New regulations ‘will open the floodgates’ on SMS scams

New regulations from Australia’s competition and consumer watchdog would “open the floodgates to scams”, according to telcos including TPG, Telstra and Optus, who are arguing against the proposed changes in a rare show of unity.

SMS scams are skyrocketing, with statistics from the ACCC showing that in 2022 Australians lost a record $3.1 billion to scams – up 80 per cent from the year before – with SMS by far the method most preferred by scammers. Australians collectively lost $1.3 million a day to scams last year, according to the ACCC.

ACCC chair Gina Cass-Gottlieb.Credit: Dominic Lorrimer

Those figures are set to significantly worsen according to Australian telcos, who are speaking out against draft regulations from the ACCC that would force them to provide open access to their networks for the delivery of bulk SMS messages.

The proposal effectively means mobile operators would face a “must-carry” obligation as well as regulated pricing on mass SMS broadcasts, changes the telcos say would lead to a rise in SMS scam traffic and stymie recent progress in restricting scammers from accessing their networks.

Currently, telcos including TPG, Optus and Telstra can vet those seeking access and anyone who wants to send bulk SMS messages has to agree with the terms of mobile operators for access to their networks. If telcos see bulk SMS being sent from an operator that is spam or scam traffic, they can block it and kick off the scammer.

The telcos say that the ACCC’s SMS regulations would take that ability away and therefore likely lead to more scam SMS traffic coming onto their mobile networks.

Scammers typically use application-to-person (A2P) SMS services – semi-automated or fully automated SMS sent using an application to mobile subscribers. A2P SMS messages are generally used by businesses to communicate with their customers and are what the ACCC may seek to regulate.

The telcos say that the ACCC’s SMS regulations would likely lead to an increase in the volume of scam SMS traffic coming onto their mobile networks.Credit: Istock

The ACCC says allowing telcos to set their own terms for message pricing has meant prices have increased – and will likely continue to increase – and that regulating pricing and access would increase competition.

TPG’s executive in charge of legal and external affairs, Trent Czinner, said the watchdog’s proposal could open the floodgates to SMS scams, given telcos would no longer have control over who gets to land SMS traffic on their networks.

“It could seriously hamper our efforts to stop bad actors from using mobile networks to defraud Australians,” Czinner said.

“It is imperative the ACCC listen to the concerns of the mobile operators leading the efforts to protect Australians from scams every day.

“Mobile operators play a vital role in detecting and blocking scam messages before they reach our customers. If this decision encourages scammers to intensify their efforts, our job will become immeasurably harder and Australians will suffer.”

Optus and Telstra have also criticised the proposals.

“The only beneficiaries of this regulation will be scammers,” Optus vice president of regulatory and public affairs Andrew Sheridan said.

“We believe that regulation of SMS rates contributed to the scam SMS problem when it effectively reduced the cost to send bulk SMS to zero in 2014.

“It is disappointing that as soon as technology enabled Optus to effectively target the business model of scam SMS, the ACCC is again proposing to re-regulate prices.”

Telstra runs a “snitch on a scammer” hotline and blocks more than 11 million SMS scams each month.

“The proposed change in regulation by the ACCC could have unintended consequences that may impact our ability to help prevent scams and protect our customers,” Telstra’s regulatory and legal executive Bill Gallagher said.

“We would caution any move that could contribute to making it easier and more attractive for scammers to target our customers via SMS or which could inhibit our ability to take action to block scams.”

The ACCC operates the Scamwatch website as well as the National Anti-Scam Centre, which co-ordinates government, law enforcement and the private sector to combat scams. A spokesman said no decision had been made on whether to regulate A2P messages.

“The ACCC is considering submissions in response to the draft report before reaching a final view on whether to regulate application-to-person SMS delivery services. If the ACCC decides to regulate the service, providers of this service will have an obligation to terminate [deliver] application-to-person SMS from interconnected parties upon request,” an ACCC spokesman said.

Trent Czinner is group executive legal and external affairs and company secretary at TPG Telecom.

“As indicated in the draft report, the ACCC intends to explore measures when setting terms and conditions for access to regulated services that will support and facilitate industry efforts to combat scams, including in complying with relevant anti-scam obligations under other regulations.”

The ACCC is set to publish a final report by the end of March.

Telecommunications consultant Paul Budde said he was automatically sceptical whenever the likes of Telstra, Optus and TPG say something was too difficult or too costly.

“We have heard that many times before,” he said. “Having said that, yes, of course, opening up SMS might further enhance the opportunities for spam. So that needs to be addressed and discussed within the industry on how to best tackle that. ”

Budde said that, ultimately, the ACCC and communications regulator ACMA would have to closely monitor the situation to prevent an uptick in scams.

“We do have industry forums where this can be discussed and industry codes can be developed to avoid spam as much as possible. SMS does have a good track record of blocking spam and we don’t want to see that eroded.”

RMIT University Associate Professor Mark Gregory, a senior telecommunications and network engineering academic, welcomed moves by the ACCC to regulate A2P messages and said that was a logical step, given the watchdog already regulated person-to-person SMS messages.

“A2P scams are on the rise, however, this is consistent with the overall increase in SMS-related scams. There are technologies that can be used to reduce SMS scams,” he said.

”A requirement that organisations using SMS to send targeted or bulk A2P messages use a registered sender ID would reduce the opportunity for scam messages. The government should consider limiting A2P providers to those that have registered with the ACMA and, where possible, to Australian entities.”

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