Origin Based Rating: data drives profitability

Origin Based Rating: data drives profitability

04 May 2020 | Eli Katz

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Eli Katz

Blog Author | founder and CEO, XConnect

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Over the last three months, the voice industry has seen an unprecedented surge in traffic volumes.

Ofcom in the UK has had to address spikes in voice calling of 50% while AT&T in the US has seen peak wireless voice traffic of up to 44% above normal usage. Current usage is bucking the trend of overall decline but serves to highlight the true value of voice.

In a challenging voice market, carriers should take this opportunity to maximise the value of each minute on their networks, explore ways to optimise their operations and institutionalise the value of voice in the minds of end-users. The current surges in demand have revealed the need to do more to ensure the long-term health of their businesses.

Carriers’ traffic fell 9% in 2017 and then another 4% in 2018, to a total of 465 billion minutes, according to TeleGeography. Global telecoms fraud losses are estimated to be $32.7 billion (€29 billion) annually, according to a joint report published by Europol’s European Cybercrime Centre. A Tier 2 Carrier recently analysed one month of traffic with 3 million minutes to one OBR destination and identified potential losses due to OBR penalty surcharges of over $120K – 30 times the margin generated on that traffic.

Carriers have to take action to combat revenue leakage and find new ways to maintain margin and grow profitability.

What is Origin Base Rating?

Origin Based Rating, also known as Origin Based Charging for voice termination, takes into account both the origination and termination of a call when billing. The terminating network (usually mobile) will apply a surcharge to the mobile termination rates (MTRs) based on the country of the call’s origin. Penalty surcharges can also result from invalid or manipulated Caller Line Identification (CLI) and Automatic Number Identification (ANI). Currently networks in over 20 countries (including many EU) have began charging OBR. This list of countries is growing almost monthly.

Carrier contracts typically have clauses where a call with an invalid CLI (also known as A-number or ANI) will be charged a penalty surcharge (or the highest country surcharge). An example of an invalid CLI is if the CLI is not defined as allocated in the official number plan issued by each country’s regulator. Penalties can mean an increase of 3,500% over the standard termination rate, for example $0.35 vs $0.01 for termination to German Mobile networks. Therefore, even a small amount of traffic to an OBR destination with invalid CLI, incurring the penalty surcharge, can wipe out many months of margin.

They can do nothing and risk an existential threat to their business, they can block high risk voice traffic and potentially lose some market share, or they can carry traffic and accurately charge according to any surcharges that apply. Clearly, doing nothing is not an option. 

Blocking high risk traffic offers a quick solution to OBR management, but ultimately any carrier looking to optimise their business for the long term must be able to correctly identify and manage the traffic subject to OBR.

If left unchecked, carriers will see negative margins and lose time and resource to disputes with other carriers.

Data drives decision making

The first step is gaining visibility into the size of the OBR problem. Today, carriers often do not understand the scale of their OBR losses or the disputes they can anticipate in the future. This is where global number information data sets can be used to assess the scale of potential surcharge losses, risk to the business, and enable carriers to optimise their voice traffic.

Carriers need data for greater control over the traffic they carry and to make precise decisions in real-time.

Using real-time data for CLI/ANI validation can mitigate the risks associated with OBR and power informed decisions that deliver predictable margins. As a minimum, originating carriers and transit carriers need to validate the A-number (CLI/ANI) on traffic terminating to OBR destinations. Demonstrating that the CLI is valid, as defined by the official regulator’s numbering plan in the country of origin, will mitigate against the largest penalty fees, which are often around €0.35 / minute.  More advanced analysis is also possible, such as A-number frequency checking, which can be used to single out spoofed CLIs.

To perform most A-number validation techniques, carriers must have access to complete, accurate and up-to-date number plan information for each country. In addition, they must be able to access that data in the call routing platform switch in order to make real-time decisions.

Applying data to these kinds of challenges does not have to be complicated. It can be a simple way to improve a carrier’s profit while reducing risk in its business. Unlike more complex and multifaceted challenges facing carriers, OBR can be directly addressed using data.  

No matter what happens in the voice market, carriers should be looking at how they prepare for the future and optimise their operations. Access to accurate, reliable and up-to-date number plan and number portability information, with an ability to apply real-time analysis, can be a way to ensure they have control over their traffic and can guarantee that every minute they carry contributes to the long-term sustainability of their businesses.