Every day, individuals place outbound telephone calls. In only a few steps – pick up phone, dial number, listen for ringtone, have dialogue, and hang up – the call is successfully placed, without the caller, or recipient, having to think twice about the process. And, every month, that caller receives a phone bill detailing every call placed, as well as their corresponding rates. But, how are those rates determined?
Telephone bill rates go beyond the customer finding an affordable, reliable telecom company. In fact, there is an entire process that dictates what you – the customer – will pay for calls to various destinations.
Least cost routing, or LCR, in essence is a simple practice that finds the most inexpensive way to route phone calls, allowing companies or users to save on their monthly phone bills. According to one expert, it is the process of analyzing, selecting and directing the path of outbound communications traffic, depending on which path delivers the best rates.
Today, least cost routing serves as a vital way for voice communications providers within the telecom industry to remain competitive. Moreover, least cost routing often determines the rates these companies are able to offer their customers on calls – be it local or international, on a fixed line or via mobile device.
To paint a clear picture, a telecom company in the U.S. looking for a calling path to Argentina will likely assess the calling rates for a selection of telecom companies operating in Argentina, and then choose the provider that offers the cheapest rate. The chosen rate is the cost they will acquire in order to send calls to Argentina, and will thus establish the rate that the company will charge their customers. The company can then purchase the communications services, route calls on their network to Argentina through this new calling path, and grant these savings to their clients.
While cost is obviously the most significant factor in least cost routing, providers are also forced to consider route quality and call quality during the selection process.
Currently, mobile number portability is heavily impacting the least cost routing market, and has become a heavily debated movement overseas. A service that makes it possible for subscribers to keep their existing phone number when change a service provider or mobile operator, number portability is changing the way least cost routing providers route calls. Instead, they can no longer rely on using a portion of the dialed telephone number to route a call, but now have to find the actual current network of every number before routing the call.
Fortunately, mobile number portability is expected to create new opportunities for non-traditional telecommunication service providers in many countries. In fact, the FCC (News - Alert) ruled in 2008 that number portability obligations extend to interconnected VoIP providers and carriers supporting VoIP providers.
Tammy Wolf is a TMCnet web editor. She covers a wide range of topics, including IP communications and information technology. To read more of her articles, please visit her columnist page.
Edited by Chris DiMarco