, may not have the same relative mass-market discovery potential as STK-based access.

6.2.3 SIM Menus

In terms of competition, issuance by a MNO of SIMs with STK and specific menus or icons may give the MNO
and its partners a huge advantage over any other third parties that may want to provide similar services, since
the discovery of the MNO’s STK menu is persistent and does not require a download to the handset by the
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third party.
To deliver SIM menu updates, either the SIM must be returned to a MNO or SP agent, as the case may be,
and exchanged for a new one. Or, the application updates must be delivered OTA using specialized, optional
SIM features and multiple binary SMSs sent to the mobile handset. Update limitations – and the fact that the
MNO controls the STK gateway and pricing thereof - may hinder the number and frequency of STK application
deployments and thus the ability to provide new user features. This is especially so for SPs dependent on the
STK gateway access at the MNO, and who are sensitive to STK transaction pricing by MNOs. Use of Thin SIMs
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may bypass competition-related access bottlenecks. Even if access is made available to the necessary STK
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components, variable and often caustic pricing can make the transaction unprofitable.

6.2.4 Access to short codes
The ‘short code’ access codes numbers used to access STK may be assigned by the MNO at their discretion,
although in some markets a regulator may do so. See Section 7 for more detail on short codes.
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6.2.5 Pricing of STK access

Pricing of STK access has an issue in some markets. This may relate to the charges for a transaction, which
may be per transaction no matter how many SMS are used, or per SMS. The MNO may also charge for OTA
updates to a SPs STK-based SIM menu.

145 Since MNOs own the SIM card and thus control anything on it, this includes controlling the ability of third parties to load and use
their own applications and encryption keys for use by their own customers. And as only the MNO can provision the SIM, the abil-
ity of a SP to receive or gain access to the required mobile encryption keys independently of the MNO is usually a complicated
and expensive negotiation.
146 Or through some other discovery mechanism.
147 See below on the case of Daviplata in Colombia who were affected by MNO STK pricing, rendering their already-launched G2P
services unprofitable.
148 See Section 12 on Thin SIMs
149 See further Section 17 on Competition Aspects in DFS and technical solutions thereto. See also on USSD policy, TRAI (2016a) ibid

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