White Paper

SMS Messaging in SS7 Networks:

Optimizing Revenue with
Modular Components

Intel in
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 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

Table of Contents
Executive Summary 1
Increasing Revenue with SMS Services 1
What Exactly Is SMS? 1
Types of SMS Services 2
Modular SS7 Components Optimize SMS Revenue 2
Worldwide Growth of SMS Services 3
Europe 3
Japan 3
North America 4
Asia Pacific 5
Cost-Effective Deployment Strategies 5
How Is an SMS Message Processed in SS7? 6
Provisioning SMS Economically 6
Adding Profitable SMS Applications Easily 6
Reducing Costs with IP 7
Extending an SS7 Network for SMS – and the Future 8
Appendix A: SS7 Building Blocks for SMS 9
Appendix B: SS7 Nodes Important for SMS 10
 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

Executive Summary What Exactly Is SMS?

Telecom equipment manufacturers (TEMs) and SMS messages are an alternative to voice
service providers are searching for ways to communication over the telephone when silent,
generate revenue from new services. private, or very brief communications are best.
Applications utilizing enabling short message Since they are somewhat non-traditional, SMS
service (SMS) can be an ideal way for these messages have an element of playfulness that
businesses to increase income without making often encourages creativity, and customers can
a major infrastructure investment. find such novelty addictive.
Signaling System 7 (SS7) is the technology SMS messages can be sent between users or
used in the core network to transmit SMS to and from an application, which gives service
messages, which share the same channels development an extra flexibility that
and infrastructure as call control messages. encourages innovation.
Cost-effective modular components from Intel
Here are some of the ground rules for SMS set
can be added easily and quickly to an
down in the Global System for Mobile
SS7 network to handle increased traffic and
Communications (GMS) standard:
generate income from SMS messaging
■ Length and type — Each message can
services.
contain up to 160 alphanumeric characters.
Some non-text-based formats, such as
Increasing Revenue with binary, are also supported for specialized
SMS Services uses such as ringtones and images.
The introduction of new ways to communicate
has resulted in flat or declining call rates, ■ Storage and forwarding — Messages can
prompting TEMs and service providers to look be stored and forwarded because they are
for innovative ways to grow revenue with not sent directly from sender to receiver, but
value-added services. Applications using SMS pass through an SMS message center.
can rapidly provide additional revenue for these ■ Confirmation — Message delivery is always
businesses. confirmed, whether the message is delivered
Usage models for SMS seem to be limited only or not.
by the human imagination, and range from ■ Simultaneous traffic — Because the
frivolous to serious. Although to date the rest mechanism for transmitting SMS messages
of the world seems to be more excited about is part of the SS7 control channel, which is
SMS than the United States, major mobile separate from the voice path of any
providers in North American are putting their particular call, short messages can be sent
marketing muscle behind SMS, extolling its and received at the same time as voice,
advantages and pricing it competitively. data, and fax calls. For this reason, SMS
Today, service providers can choose to users usually do not receive busy signals.
upgrade closed, proprietary systems or add ■ Increased length — Methods for
modular, standards-based components to concatenating several short messages and
enhance an SS7 network for SMS services. A compressing messages are defined and
modular approach allows faster time to market incorporated in the standard.
and reduced development costs, permitting
TEMs and service providers to react quickly in Any mobile subscriber with a phone and a
the lucrative SMS marketplace. A modular service that support SMS can send or receive
strategy can also ultimately reduce overall total SMS messages.
cost of ownership (TCO) since it allows
solutions to be reused, enhanced, scaled, and
administered more easily and cost-effectively.

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 White Paper SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components

Types of SMS Services not have such stringent requirements,

Although launched in 1992, SMS only recently cost-effective modular components from Intel
become a popular wireless data service. can be added easily and quickly to handle the
Text-to-text messages were the initial offering, increased traffic generated from SMS. These
but new applications are being added quickly. components include SS7 interface boards,
protocol stacks, and signaling gateways that
SMS applications can be divided into a utilize the Internet Protocol (IP) to transport
number of categories: SS7 messages.
■ User-to-user text messaging — Examples

are innumerable: notes to friends about The initial capacity necessary to begin
dinner reservations, to family about being providing SMS services is small compared to
caught in traffic, and to business associates the capacity needed to offer a full range of
asking for a last-minute statistic just before SMS services. Modular components provide a
an important meeting. way to upgrade the SS7 network as traffic
increases and to handle spikes in traffic flow
■ Informational messaging — Usually a that may occur. User-to-user services generally
one-way message that is time-sensitive. grow at a predictable rate, but the new
Banks can send overdraft notices, or parents applications that are gaining popularity can
can be notified if their teenagers are not easily overwhelm a network that is not properly
in class. prepared.
■ Notification services — Messages can tell For example, a national TV event with
users that they have voice mail, fax, or email televoting can generate significant income, and
messages waiting or that they have a SMS messages seem well on their way to
meeting or appointment. becoming the vehicle of choice for such
■ Premium-based services — Short news, voting. Not only is the amount of data in such
sports, traffic, weather, stock market quotes, a message very small, but many more SMS
movie times, and more can be provided on messages can be handled in a short time
request. Other applications such as because overhead is significantly smaller. Voice
televoting fall under this category. calls have to ring at a service center, the caller
must be greeted, and the vote recorded. Even
■ Mobile commerce — Users can hire cabs if an interactive voice response (IVR) system
and buy goods and services, such as movie handles the calls, the physical processing of a
tickets or meals to be picked up or delivered. voice call is much slower than that of an SMS
Clearly opportunities for new revenue from message.
SMS exist. Only the ability of service, content, Nevertheless, a sudden, temporary increase in
and application providers to develop services SMS traffic numbering in the millions of
that subscribers see value in, and are willing to messages could paralyze an SS7 network not
pay for, will determine the continued success provisioned for such usage spikes. Modular
of SMS around the world. components allow a network to be protected
from such daunting peak flows while providing
Modular SS7 Components customer satisfaction because many more
Optimize SMS Revenue SMS messages can be counted in a short
SS7 is the technology used in the core timeframe. Modular components with their
network to transmit SMS messages, which high capacity and low cost, compared to
share the same channels and infrastructure as traditional SS7 equipment, are ideal for
call control messages. For operators, this is optimizing revenue in such situations.
some of the most expensive bandwidth in
consumer applications, because it is subject to
strict operational requirements for reliability and
traffic management. Because SMS services do

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 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

Worldwide Growth of SMS Services

Because SMS messages are initiated over a mobile network, the number of mobile users is
important in sizing the demand for SMS services.
Today, mobile penetration rates vary widely by geography, and so does the appetite for SMS
services. In the United States, for example, the adoption rate for cell phones is lower than in Europe
and Japan, and, not surprisingly, the popularity of SMS services has lagged also. However, as cell
phone use increases, the demand for SMS services can also be expected to rise.
In this section, we will look at the mobile penetration rates in several geographies and the current
popularity of SMS services.

Europe
In terms of SMS adoption and usage, the European market segment has long been considered one of
the most advanced. This is not surprising, considering the high rate of current mobile penetration as
seen in Table 1 [iGillottResearch], with modest increases in mobile penetration expected in the future.

(000s) 2001 2002 2003 2004 2005 2006 CAGR

Total Subscribers 327,416 342,036 353,320 359,165 371,945 392,200 3.7%

Population 495,100 498,566 502,554 506,575 510,627 514,712 0.8%

Penetration Rate 66.1% 68.6% 70.3% 70.9% 72.8% 76.2%

Table 1. Cellular Penetration Rates in Europe

User-to-user text messaging has been in use for almost 10 years, and subscribers vote for a
favorite sports star, hire cabs, and order theatre tickets via SMS. At the same time, service
providers are working overtime to develop innovative ways to increase usage and revenue.
Because Europe is a mature market segment [Forrester] for SMS services and people feel
comfortable using them, premium or high-value services such as gaming, information alerts, and
advertising are expected to find easier acceptance. Applications that download ringtones and use
animation have already increased in popularity.
Service providers in less mature market segments, such as the United States, can learn a great
deal about how to encourage SMS usage and deal with increasing network demands from the
European experience.

Japan
Mobile penetration rates in Japan are second only to Europe, and are expected to grow and reach
about the same level as Europe in 2006. See Table 2 [iGillottResearch].

(000s) 2001 2002 2003 2004 2005 2006 CAGR

Total Subscribers 67,100 73,700 79,700 85,100 91,350 98,500 8.0%

Population 127,100 127,316 127,533 127,749 127,966 128,184 0.2%

Penetration Rate 52.8% 57.9% 62.5% 66.6% 71.4% 76.8%

Table 2. Cellular Penetration Rates in Japan

Sophisticated messaging usage is very high. For example, J-Phone’s Sha-mail picture messaging is
used by over half of its 12 million subscribers [Probe].

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 White Paper SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components

North America
Mobile penetration rates in North America are currently about 15 percent lower than in Europe, but
are expected to slightly exceed European and Japanese levels by 2006. See Table 3
[iGillottResearch] for current and predicted mobile penetration rates in North America.

(000s) 2001 2002 2003 2004 2005 2006 CAGR

Total Subscribers 134,800 153,200 174,200 199,900 224,000 250,800 13.2%

Population 311,000 313,022 315,213 317,419 319,641 321,879

Penetration Rate 43.3% 48.9% 55.3% 63.0% 70.1% 77.9%

Table 3. Cellular Penetration Rates in North America

SMS usage has also lagged behind Europe and Japan, but industry analysts anticipate that it will
catch up quickly. See Figure 1 [Barrabee]. Active SMS users are expected to rise sharply from 9
percent in 2002 to 47 percent in 2006.

Active SMS Users in the United States

Source: the Yankee Group, 2002

Figure 1. Active and Projected SMS Users in the United States

The Canadian market segment is already showing great promise, and increased SMS activity. In
November 2002, for example, subscribers sent more than 20 million mobile-to-mobile text mes-
sages. Since the introduction of inter-carrier text messaging in 2002, the volume of messages sent
by Canadians has increased by 98 percent [CWTA].
Clearly the United States and Canada are large potential market segments for SMS services as
mobile penetration rates continue to rise.

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 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

Asia Pacific
Asia Pacific is something of an anomaly. Mobile penetrations rates are growing but are still very low.
See Table 4 [iGillottResearch]. However, SMS messaging is extremely popular.

2001 2002 2003 2004 2005 2006 CAGR

Total Subscribers (000) 207,212 296,025 397,651 521,643 648,734 751,277 29.4%

Population (millions) 3,100 3,147 3,191 3,235 3,281 3,326 1.4%

Penetration Rate 6.7% 9.4% 12.5% 16.1% 19.8% 22.6%

Table 4. Cellular Penetration Rates in Asia Pacific

Text-to-text messaging has been established as part of the Asia Pacific lifestyle for several years
and continues to grow more sophisticated. Ringtone downloads, animated characters, consumer
product purchases, and news/stock updates are all very common SMS uses in the region. The
messages sent by subscribers in other regions are usually measured in multiples of ten per month.
In Asia Pacific, it is not unusual for subscribers to send hundreds of SMS messages in the same
time period.
SMS use in China is especially interesting. The number of SMS messages was expected to triple
from 19 billion in 2001 to 60 billion in 2002. By 2007, SMS revenues in China are expected to sur-
pass US$17 billion [Pyramid].

Cost-Effective Deployment Strategies

Since it can represent a major growth area for revenue-generating services, SMS messaging has
become a key focus for operators and equipment vendors worldwide. In this section, we will take a
quick look at the basic way in which SMS messages are processed in SS7 networks, and suggest
several strategies that utilize modular components.
SMS services can be deployed quickly and economically with modular components because such
components are designed to be flexible and scalable and integrate easily into existing systems. And
modular components can also be reused in different kinds of applications if the initial application
becomes obsolete or is underutilized.

How Is an SMS Message Processed in SS7?

When an SMS message is sent from an SMS-capable cell phone, the message is handled no
differently than a normal call setup: it moves from the cell phone to a base station to a Mobile
Switching Center (MSC).
From the mobile switching center, the SMS message moves inside the SS7 network to the Short
Messaging Service Center (SMSC), a standard part of the network. The SMSC queries the Home
Location Register (HLR) to find out where the recipient of the message is and whether or not he or
she is switched on to receive a message. If not, the SMSC stores the message until it can be
delivered. See Figure 2.

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 White Paper SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components

SS7 Network

Home
Location
Register

Inbound SMS

Short
Mobile
Phone Base Message
Switching
Station Service
Center
Center

Outbound
SMS

Figure 2. Movement of SMS Message

Provisioning SMS Economically the “quiet car” on a commuter train where

Because SMS messages are handled in the voice calls on cell phones are prohibited.
same way as other messages in the SS7 Americans, who seem to find email more
network, the basic infrastructure is already in natural than voice calls, can think of SMS as
short email messages sent conveniently and
place for SMS services. However, a service
quickly by phone.
provider who wants to increase revenue by
encouraging SMS usage will need to increase However, as has been seen in geographies
capacity in both the SMSC and the HLR or where SMS usage is pervasive, customers can
add more SMSC and HLR nodes. quickly be moved to applications such as
televoting, purchasing goods and services
Modular components, such as the high-density
online, and using cell phones as a source of
SS7 interface boards and protocol stacks
information. Such SMS applications can be
provided by Intel, are an easy, cost-effective very lucrative for service providers, potentially
way to ready an SS7 network for increased generating million of messages per day.
SMS traffic at a relatively low cost compared Fortunately, such applications can be added
to adding traditional SS7 components. simply to an existing SS7 network with an
application platform that consists of a standard
Adding Profitable SMS Applications Easily off-the-shelf server equipped with the same
Initially service providers and their customers type of modular SS7 interface boards and
may think of SMS as a user-to-user service, a protocol stacks from Intel that were used to
kind of silent text “call” sent, for example, from add capacity. See Figure 3.

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 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

SS7 Network

Home
Location
Register

Inbound SMS

Short
Mobile Application
Phone Base Message
Switching Platform
Station Service
Center
Center

Outbound
SMS

Figure 3. Adding an SMS Application

Because modular components are employed SS7 network is an ideal solution for increased
in these network upgrades, TEMs can create usage at a much lower cost.
solutions with enticing applications and SS7
To make deployment as easy as possible, Intel
boards and software from Intel that can simply
provides the Intel® NetStructure™ SG430 SS7
be “slotted” into an existing SS7 network. For
Signaling Gateway, which is a platform
example, an application can be created to
consisting of a carrier-grade server, interface
allow a user to send an SMS message
boards, and protocol stacks that enables IP
requesting that information be emailed to a
within an SS7 network. Together these
PC, and the information can be sent directly
modular components can augment an existing
from the application platform within the SS7
SS7 network, and provide very reliable service
network.
while cutting the cost of providing the service.

Reducing Costs with IP Figure 4 illustrates a simplified deployment. The

Even when SMS capacity is increased within SG430 can be used for a wide variety of
an SS7 network with cost-effective modular applications, including an SMS router as in this
components, SS7 signaling remains relatively case. When two routers are used, alternative
expensive, partly because it is designed for paths to the nodes are created over IP. The
high-availability five-nine service. SMS router can decide on the application level
to route SMS messages to the most
Since SMS-related services need to be very appropriate destination (the SMSC or the
reliable to encourage usage but are not as application platform), making the system in this
critical as core SS7 network services, the use example more robust and efficient.
of modular IP-based components added to the

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 White Paper SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components

SS7 Network

Short
Mobile SMS SS7 Over IP SMS Message
Switching Router Router Service
Center SS
7O Center
ve
rI
P

Signal Application
Transfer Platform
Point

Gateway
Mobile To Other
Switching Networks
Center

Figure 4. Adding IP to SMS-Enable an SS7 System

For additional details about the modular respond to demands for new services and
components discussed in this section, see applications without scraping their existing
Appendix A. More information about the infrastructure or extending it with expensive
network nodes referenced in this paper can be proprietary components.
found in Appendix B.
Providing SMS services to mobile customers is
an ideal way to increase profits. Fortunately,
Extending an SS7 Network for SMS provisioning an SS7 network for additional
– and the Future SMS traffic and new SMS applications need
Traditional telecom infrastructure has been not be prohibitive. A modular approach can
deployed as monolithic entities – each platform provide fast time-to-market, low development
using different hardware and software, and costs, and reduced overall TCO since the
different proprietary interfaces. Even though modular approach allows easy enhancement
SS7 protocols are standardized, the largest and scalability as new, standards-based
TEMs have extended these protocols to building blocks become available.
provide extra features and subsequently
blocked compatibility with other vendors. This Adopting a modular strategy also has the
worked adequately when only a few vendors, benefit of preparing equipment manufacturers
who deployed their equipment end-to-end and service providers to face a future in which
within a network, existed in the market communications technology continues to
segment, but it is not thought to be a prudent advance rapidly, leaving behind old technology
solution today. and usage models.

As the telecom marketplace matures, service The outlook for the worldwide SMS and
providers and TEMs can no longer afford to communications marketplace is a positive one,
extend expensive SS7 infrastructure. Instead, and modularity is the key to prospering in
they must devise a strategy that lets them that world.

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 SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components White Paper

For more information on Intel telecom Appendix A. SS7 Building Blocks

products, go to www.intel.com/go/telecom. for SMS
To get details about Intel’s SS7 modular Over the last 25 years, the SS7 network has
components, see www.intel.com/go/ss7. evolved from basic call set-up and tear-down
to the technology platform for premium value-
References added services inside the network. Since SS7
[Barrabee] Linda Barrabee, “SMS in 2002: U.S. is the transport mechanism for SMS services,
Carriers Establish Beachhead for Future understanding the underlying SS7 protocols
Success,” Wireless Mobile Services, March and architectures is important. These basic
2002. building blocks for an SMS solution directly
interface with the SS7 network, and are
[CWTA] Canadian market statistics can be described in detail here.
found at
http://www.cwta.ca/industry_guide/facts.ph SS7 Software Protocols
p3. See especially http://www.cwta.ca/ The standard protocol building blocks that
industry_guide/facts_files/MOtxt.htm. support SMS and associated operations are
[Forrester] “Operators’ SMS Revenues Will MTP1-3, SCCP, TCAP, and GSM-MAP or
Peak in 2003, And SMS Volumes Will Stagnate IS41-MAP. All of these software components
In 2004, Forrester Contends” at must exist within the system. The specific
http://www.forrester.com/ER/Press/ operations supported within the MAP modules
Release/0,1769,709,00.html. vary, depending on the node function, but
these are fairly simple for SMS operations.
[iGillottResearch] Worldwide Wireless and
Mobile Forecast: A Market Study, Application
iGillottResearch, Version 1.0, February 2002. MAP
[Probe] Advisory, Insight and Market Strategy TACP
(AIMS) Service Report, Wireless Internet
Services and Networks (WISN), Probe SCCP
Research, Inc., Volume 3, Number 9, MTP3
November 2002.
MTP2
[Pyramid] “China’s SMS Explosion: Capitalizing
on SMS, MMS and Emerging Data Services in MTP1
China,” Pyramid Research at Message Transfer Part (MTP1, MTP2 and
http://www.ppa.com.tw/Pyrawid/news/ MTP3) — MTP protocol layers reliably
020731_Pyramid.htm. transport messages inside the SS7 network.
MTP1 and MTP2 handle the physical link and
link management. MTP3 handles routing, route
management, and node availability up and
down the protocol stack.
Signaling Connection Control Part (SCCP)
—— SCCP provides connection service
between two nodes within the SS7 network. It
uses the MTP services to route messages
between nodes.
Transaction Capabilities Application Part
(TCAP) — TCAP is the protocol that uses the
services of SCCP and provides a standard
schema for transactions between nodes in the
SS7 network. TCAP messages include, for

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 White Paper SMS Messaging in SS7 Networks: Optimizing Revenue with Modular Components

example, a transaction ID field that identifies It lets these applications be distributed over
the message to both nodes for a particular multiple platforms, creating scalable and
session. It also provides the platform for the resilient networks. Routing algorithms do not
SMS service. simply re-create SS7 links and linksets in the
IP domain, but form the foundation of
Mobile Application Part (MAP) — The MAP
advanced distributed service platforms. The
layer uses the TCAP layer and provides the
gateway uses Internet Engineering Task Force
specific functions for the operation of the
(IETF) SIGTRAN protocols, ensuring
mobile network. Mobile-specific queries
interoperability with other equipment using the
between nodes for routing and status use this
SIGTRAN standard.
protocol. The SMS service is defined in the
core network by this protocol, and this is what The SG430 uses SIGTRAN’s Stream Control
provides the send/receive capability to an SMS Transmission Protocol (SCTP) and adaptation
application. layers to transparently carry SS7 traffic through
IP networks to remote applications or between
MTP, SCCP, TCAP, and MAP provide services
gateways. The SG430 handles management,
to each other and ultimately the applications
such as the monitoring and reporting of route
that are the basis of operation for the SS7
availability between the IP and SS7 domains.
network. Intel provides protocol “stacks” such
as the one described here to speed SMS
Appendix B. SS7 Nodes Important
deployment in SS7 networks.
for SMS
Appendix B provides more information about
SS7 Boards
the SS7 nodes discussed in this paper.
SS7 interface boards from Intel support
E-1/T-1 or V.35 interfaces to network STPs or Mobile Switching Center (MSC) — The
other network nodes. When a network already MSC is the equivalent of the local switch inside
supports SIGTRAN standard interfaces (M3UA the mobile network. It provides very similar
or M2PA being the most likely), physical services to a switch, but uses virtual circuits
interfaces are not required. In most networks, over radio channels instead of physical voice
however, actual SS7 interfaces will be needed. circuits. One variation on the MSC is the
Gateway Mobile Switching Center (GMSC)
The key requirement for SS7 interface boards which routes calls into and out of the network
is the ability to operate at very high utilization. and will not have phones locally registered.
For a high-density application, SS7 boards
should be able to run at or near 1 Erlang at Visitor Location Register (VLR) — The VLR
message sizes of 128 octets or above. This is the database attached to an MSC that
will prevent a system failure at the node level keeps track of all the phones currently
because of excessive traffic. Handling “registered” to it, informing other nodes of
congestion in a graceful manner is a necessity. status changes, and checking authentication
information.
Signaling Gateway Short Message Service Center (SMSC) —
The Intel NetStructure SG430 SS7 Signaling The SMSC is the clearinghouse for SMS
Gateway is a key building block in the new messages on an SS7 network and provides
generation of networks and service platforms. store-and-forward services.
It supports standards-based protocols and
Home Location Register (HLR) — HLR is a
architectures, and includes a set of features for
core database that keeps track of subscribers.
increasing system reliability, maintainability, and
It contains information on the current account
efficiency.
status and provides authorization information
The SG430 interfaces to both SS7 and IP for billing. When a call or SMS is trying to
networks, carrying SS7 information to and reach a subscriber, this is the node that is
from IP-based applications such as queried to find out where in the network that
softswitches and mobile network elements. subscriber actually is.

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