By Alok Saboo on March 14th, 2011
Given the commoditization of voice, it is not surprising to see VoIP providers trying to use price as the means to compete with each other and fight for market share. While technological advances and increase in call volumes may enable providers to offer low cost international VoIP calls, sometimes providers resort to shady techniques to make a fast buck. Let me state upfront that most providers do not engage in such tricks as they have their reputations to protect, however, some of the less reputed providers (and I will not name any) who have nothing to loose MAY engage in such activities. This post is intended to create an awareness about such practices so that VoIP providers think twice about employing them.
Make no mistake, providers are here to make money and will not offer you anything for less then what it costs them. Another thing to keep in mind is that everything has a fair price (which in our case is almost always greater than ZERO). Let’s crack the nut and look what is hidden inside your cheapest international calls solution.
- Billing Interval: VoIP providers often quote their rates per minute. Increasing billing intervals is the easiest way to make calls appear "cheaper".
VoIP providers buy minutes with 1 second billing interval. So, when they charge the customer per minute, they can sell more minutes without paying for them. For example, you will be charged for 2 minutes for your 1 minute 5 seconds call, but your provider only pays for 65 seconds and pockets the rest in extra profit. The provider may pocket the entire sum or pass on some of this margin to the customer. So, per minute rates can be around 15% cheaper than those with 1 second billing intervals. Given that per minute billing is almost a norm, no one even questions this practice.
- VoIP Fraud: While changing the billing interval may still be acceptable, sometimes providers can get even nasty. How to make the calls even cheaper? The answer may be VoIP fraud. Given the lack of regulations and extremely low barriers to entry, VoIP space is full of run away providers. Several providers set up shop, attract customers with lofty promises, send calls, pocket the money, and disappear (to return under a different name). No wonder, they can offer almost FREE calls…
- Another way to steal the traffic and make costs cheaper is hacking into VoIP systems. Given the huge demand for cheap sources of traffic, aggressive hackers routinely hack into PBXs or ATAs, steal passwords, and exploit unprotected gateways. It is a daily job of people, who can work for a company, which serves the customers like I described above. It is not surprising then to see the huge interest in VoIP security.
- Call Duration: Another simple trick that your VoIP provider can play is FAS. FAS stands for False Answer Supervision. Ideally, your provider should only charge you after your call is connected. However, your provider may start the billing earlier than the called party actually picks up the phone (e.g., even when the phone is ringing). It is not uncommon to see providers charge for calls that were not even completed. Unless you carefully monitor each and every call that you make, this can be almost impossible to detect. It can easily provide a comfortable buffer to such shady providers to be able to undercut other legitimate providers who do not engage in such practices.
- Call Routing: This is one of the most interesting points. Normally providers use official international calls termination through one of the telecom operators in the destination country. Lets assume that the termination rate is 0.10 USD. But if the local call costs less (which is usually the case), let’s say 0.01 USD, an enterprising provider can get a local number in the destination country and then re-route your calls to use that number, skipping the local telecom company and official call termination procedure and saving the difference in the process. This is also often termed as “black route”
Yes, there will be no original Caller Line Identification (CLI) at the other party’s end, but for several users this is not important. If your called party does not get the call from your number or gets calls from “Unknown Number” or “Number Withheld”, chances are that your provider is engaging in such tricks.
- Grey Routing: Providers are, however, intelligent and often do not exclusively use the black routes (not CLI). They often use Grey Routes – a mix of official termination (White route) and the black route. Consider, two providers, A and B, claiming that they terminate calls with proper quality and original CLI. It means, that both should buy the same quality termination, which will cost 0.1 USD as mentioned above. Now provider B buys a little bit of black termination and makes a mix of white (official termination) and black (call re-routing) leading to significant savings.
As a customer, you may not even find out or may not argue much even if you notice that 10 percent of you calls were terminated without CLI.
- Pricing: Another point of interest is holes in your provider’s price lists. Most providers do not update their call rates on a daily basis (unless, of course, the rates go up). However, they update their contracts with their suppliers on a more frequent basis. By delaying the rate updates, your provider can easily pocket lot of money. Given that consumers are not aware of the wholesale rate changes and they are not likely to track the rates across multiple suppliers, such tactics may often go unnoticed.
These are some (and by no means an exhaustive list) of the tactics that providers may use to offer cheap calls. Unfortunately, however, it may be practically difficult to detect these tricks. Thus, it becomes important that you carefully select your provider.
Cheap calls do not always mean the same…
This post was jointly written with Sergey Kolesnichenko. Sergey has been working in the telecom industry for over 10 years and has a lot of experience in VoIP wholesale and in development of retail products, which give people the possibility to make cheap international calls. Recently Sergey published another article VoIP – Winner or Killer? on Letsgeek.net