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For a long time and in many countries around the world, mobile operators were settling mobile interconnection rates through negotiation and commercial agreements. Here the regulator was often only a mediator or arbiter and sometimes settled the interconnection charges in cases where the parties failed to find agreement.

With increased incoming traffic, revenues from tackling cases of arbitrage when terminating international traffic have become a concern in many countries throughout the world. In the European Union, mobile network operators are now allowed to apply higher termination rates to non-EU incoming traffic and with this comes a higher risk of Mobile Termination Rate (MTR) Arbitrage. To terminate the traffic at lower costs, some operators / carriers that are supposed to pay high MTR re-originate the traffic in order to pay lower MTR.

At the same time, there has also been a shift in consumer demand. Latest market developments show that voice is less important in driving retail competition, even when offered in unlimited or large call allowances as part of many SIM-only and post-pay subscriptions. The new generation of consumers increasingly use mobile networks for data connectivity: mobile data use has seen unprecedented growth in recent years, mainly driven by the increase of smartphones and the increased availability of 4G technology, which provides a better user experience for data services.

Nevertheless, some researchers addressing this problem found that under CPNP (Calling Parties Network Pays) and CPP (Calling Party Pays) regimes, the termination monopoly problem and negative pricing externalities lead to excessive MTRs, and therefore traffic re-origination and loss of revenues.

Since call termination can only be supplied by the network provider to which the called party is connected, there are currently no demand- or supply-side substitutes for call termination on an individual network. In these cases, each network constitutes a separate relevant market and each network operator has a monopoly for terminating calls on its own network.

Therefore, each provider can propose take-it-or-leave-it offers in an unregulated market. Consumer ignorance, on the other hand, when customers are unable to identify the network they are calling or from which network they are receiving a call, may lead them to base their calling decisions on average prices

This just encouraged fraudsters to manipulate the CLI (Calling Line Identification) of calls originating outside EU and replace it by a CLI matching a numbering plan of a country having to pay low MTR, technically called CLI Re-filing.

To sum up, there exists a broad variety of mobile interconnection regimes, and mobile termination is treated differently by regulators across the world.  Operators have different views, like the idea of having and retaining mobile termination rates, whereas others think that it is reasonable to try to avoid these kinds of payments.

It is difficult to judge whether one model is better than the other. There is a striking similarity between MTRs applied in the Americas region, and MTRs in the Europe and CIS region, despite that fact that there is no ex-ante price regulation in many countries, and in the latter, such regulation is prevalent. In fact, in many cases the maximization of consumer utility, and not always the absolute size of MTR, could be the best criteria for regulators to base their decisions on.

My view is that Bypass and its related practices are products of a conflict between deregulation and the Internet on one hand, and overly complex and possibly outdated charging and settlement regimes on the other.

In the era of Skype and ubiquitous Internet access, I wonder for how much longer operators will be able to justify high charges for international voice traffic when subscribers can already send much larger numbers of bytes around the globe in the form of email attachments, or gigabytes of files delivered via the Cloud for a small monthly fee?

Might there not come a day when all voice and data services are charged at the same low rate per byte, or offered in all you can eat monthly bundles regardless of location and call destination?

Helder Ribeiro

RAID.Cloud Product Marketing

It's time to change your Fraud Management System

Topics: Risk Management, Fraud Management, ByPass Fraud