Billing Q & A with Jim O’Neill

Q – Can you explain bilateral agreements and how they relate to telecommunications billing?

A – Bilateral agreements generally involve two companies that have agreed to a specific set of terms and conditions under which they will do business with each other. Long before telecom industry competition, the International Telecommunication Union (ITU) coordinated an accounting rate mechanism for international voice traffic that was used by almost every country. Each national telecom operator set the terms on which they exchanged international calls through a set of bilateral agreements called accounting rates.

For a long time, this enabled monopoly operators to maintain artificially high pricing for international voice calls even though the real cost of providing the calls was dropping fast. These historic agreements were set up with the presumption that traffic was balanced in both directions and provided for a 50–50 split of the charges billed to the caller. Of course once foreign carriers realized that there were more calls from the U.S. than to the U.S., they imposed artificially high termination rates on calls initiated in the U.S.

The expansion of the Internet for commercial use has also led to a number of specialized bilateral agreements. To facilitate the World Wide Web, exchange points that divide the world into regions have been established. These EPs are multiple-access networks that allow ISPs to exchange traffic and routing information with other ISPs. The basic premise of an exchange point is that parties can purchase a connection to this location and gain the ability to exchange traffic with others at the exchange point. (Think about a major hub airport where several different airlines are served. The airlines can exchange passengers between their flights in much the same way that ISPs can exchange IP packets across the EP).

An example with which people are more familiar is wireless roaming. In North America, it is more common for operators to have a bilateral roaming agreement with one carrier in another market. These agreements typically call for mutually agreed upon wholesale rates between the roaming partners. Charging each other wholesale rates simplifies the task of supporting one-rate type plans that reflect roaming air minutes in the home allowance and absorbing the long distance charges. (It also reduces the amounts reported as fraud losses). These agreements may require special rates or message handling considerations due to customers making calls along a market border that results in roaming when the customer has actually not left his or her home territory. When this occurs, either mediation or the billing system itself will examine incoming roaming calls and redefine them as home calls based on the cell used to initiate the call and the called number.

In other parts of the world—especially where GSM is the standard—roamers often have a choice of several carriers from which to choose. Some operators send a greeting to roamers, stating their rates and offering additional services that may be available. A number of business acquaintances from Europe have told me they often choose a carrier based on the friendliness of the welcome message or because it may be displayed in the language of their home carrier’s country.

In Europe, bilateral agreements also define requirements for testing the TAP record format. Historically, European clearinghouses have not performed the extensive editing and balancing steps common in North and South America, so testing each other’s TAP record formats has been quite common. These European agreements also define the rules for roamer usage limitations. Operators can set daily limitations on the allowed minutes of use while roaming. Unfortunately, the mechanism for dealing with excessive use has been less than desirable in many countries. If a limit is exceeded, the roaming partner carrier has to capture and count the daily roaming minutes. Then it sends a fax to the home carrier alerting it to each number that has exceeded the limit. The home carrier has to respond specifically to stop the roamer from further roaming. That may not sound like much, but consider the additional processing and manual steps in dealing with that roamer by roamer. As the North American net settlement model expands throughout the world and awareness of fraud losses increases, that may change for the better.