The topic of origin-based routing is getting increasing attention in the telecoms industry. In this three-part blog series, we’ll look at why that’s the case and what steps you should be taking to address it.
The global decline in telephony ARPU over recent years is, arguably, no longer news. While, according to the analyst firm Omdia[1], total worldwide telecoms revenues from mobile and fixed broadband services are predicted to increase by 14% between 2022 and 2027 to reach €1.2 trillion, monthly ARPU (Average Revenue Per User) is predicted to fall by 4.2% by 2027. These numbers are mirrored by the corresponding decline in the smartphone market. According to IDC[2], worldwide smartphone shipments dropped by 9.7% year over year to 301.9 million units in the third quarter of 2022. This represents a fifth consecutive quarter of stagnation.
Increasing competition in the industry is only adding fuel to the fire. As subscriber rates drop, lowered interconnect prices become one form of collateral damage. The well-established shift away from voice business to data services also increases the problem. And in many geographies, regulators zealously pursue lower termination rates for interconnect usage, adding further pressure to already besieged margins. How the declining ARPU trend can be reversed is a vexing question.
Origin-based routing arrives: the financial imperative
This is the landscape in which origin-based routing first began to appear over the past three years, at first in Europe, with the initial goal of bridging the pricing differential between calls originating and terminating in the EU region and those originating in the EU but terminating elsewhere in the world. Regulators had mandated lower prices for call termination in response to which European carriers built a surcharge model based on origination for fixed and mobile calls. Initially, the model was based on identifying origination groups composed of mainly non-European countries, but this expanded to include the segregation of missing or non-identified calls too, in short order.
This interest in what was known as origin-based routing should come as no surprise, given the ARPU pressures we’ve identified. Unsurprising and also impactful. Depending on the country of call origination, in Germany (for one example) differences as much as €0.20 per minute (a 1,000% increase) with additional surcharge penalties for calls with fraudulent calling party numbers (CLI/ANI) such as manipulated or invalid numbers have been discussed. Already, many carrier contract clauses now determine that calls with unrecognised calling party numbers will be charged the penalty surcharge that can be as much as €0.35, or a 3,500% increase over the standard termination rate. The OBR take-up incentive for operators is clearly established.
Solving a problem but not without challenges
If we’ve now understood the motivation for the genesis of origin-based routing, that’s not where the story ends. Rules are still evolving, and fast. Geographical termination groupings were only the start of the conversation. Now, operators are moving towards profiling based on volumes and prices, and networks within countries. The result: complexity is increasing and for most operators, there isn’t an easy fix to hand. Deploying but not adequately meeting the requirements of OBR creates as well as solves problems. For example:
Pricing: Rate changes are frequent, and hard to track. Not all new rates apply to every customer so incorrect invoicing and disputes, already problematic will be increased by OBR if the right solution isn’t deployed.
Complexity: OBR adds another layer of complexity to the standard rate card. For instance, the rates from various originations must be correctly factored into the prices in the rate per minute. Given that a lot of the required rate-related data exchange happens informally, there’s a potential problem with tracking and accounting.
Billing: Incremental billing based on origin will have to be factored into legacy operations, to account for OBR.
Fraud: There’s nothing new around the broad issue of fraud in the context of interconnect settlements but CLI spoofing and masking become a heightened issue with the advent of OBR, where pricing is origin based. When, a significant percentage of network calls are sent with no CLI the default is often the destination rate. That might on the one hand be so high that the operator becomes un-competitive, or on the other hand so low that it invites fraudulent calls to take advantage of the prices. These are choppy waters that OBR implementation demands operators address.
Above are just some of the challenges that facing service providers and transit carriers as they seek to manage the routing, rating (for carrier reconciliation) and pricing for origin-based routing. They can’t be ignored. If left unchecked, carriers will see further negative margins not to mention losing time and resource to resolve disputes.
Origin-based routing: taking control is the first step
For carriers, the point of departure for effectively implementing origin-based routing is to understand the scale of the challenge they face. Commonly today, many don’t fully grasp either the scale of potential losses or the extent of future problems if their OBR solution is inadequate. The solution, at its core, lies in being able to access data sets that can assess potential surcharge losses and business risks, in so doing enabling carriers to optimise their voice traffic and make precise calculations in real-time.
To give just one example why this is important right from the coal face, using real-time data for CLI/ANI validation can mitigate the risks associated with OBR and also drive decisions that result in consistent margins. To do this, originating carriers and transit carriers must be able to validate the A-number (CLI/ANI) on traffic terminating to OBR destinations. Being able to demonstrate the validity of the CLI number mitigates against penalty fees, which are often around €0.35 / minute. A-number frequency checking can also be used to identify spoofed CLIs.
The trouble is, without a solution taking these steps can be problematic, or even impossible. And to validate, carriers must have access to complete, accurate and up-to-date number plan information for each country. They also must be able to access that data in the call routing platform switch if they’re to be able to make real-time decisions.
There are solutions
In the next two blogs in this series, we’ll look in more detail about how the challenges we’ve identified here can be overcome, and why an innovative solution is required to do so. One example of such a solution is Carrier Cloud from Digitalk, which fully supports OBR optimisation alongside optimised rating mechanics. This delivers radical improvement in the efficiency of managing Origin Based destinations - without increasing workload in managing Rest of World rating – driving efficiency gains and reducing costs.
With this level of Origin Based Rating, Routing and Billing functions, import of any rate plan is also considerably simplified. In addition, Digitalk also offers a range of highly effective integrated simulation tools to easily diagnose OBR scenarios. This ensures 100% reliability of rating and routing prior to introduction of live traffic.
[1] https://omdia.tech.informa.com/pr/2022-oct/omdia-telecom-services-revenue-will-fall-42-per-user-as-new-tech-fails-to-deliver-enough-value-by-2027
[2] https://www.idc.com/getdoc.jsp?containerId=prUS49809922
