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Cracking down on illegal call termination

In order to provide a competitive service as well as retain customers, being able to offer high quality international traffic is extremely important for carriers.

If they can’t offer this, clients will go elsewhere – they have more than enough options.

As the world becomes ever more connected, international traffic is of course growing. In Africa, many subscribers are increasingly moving between countries, and rates are becoming more affordable as a reflection of this trend. Domestic traffic is remaining fairly steady, so the growing revenue from international traffic is becoming more significant to operators.

Even though international termination rates are falling, they can still be as much as ten times higher than domestic termination costs. In some parts of the world – particularly developing regions - the revenue from taking international calls and terminating them nationally is a significant vehicle for investment into operator networks.

“In terms of international termination, a key reason why fees are too high in emerging markets is because there is a lot of immigration out of these regions to developed markets”, says Julio Puschel, principal analyst and head of telco strategy at Informa. “For example, in Latin America there are many Mexicans and Central Americans migrating into the US, and then generating a lot of calls back into these countries. As many immigrants have a low income, they will benefit immensely from low-cost alternatives.”

In the developing world there are several markets that are not yet deregulated to a satisfactory degree; in those highly regulated markets there tends to be a higher termination fee (above $1/minute). This is of course very attractive to operators – and in such markets there are often only one or two operators in the country that are able to terminate the call. Passing on this cost to the subscriber has resulted in fraud as callers attempt to circumvent such charges.

Carrier bypass fraud is a global phenomenon, although it is more widespread in emerging markets where infrastructure is perhaps less robust – operators in developed markets have likely faced the issue before and are protected more by regulation.

Illegal termination bypasses the regulated operators that are allowed to take foreign calls coming in a given country. In certain countries, it has been reported that as much as 70% of traffic is terminated on illegal routes. There is of course a huge demand for this in low-income markets; when official fees can be more than $1 a minute, low-cost termination is extremely attractive.

Many subscribers in emerging markets will have multiple phones or SIMs so that they can take advantage of offers that allow them to talk for free to subscribers on the same network. The same idea applies to termination of calls: by using multiple SIM cards for each network, illegal terminators can direct the calls onto the corresponding network. Calls will come into the country over the internet to a specific connection, then be terminated via a mobile phone (or a rack of them) connected to the bootlegger’s computer.

Fraudsters can therefore act as operators, taking international calls by acting as an operator. It can be difficult for an operator’s international counterparts to establish their credentials and realise that the fraudster is unofficial, as a lot of international traffic is handled via a ‘cascade’ model where calls can be handed over several times between operators. This allows bootleggers to take international calls and terminate them at a very low cost, or even for free.

There are widespread opportunities for fraudsters, and this practice is not limited exclusively to markets with high termination fees. While it is rife in a number of central African countries that have not been deregulated, it is also common in South Africa.

“As an international traveller, it’s very easy to hear when your call has been terminated illegally”, says Finn Kornbo, Director of Strategic Product Management at business support solutions company CSG International. “The quality is often terrible and it’s difficult to maintain any kind of conversation. Because of that, the holding time for the call is very short – you lose out in every way. Operators in-country don’t get the incoming calls at the international termination rate, and callers are deterred by the short holding time and are pushed towards other means of communication such as OTT services.”

From an in-country operator perspective there are two steps to follow, says Kornbo. Firstly, they must implement solutions to identify and terminate fraud. Secondly, they need to provide a compelling proposition in terms of service and price for incoming as well as outgoing traffic so that the client doesn’t feel the desire to look elsewhere.

One way of identifying the problem is via better routing control, which provide greater visibility of traffic quality of service and cost for interconnected traffic across multiple networks. Combined with assurance solutions, which can detect devices which are being used to illegally terminate calls and shut them down, this enables the operator’s infrastructure to automatically select routes that have been tested for legitimacy.

However, this does not resolve the core issue. “With illegal connections, there is no guarantee of the quality of service”, notes Puschel. “What operators are missing is not only the price, but this as well. From a consumer perspective, paying a higher price for a call without any guarantee of quality can only ever be a ‘best effort’ scenario. Operators can’t crack down on illegal termination without addressing the quality of their own international offering – even if they don’t resort to illegal means consumers will migrate to OTT players such as Skype or WhatsApp.”

The first step is for operators in-country to block illegal activity by fraudsters, but the second step is for the operators of outgoing traffic to be more conscious of the routing partners they choose for their interconnected traffic. A good termination price is no longer enough – the quality of service has to be monitored continuously in order to assure the appropriate service level. This in turn maximises revenue by holding calls for longer and avoiding customer churn.

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