International Interconnect: Verifying Best Rates, Call Types Still Difficult

Though U.S. carriers continue to terminate vast amounts of traffic oversees, many carriers are still having trouble finding the best interconnection rates when they terminate those calls. Growing competition among European carriers is creating a plethora of rates and termination agreements, which leaves U.S. carriers vulnerable to paying rates they haven’t agreed to.

“Often the circuit on the European side goes down, and the U.S.-originated traffic goes to another European carrier—and you have to rate that on the new carrier’s plan,” says Shawn Zargham, CTO for Emerging Technologies Group. “It goes out on a different trunk than you thought. The new trunk is much more expensive; now your margins are being eroded, your traffic is flowing onto another carrier you hadn’t agreed to. Now you’re dealing with another vendor.

“The European market is like a procurement center; each sells a different set of products at another cost. You have to handpick the vendors that are handing you the best rates, otherwise there are too many to handle.”

Even when routing goes as planned, ever-changing city and country codes, an inability to discern between wireline and wireless termination points, and flawed country databases mean U.S. carriers are unable to find the best termination rate overseas. That means they are unable to charge their subscribers properly to cover those termination fees.

Recent rulings by European regulatory agencies complicate matters, because they call on carriers to lower their termination fees, especially for wireless. If U.S. carriers can’t keep up with the changes, they’ll end up overpaying to European carriers who won’t go out of their way to correct their counterparts on the other side of the Atlantic. It’s no longer a simple matter of who owns the network where the call terminates. Network systems have to determine the type of call and pinpoint who owes whom.

“When we talk about rates for international traffic or revenue assurance, everything centers on accurate intercarrier billing,” says Martin Demers, chief marketing officer for Ace-Comm. “In international traffic, the destination is not that important, but what’s important is through which carrier you route that traffic.”

Complexities in

Overseas Numbering

Some countries have multiple carriers that handle international traffic. Japan, for instance, has three international gateways at its borders. After one of the Japanese gateway companies receives a call from abroad, it may hand it off to one or more telephone companies within Japan—wireline or wireless—until it reaches its destination. The calls are routed based on country code, regional code, and city code. The U.S. carrier has little control over how that call is routed within the country, and it has little control over whether that call was routed on a least-cost basis.

Many countries use a string of digits to help carriers determine where their calls terminate, but the dialing string is not standardized worldwide. In the United States, carriers use the central office number within an area code. For international calls terminating in more than 200 countries, carriers need access to a robust and accurate database of ever-changing overseas city and regional codes. The code strings are always changing to accommodate growing subscribership and evolving technology. Phone numbers are constantly being reassigned to new regional and city codes as customers churn, or move their fixed phone numbers to cell phones, or switch carriers. AT&T and other large carriers might have the personnel and money to create their own databases of international wireless lines to verify termination fees, but smaller carriers have to trust the terminating network owner to bill them correctly.

Not only that, but each country designs its numbering plan differently. Information on their plans and prices is available, but the carriers involved in international telephony don’t have the up-to-date information on the city or geographic breakouts or subsequent numbering changes. Notification of the changes is often slow, so U.S. carriers can’t keep up with the rate changes.

A French carrier, for instance, might charge 4 cents a minute to terminate within Paris, or 10 cents a minute outside Paris. One carrier says a certain rate ends at the Paris city limits, while other carriers may include suburbs and outlying areas in their price. So each carrier might try to sell calls to France at a different rate.

And that, Demers says, is why the final phone number is so important. Originating carriers can try to use the string of numbers representing that call—country code, regional code, city code, area code, and so on—to learn whether the call is wireless or fixed and where it’s headed. But that long string of numbers holds a lot of information and, as noted, is not uniform across the globe.

“When you analyze a number,” Demers says, “you can go all the way down to city codes. For instance, if you are being charged for a call in Paris your system may think it’s a wireline call. But if it’s a wireless call, that mobile carrier will charge a lot more in a mobile network.” A lot of carriers lose money this way—by simply not knowing whether the final phone number is a wireless phone. “It’s based on the dialed number, … and it only rings one phone,” Demers says. “You can identify down to the phone if you want to, but most international carriers don’t go down to that granularity.”

Zargham at Emerging Technologies agrees. “If you’re making a phone call to Europe, and that call is cellular, you have to pay a lot more. The way the regulators in Europe set this up, it’s more expensive. In the United States, the carriers charge the owner of the wireless handset for the local minutes. In Europe, the wireless subscriber doesn’t pay; the person who called that phone number pays. Now translate in the point of view of carriers in the U.S. who, unaware, send traffic to Europe for wireless termination. They think they’re going to pay a cent or two, but they’re surprised to get a bill 10 times as expensive.”

That is why it’s crucial to know which calls are sent to a wireless subscriber overseas. “The numbering scheme for wireless phones in Europe is different than in the United States,” says Rick Findlay, director of wireless industry solutions at Convergys. “As they become more prolific, keeping a different numbering scheme for wireless becomes more complex.”

“When it comes to mobile versus fixed,” Zargham says, “the numbers [depicting the two] are close together, and the determination of the type of termination might be several numbers into the string, after the numbers that indicate international calls, city codes, and country codes. It’s very difficult to determine whether the call is mobile or a fixed call.”

In instances where wireless calls are easily identified, determining which wireless carrier owns the subscriber may be difficult, says Shmuel Avraham, vice president of corporate marketing for Amdocs. “There is wireless LNP in Europe with the same phone number,” he says. So if a wireless phone number once belonged to one wireless carrier, it may now belong to a different one without the U.S. originating carrier knowing. “This issue is complex because there is no way to manage this kind of operation with the various countries,” Avraham says. “Each one treats it as an internal regulatory issue. … Each country will have various rules.”

The availability of a central depository of wireless and wireline number assignation differs from country to country, too. Each country makes its repository available on different levels. “In Germany,” Avraham says, “there is a central depository of which carrier is wireless and which is wireline. The British central repository is not in place, for instance, while the German repository may not be available to competitors. Through my experience working with initiatives in various countries, one of the guidelines they follow is that they reveal minimal information by not necessarily providing the full inventory or database of information.”

Some vendors are promoting an international standard set to keep descriptive numbers uniform. “It’s feasible,” Zargham says, “but no carriers can agree to it.” The International Telecommunications Union is one of the bodies trying to create such standards. “What we’re trying to do,” he says, is to give carriers tools to analyze the rate ranges and connect their [oversees partners] to their rates to identify what are the true costs to sending the traffic to a number. We want to go as deep as we can into the dialed number to determine the true costs.”

Managing Interconnect Agreements

One method of doing this, Zargham says, is to take a carrier’s existing interconnect agreements, and define the parameters of the possible termination points. “France Telecom would say to the U.S. carrier, ‘This is what I think is mobile, and this is wired.’ We take the information from the vendors the carrier is dealing with to get the best possible rate for each market. You want to deal with more vendors to get the best possible rate.”

The analytical tools would look at what the foreign carrier is calling each of the termination sites—wireless or wireline. “As soon as the U.S. carrier gets the CDRs, they can rate these things according to their rates, to give the American carrier a true view of the cost,” Zargham says. “The CDRs are collected from the stateside switches. That would have the number that was called, and by looking at the digits in the called number and mapping against the rate plan the vendor gave you, you can determine what the vendor is going to charge.”

Of course, for such a system to work, the carrier needs a database supplied by the software vendor, or one of the databases currently on the market that do their best to keep up with international rate changes and numbering strings—companies such as SNET, Intrado and Intec provide such services and guidance for carriers. According to SNET, 5,000 new wireless phone numbers can be created in a single day around the world.

Another method is to build an “agreements database,” which houses the rates a carrier will charge, and its method of determining which phone numbers are wireless and which aren’t.

“In the agreement database, if you send traffic to a vendor they have to tell you how they’ll charge you for that,” Zargham says. “They’ll give you how to determine what’s fixed or not. The vendor tells you how to determine how a cell call is defined in its region. In costing, we don’t have to have a fixed set of destinations to get the true cost. You’re simulating every vendor’s billing system in near real time.”

Hopefully, the foreign carriers’ billing systems are accurate. That’s where good faith must come in, … good faith backed by verification. It’s still a good idea to compare CDRs if there’s a doubt. The U.S. carrier compares its termination minutes to a carrier, and compares it to the bill sent by the foreign carrier. If there’s a big disparity, there’s reason to drill down to determine where the differences occurred. It’s important for the billing staff to check for unknown carrier codes and unfamiliar code strings.

“The terminating carriers can determine when the other carriers don’t realize the problem. They take advantage of it,” Zargham says.

OFTEL: Lower Wireless Interconnect

The Organization of Federal Telecom (OFTEL) in England recently ordered British carriers to lower their interconnection rates. According to OFTEL, the carriers had been pricing their interconnection rates too high.

“The OFTEL decision to force terminating carriers to lower their rates might be important to U.S. carriers who need to determine whether they are getting the right price for termination services,” says Convergys’ Findlay. “The OFTEL decision is seen as a precedent, and regulators across Europe are likely to force reductions in mobile call termination rates. In comparison to the U.S., this may have occurred since most European markets have less competition with two or three large operators controlling over 80 percent of their markets.”

Findlay believes the OFTEL decision is a precaution to reduce roaming costs in advance of 3G, where roaming costs could be “sky-high” for surfing the Web or some kinds of data transfer. “The FCC and U.S. trade officials have been investigating the issue of high termination rates paid by U.S. consumers who call Europe,” he says. “The OFTEL ruling supports their stand, since it will lead to lower termination rates for calls placed to the U.K. and ultimately across Europe.”

Avraham at Amdocs believes it is better for U.S. carriers to concentrate not so much on individual call routing, but on the bigger picture. “I’m not underestimating the importance of looking at the individual phone numbers,” he says. “I’m saying that you’ll better spend your time trying to find a better offering for your subscribers.” By determining where most of its international calls are headed, the carrier can find ways to give discounts to customers and make more money that way, rather than finding individual mistakes on calls. By looking at the larger picture, the carrier can also see patterns in poorly routed traffic.

He also suggests that U.S. carriers send a notice to their interconnection partners on what they expect to be billed before their international partners send them the bill. It puts the international carrier on notice that they shouldn’t try to over-bill. “Information is power. … This is a good reason why carriers are using it,” Avraham says. “If the other party knows you are monitoring very carefully, the other partner will send the correct charge.”

Tips in Battling

International Fraud

A key area where carriers can’t keep up is the complex world of international interconnect fraud. It robs carriers of millions, and carriers aren’t doing much about it.

Fraud is prevalent in the international interconnect arena because the stakes are much higher. Carriers in hundreds of countries exchange traffic under just as many rating and taxing variables. There are dozens of ways to shortchange interconnect partners, and the affected ones can find little recourse. Experts estimate that industry-wide fraud costs up to $55 billion a year; the interconnect side is a large chunk of that, perhaps $10 billion to $20 billion.

“We’ve seen quite a few incidents of interconnect fraud internationally,” says Patrick Leask, product manager at Agilent OSS. “Because there are thousands of complex interconnection agreements, there’s more opportunity for fraud than in other sectors.” The arbitrage arrangements between two or more international carriers are a key breeding ground for scams on large scales—where large carriers can stick other large carriers on large volumes of calls. “The intention is to avoid some sort of particular toll or termination fee, or using another agreement that isn’t as expensive,” Leask says.

One arbitrage scam goes like this: A wireline carrier in Country A has a contract to send traffic to a wireless carrier in Country B. But it instead sends that traffic to a wireless carrier in a neighboring country (Country C) where the taxes and rates are lower. The originating carrier collects the usual fees from its customers, but pays the terminating wireless carrier lower rates and taxes set by the regulatory body in Country C rather than in Country B.

“The originating carrier wins, because it gets the same revenue from its subscribers and keeps higher profits,” Leask says. “In arbitrage, there is a whole spectrum of ways to cut a break, such as picking a cheaper interconnection route, or through bypassing tougher regulations and local taxes. There are a lot of examples of that.”

The scams are easy to commit because of the various regulations within countries and the endless contractual vagaries that abound. Each carrier may have contracts with hundreds of other carriers, making it difficult to track who’s honoring their contract. “You don’t have the detailed contractual knowledge you need,” Leask says. “You wouldn’t know in detail, with all the rates out there; you only know what you’ve negotiated.”

On interconnect networks, the switch only records the calls going out to Carrier B, nothing about what Carrier B is sending to you. You think you owe 200 million minutes, where 40 percent is local traffic, 20 percent is international, and 20 percent is mobile. But you can’t be sure, because sometimes carriers will deliberately misreport traffic.

American long-distance carriers also face a phenomenon known as “whipsawing.” This occurs when the monopoly carrier of a country will play American carriers against each other to get the best interconnect rate. Meanwhile, because the countries have a state-owned, or monopoly carrier, the American carriers don’t enjoy the same convenience.

Call-Back Fraud

Then there’s the old call-back fraud. Calls originate from countries such as India and China where outgoing international calls are very expensive. The call goes from Country A to Country B. Automated equipment in Country B does not actually pick up the call, but instead calls the originating country right back, because it’s cheaper in the other direction. It’s all computerized, using the calling number from the signaling data to call back the originating number right away. It gives the caller in Country A the dial tone for Country B—that is, the dial tone now originates in Country B, so the caller can enjoy those rates no matter which direction the call goes.

“In some countries, it’s illegal to do that, but there’s no way to catch people doing it,” Leask says. A lot of companies set up that service in the United States. “It’s legitimate in a lot of countries, and you may find some countries where the incumbent offers it.” But the U.S. carrier gets the shaft. “A lot of that goes on internationally,” he says, “and because of it a lot of the international traffic is heavily biased one way—toward the United States.” This means the U.S. carriers can’t determine it’s coming in, and they can’t collect on the termination. “If you’re just looking at what your switches are telling you, they aren’t telling you about the calls that aren’t answered, because the switch doesn’t indicate unanswered calls,” Leask says.

Keeping Track of Lost Revenue

How then, does a carrier stay in the game in the tricky playing field of international interconnect? How does it track those millions of instances of call routing and successfully catch partners who are bypassing it and collecting the difference? One answer is for the carrier’s interconnect auditors to understand that they’ll never be able to track all of the interconnect agreements out there. They have to concentrate on their own. They have to be able to monitor the network in order to catch CDRs indicating that traffic is being routed over their equipment without permission or by a carrier that doesn’t have a contract with them.

Agilent’s Leask believes carriers need to use SS7 monitoring to get a better picture of what’s really going on with traffic. The monitoring system can either poll single calls or batches of calls, watching for unidentifiable traffic and traffic patterns that indicate call minutes are being diverted from intended routes. But remember, traditional interconnect switch CDRs are blind to incoming calls. Users of SS7 monitoring products, such as Agilent’s Access7 and others, say the signal monitoring methods create richer data that can determine inbound traffic on the interconnect circuit.

“What we see in detail is all the traffic going across the interconnect gateway, the volume, and the type of traffic by analyzing called and calling party numbers,” Leask says. “By looking at that traffic you can see if there’s any shift in that traffic, any that’s been put onto a cheaper route.”

SS7 monitoring is also a good tool for checking the honesty of interconnect partners, Leask says. One CLEC allegedly defrauded Southwestern Bell with interconnect traffic by stripping information from the traffic, such as the calling party number. The traditional CDR just couldn’t pick it up. By checking the SS7 data, Southwestern Bell determined the origin of the traffic and took the CLEC to court.

According to Leask, SS7 taps installed at the signaling link at the interconnect gateway cull the data from the signaling stream. “We have a monitoring SS7 tool that creates an abstract CDR by taking up at least five complex messages in SS7,” he says. “You then analyze a simple abstract of the call to catch the suspicious call patterns and traffic coming from an unauthorized source.” SS7 can also monitor other parts of the network, including wireless data fraud.

When Is It OK to Ignore Discrepancies?

U.S. carriers haven’t paid as much attention to international interconnect as they should. “The whole area of interconnect, most carriers haven’t focused on it in the past,” says Peter Mercieca, a partner at KPMG. “It’s been less of a priority because there was a sense it’s not based on what you pay another carrier, that the traffic cancels itself out in the end. Some carriers are beginning to realize there are benefits to be gained by reconciling incoming and outgoing call records. They’ve concentrated on anything that has grown the top line subscriber growth.”

According to Mercieca, U.S. carriers haven’t allocated the resources for interconnection rate verification. “It’s more of a back-office operation, and not an area of focus,” he says. “They haven’t had the right people focused on it. They have to dedicate resources to the problem. They are not sure if it’s a legal or a regulatory issue. Is it risk management? Regulatory affairs? A billing function? In reality, it impacts all areas. Carriers need the right people to focus on it.”

Managing interconnect rates overseas is a matter of common sense, Mercieca says. “They have to keep an eye on those rates and changes.”