diff --git a/drafts/pstn_gatewaying.txt b/drafts/pstn_gatewaying.txt
new file mode 100644
index 00000000..2cb8c649
--- /dev/null
+++ b/drafts/pstn_gatewaying.txt
@@ -0,0 +1,48 @@
+Gatewaying to the PSTN via Matrix Application Services
+======================================================
+
+Matrix Application Services (AS) provides a way for PSTN users to interact
+with Matrix via an AS acting as a gateway. Each PSTN user is represented as a
+virtual user on a specific homeserver maintained by the AS. Typically the AS
+is provisioned on a well-known AS-supplier HS (e.g. matrix.openmarket.com) or
+is a service provisioned on the user's local HS.
+
+In either scenario, the AS maintains virtual users of form
+@.tel.e164:homeserver. These are lazily created (as per the AS spec) when
+matrix users try to contact a user id of form @.tel.*:homeserver, or when the
+AS needs to inject traffic into the HS on behalf of the PSTN user. The reason
+for these being a visible virtual user rather than an invisible user or an
+invisible sniffing AS is because they do represent real physical 3rd party
+endpoints in the PSTN, and need to be able to send return messages.
+
+Communication with an actual PSTN user happens in a normal Matrix room, which
+for 1:1 matrix<->pstn contact will typically store all conversation history
+with that user. On first contact, the matrix user invites the virtual user
+into the room (or vice versa). In the event of switching to another AS-enabled
+HS, the matrix user would kick the old AS and invite the new one. In the event
+of needing loadbalancing between two SMS gateways (for instance), the user
+would set visibility flags (TODO: specify per-message ACLs, or use crypto to
+only sign messages so they're visible to certain other users?) to adjust which
+virtual AS users could see which messages in the room.
+
+For group chat, one or more AS virtual users may be invited to a group chat,
+where-upon they will relay all the traffic in that group chat through to their
+PSTN counterpart (and vice versa). This behaviour requires no additional
+functionality beyond that required to support 1:1 chat.
+
+When contacting a user, Matrix clients should check whether a given E.164
+number is already mapped to a real Matrix user by querying the identity
+servers (or subscribing to identity updates for a given E.164 number. TODO: ID
+server subscriptions). If the E.164 number has a validated mapping in the ID
+server to a Matrix ID, then this target ID should be used instead of
+contacting the virtual user.
+
+It's likely that PSTN gateway ASes will need to charge the end-user for use of
+the gateway. The AS must therefore track credit per matrix ID it interacts
+with, and stop gatewaying as desired once credit is exhausted. The task of
+extracting credit from the end-user and adding it to the AS is not covered by
+the Matrix specification.
+
+For SMS routing, options are:
+ * Terminate traffic only (from a shared shortcode originator)
+ * Two-way traffic via a VMN. To save allocating huge numbers of VMNs to Matrix users, the VMN can be allocated from a pool such that each {caller,callee} tuple is unique (but the caller number will only work from that specific callee).
\ No newline at end of file