Mitigating VoIP Fraud Using Real-Time Data Analytics

When cable television companies first began to offer voice communications services to their subscribers, it seemed like a relatively simple and compelling proposition. Running voice traffic over a cable network — or over any IP network for that matter — is easy and inexpensive. The efficiencies of combining voice, video and data traffic over a single infrastructure benefit consumers through low pay-one-price packages that feature significant price savings for triple-play services. It also allows VoIP providers to generate much-needed revenue through ancillary services, and has given them a competitive edge in gaining market share from the legacy RBOCs within their respective footprints. And it has allowed cable operators to position themselves to compete with RBOCs to become the “home communication service provider.”

But while delivering VoIP to consumers has resulted in palpable top-line benefits, the technology also has evolved as a preferred vehicle for fraudulent and illegal use by unscrupulous customers. The very nature of VoIP, a portable technology that masks call origination, makes it difficult for providers to gain immediate and accurate visibility into how their services actually are being used. As a result, fraud has occurred in various environments, ranging from misuse of residential services to prohibited commercial practices, such as businesses conducting outbound auto-dialing or faxing.

Some VoIP-related fraud actually occurs because cable providers, who typically have entered the world of voice through video and data services, did not correctly understand the wholesale reconciliation protocols behind international voice communications, and the dangers of bundled pricing plans within this market.

For example, some VoIP providers do not understand the intricacies of international termination fees. Since they assume that transporting voice followed the financial model associated with data transmission, where no carrier-to-carrier transactions occur, they were completely unaware that the VoIP provider must pay a termination fee to an operator whenever a voice call terminates onto a fixed line network. Some of these fees can approach two cents per call, a hefty price in the low-margin world of communications. And when a call terminates onto a mobile network, the termination charge can be as much as five cents per call. Some providers have had to cough up nearly half a million dollars in termination charges, costs that can quickly eat up profits under the pay-one-price scenario.

In addition, flat-rate international rate plans have been particularly problematic for VoIP providers that operate in locations with a concentrated ethnic population. Typically, one resident may sign up for the best available VoIP plan, and then become “the neighborhood phone” by allowing their neighbors to place calls to an international location, charging a fee for the convenience. The theft of service, coupled with high termination fees, has cost operators millions of dollars.