HOT TELECOM
insight
The age of 3D rating & routing
Future rate sheets will be complex 3D structures, reminiscent of a Rubik’s cube
Origin Based Rating
The age of 3D rating & routing For wholesaler in the middle of this jigsaw puzzle, it means yet another level of complexity. In a strange year, it is not unusual to write about yet another complication in the long death throes of voice termination pricing. For at least the last ten years, we collectively have been writing and discussing the likely demise of the voice per-minute based pricing. The logic behind this belief being that regulators, as well as market pressure, have continued to exert a relentless downward force on voice termination charges. As a result, the natural course of events, if this trend continued, would be that eventually the cost of managing the complex pricing, rating and settlement of billions of calls would eventually exceed the margin that these calls generate. Consequently, it would be normal to believe that a simpler ‘sender keeps all’ model would arise as the chosen pricing structure. Remember also the many discussions on peering in an
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IP world, where operators could simply route the calls directly over the internet to the correct terminating operator at no cost. After all, the internet is free, isn’t it! So here we are in 2020, with the traditional voice termination model still going strong. In addition, instead of moving towards simplicity, a layer of routing and charging complexity has been added: Origin Based Rating (OBR). Origin Based Rating means that, after decades of pricing calls based on where they are going, we are now having to price them not only based on their destination, but also their origin. For wholesalers in the middle of this jigsaw puzzle, it means yet another significant level of complexity to throw at their routing and rating systems, which have been serving them well, although perhaps creaking at the seams, for many years.
History 101 Who is behind this rebirth of complexity through OBR? The quick answer – European regulators who have been the leaders in addressing what they saw as pricing approaches which deterred trading across the continent. Many regulators have continuously pushed for, and legislated towards, a much lower cost telecom environment to boost growth. As a result, they embarked on a long-term annual termination cost reduction campaign, mostly in the mobile space.
Which often results on an upper bound on the prices.
In parallel, European regulators addressed what they believed was excessive roaming charges, to bring those down to levels similar to what consumers were used to paying in their home network. This dual approach strictly applied to the region that these regulators were responsible for: the intra-EU trading market.
In effect, their objective was to level the playing field. If they had to pay high rates to terminate in country B, then the cost to country B to terminate in Europe would be raised to match. This spread quickly across Europe, from its beginnings in France, such that by the end of 2016 much of Europe had some sort of pricing based on the origin of the calls.
However, for many technical and business reasons, the reduced rates were applied to all incoming calls, including non-European originated ones. Consequently, not only calls from the UK to Germany were rated at these lower levels, but also were those originating from anywhere else in the world. Other regions and countries had different approaches. Some left the setting of the cost of terminating incoming calls to market forces. While in other cases, regulators were actually increasing applicable international termination rates, while controlling the cost of local telecom services, with the goal of amassing foreign currency. Of course, any major discrepancy between the price of a telecom service being dependent on where it originates, opens up the market to innovative (ie fraudulent) attempts to profit from that variance.
So from 2015 onwards, a two-tiered approach was instilled in Europe. An increasing number of European mobile operators, with the support of their regulators, started to apply the European regulations where they were strictly designed to be applied (for Europe calls) and set their own, much higher prices, for calls originating in certain nonEuropean countries.
But why stick to Europe? Many Caribbean operators labor under the +1 country code, shared with the USA and Canada, for historic reasons. In their case, there is no real distinction between calls to mobile versus fixed numbers. In reality, both are charged using a termination fee below US$0.01. So why not apply the same logic to incoming calls from more expensive destinations? And so the OBR approach spread through a number of these islands as well. As you can see, there is no real end to this approach. Every time an operator sees high pricing to a certain country, when they in return receive pennies for calls to their own customers, they see an opportunity to redress the imbalance and generate much needed revenue and margin at a stroke of the pen.
The end game It is interesting to think where this could eventually end. The voice market is highly dependent on the cost of termination to that distant operator. They control the access to the end customer and there is no way (outside of some possibly illegal bypass approaches) to reach that end customer without an interconnect with that terminating operator and paying what they determine is the correct price for that service.
wholesaler sending the call. Up to recently, there was no ability (or need) to do more than that.
What has kept the simple model going for so many years is the billing issue. Operators generally have monolithic billing systems that can track the duration of incoming calls and rate them based on the agreed rate with the
But over the intervening years it has become far easier to utilize evolved interconnect billing systems (perhaps from more flexible vendors), that are built to apply much more complex rules to the rating and billing process.
In order to apply the OBR approach to even a few countries, those operators had to adopt a much more flexible billing environment to take the originating country into account in pricing incoming calls. The early adopters probably had a very simple fix in place to do that.
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Once this is in place, why stick to a few groupings of rates – an intra-Europe rate and an “others” rate for example. Why not push this one step further and apply a rate for calls from a specific mobile operator in some distant country that has applied its own high termination price and so calls from that mobile operator will attract the highest rate coming into France, for example. At the end of the day, if the terminating operator’s billing system can handle it, you can have a complete 3D matrix of prices that differ between every pair of operators worldwide. As there is no way to bypass this operator and their complex pricing plan, the wholesalers in the middle will need to apply those prices to their own customers or potentially lose out, big time, with pricing that could destroy their margins.
Of course, things are never simple in the world of telecoms and a final piece of the complexity puzzle must be added. What about calls that do not have a traditional number identity? For example, calls breaking out from an OTT service provider to a normal telephone customer do not have a “number” attached to them. If I ask Alexa to call a friend overseas, this call will not carry the identity of my own mobile phone for instance. So how do calls without a valid “Calling line identity” or CLI get handled in this new rating scheme? The early answer is “badly”, with penalty rates being assessed for incoming calls that do not appear to have a valid identity. So the OBR end game is more complexity and challenges for not only the terminating operators, but maybe more importantly, for wholesalers in the middle of this 3D rating and routing equation.
A nest of challenges We have identified at least five complexity areas to be considered when an international carrier assesses the challenges of Origin Based Rating: Supplier rates, Customer rates, Routing, Invoicing and Fraud. In thinking about these challenges, there is also a critical question to consider: Is this complexity likely to remain a small factor in the overall business if it is adopted only in a few areas? If this is the case, some manual workarounds or minor tweaks to the billing systems might suffice. However, if this complexity is going to expand more widely, as mobile operators make use of more flexible rating systems in their own networks, wholesalers urgently need to develop (or acquire) a much more comprehensive solution. We tend to think that having opened Pandora’s box and
OBR wholesale challenges
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getting away with introducing these new pricing schemes (and welcoming the new high margin revenue that it generates), mobile operators will not back down. Consequently, as more operators adopt differential pricing, it will force others to react, creating a chain reaction. From there, is it realistic to think that this complex rating scheme will become the norm, rather than the exception. As a result, international carriers should avoid short term fixes and review and improve the end-to-end processes involved. Each of the key challenges outlined above could form an article in its own right to properly explain the implications, the options and solutions that are available. And some of our following articles will do just that. However, for the remainder of this article, we will touch on at least some of the issues that wholesalers must address.
Customer rate sheets The decisions of the terminating operator on their pricing structure flows through the entire wholesale business towards the calling customer. Wholesalers must therefore consider what, if any, pricing complexities they expose to those originating carriers. Of course, stressing the importance of correctly formed CLI in the signaling messages is a key component. However, to a large extent, the wholesaler can translate the new pricing structure into a rate sheet that makes sense for that particular operator in that country. It does mean however that wholesalers must maintain different pricing plans to be used in different countries, but this is not a major change. The real complexity comes when rate sheets are exchanged with other wholesalers, as they must cover each and every possible traffic stream they could receive from that carrier. A complex 3D structure indeed, reminiscent of a Rubik’s cube in some way! The “traditional” Excel based rate sheet is poorly positioned to add all the information required about the price dependent on the origination as well as termination. At a minimum, carriers must cooperate to agree to a format that covers the data that needs to be exchanged and make use of conversion services such as the one offered by Orca Wave’s AutoLoading to support the seamless integration of such complex rates. Let alone storing the data for per call retrieval for routing/rating optimization. Routing and fraud prevention Calls have always been routed based on the destination options plus the requirements of the originating carrier. However, OBR-based rating adds a new level of routing and fraud prevention complexity and many questions must be answered to deliver efficient routing.
no CLI or a badly structured originating number. Are the numbers valid for the country that are purported to be from? Is there a repeating pattern that might indicate that the originating numbers have been generated by a machine rather than from normal customers? All this could indicate that someone is trying to get a lower price than the true origination might deserve. Should the wholesaler route calls that they are uncomfortable with or unsure about? They could, or course, reject the calls with a congestion type release, which would mean that the call is passed to another wholesaler with less stringent systems in place and then terminated. However, is that an ethical business practice? What the wholesaler wants to avoid is to route these calls to the final operator and potentially be charged (well after the fact) a significant penalty. At this stage it is potentially far too late to bill the originating carrier. At a minimum, international carriers must put in place an effective real-time system, that is recognizing potentially invalid CLI details, so that they can make this choice. Being blind to these issues is a sure way to lose significant amounts of money on that termination country. Billing and settlement Even though the wholesaler has accepted the rate sheets indicating the new pricing structure, it does not necessarily mean that their financial systems will be able to flexibly apply those rates to the calls being handled. This is not an easy task for many systems. They were designed in the past decade for the high volumes of normally rated calls and are now being required to add in these new variables into the mix. If this approach to rating is the new normal, then a change to a new and much more flexible routing and rating system will be a very worthwhile investment.
For example, what should be done with calls with either
Expansion beyond voice This article has predominately been voice-oriented, but there is nothing to suggest that the application of OBR would be ultimately restricted to voice calls. SMS delivery has been handled in a very similar way to voice in the past and could follow with different rates for SMS termination, based on the originating country or carrier. That does lead into the question of whether the routing and rating of both SMS and voice calls should be handled
by one flexible and integrated system – a topic we will explore in depth in an upcoming article. But, whichever way you look at this, the widespread adoption of OBR techniques will have a significant impact on the processes and systems adopted by carriers in the coming years and now is the time to address this new reality.
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about the author Steve has a lifetime of experience in designing, engineering and operating networks, both domestic and international. With leadership experience in small technology start-ups through to global service providers, he has deep experience in a wide range of products, technologies and geographies. He has the rare skill of being able to explain complex technical issues in easily understood concepts and uses that extensively in his consulting work with HOT TELECOM.
Steve Heap CTO, HOT TELECOM
about orca wave Orca Wave is an experienced team of telecom and software professionals whom have worked together in the international and U.S. telecom space since 1997, committed to delivering valuable knowledge from information. In 2002, Orca Wave was founded by John Rivenburgh and Jeri Wait. Orca Wave’s BlueWater Software provides real time, intelligent solutions, architected to accelerate any world class information provider to global leader, as measured by quality, profit and revenue.
including wholesale, wireless, application and VoIP providers. The BlueWater Platform has been greatly expanded to incorporate the fast-growing messaging business. To find out how we can support your space journey, contact us at: sales@orcawave.net, www.orcawave.net
The software platform has been the voice engine for a number of the leading Global Tier One Carriers and innovative new market entrants
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