Least Cost Routing (LCR) - How It Can Adversely Affect Business Between You and Your Customers

Regarding connection and call quality issues on your voice or data communications... have you or your business experienced any of the following issues?

Communication or connection issues with modems, alarms panels or any other telecommunication device?

or...

Someone tried to call you, but your phone never rang?

Someone tried to call you, the phone rang on their end but didn’t on yours?

A call came through, but the quality was poor?

A call came through, but the Caller ID was incorrect?

Especially if the issue happens suddenly, your phone line / service maybe experiencing its issues due to "Grey Routing" or a "Least Cost Routing" configuration change by your Phone Service Provider.  

To save you from reading through the technical explanation that follows, I'll first start by stating a permanent solution...

I highly recommend after your issue has been re-mediated that you request for your line / circuit be placed on an "exception list"; that being if they offer this as an option.  This will address the issue when they make routing changes to save cost, your line / circuit would be excluded from the evaluation and subsequent route re-configuration. 

Worst case, depending on how critical the line / service, you may need to seek a different phone service provider for the line so that you are not subjected to a periodic route re-configuration.

(Note: I usually write my articles completely from scratch, but the following was lifted very heavily and in most cases verbatim from http://bit.ly/1Ux9Y7o and http://bit.ly/1hrGqd8 . Please visit the links of the actual authors if you wish to see how this information existed within its original context).

On to the detailed explanation...

Periodically be it daily, monthly or yearly your service provider may evaluate the least expensive routes to get your call or data communications from 'Point A' to 'Point B'.

No longer is there such a thing as a phone company which has equipment everywhere. No such company has existed since the Ma Bell monopoly was divested. All companies – including Verizon, AT&T, Sprint, etc. work to integrate with each other and are allowed to service only certain areas of the country. Simply put, your call goes through several carriers before reaching its destination.

If your phone service provider finds Company A has great rates from 9am-5pm and Company B has great rates at all other times – they choose the cheapest company to route the call at that time.

Least Cost Routing (LCR) has evolved from simple strategies like the ones listed above to a massive market of buying, selling and trading minutes across a virtual black market. Phone service providers input “rate decks” (or large lists of areas you can call which each have a different cost to call) into a computer from hundreds of different phone companies and shuttle around your calls based on whoever can honor the cheapest rate at that exact moment.

Some companies lower their rates by “blending” rates together. For example, let’s say a phone company named “Super Bell” can deliver calls to Iowa at a cost of $0.03/minute and calls to California at $0.01/minute. The average rate per minute is $0.02 if traffic was even, Super Bell markets this as a “flat-rate” in hopes that more people will call California then Iowa. (which makes sense since California's has a much larger population.) If it works out, they’ll make money, since most calls will cost less then they will charge you. But you (or your direct service provider), as the consumer, are always guaranteed $0.02, which is nice and simple to understand and sounds really cheap!

Along comes Mega Call...

This phone company promises rates that can’t be beat. How do they do this? They set up a computer program that takes the really expensive calls that their customers are making to Iowa (which would cost them $0.03/minute normally) and they start sending all those calls to Super Bell who advertises the $0.02/minute blended rate. Mega Call does NOT send Super Bell the less-expensive traffic to California and instead keeps it for themselves, paying only $0.01/minute for those calls. So, now Mega Call can market their service at $0.02 (the same as Super Bell) but will never have a single call that loses them money because all their expensive calls went to the other guy! They’ve got themselves a guaranteed win. 

Make sense?

Here’s the problem. This has all become very computerized with many, many companies participating in this behavior. The net effect is some phone calls are literally bought and resold five times before the call is finally connected, so that people can provide you a cheap rate. In the process of doing so, sometimes calls get dropped, equipment fails or is incompatible with other equipment or call quality simply degrades. Some calls literally get bounced all the way from New York to California and back again even though you’re calling someone who’s just one state away. This inevitably impacts call quality.

Enter the Grey Route

The grey route is a sub-par phone line or phone company who intentionally sells phone service in areas that should be expensive but is cutting corners to be able to provide the service for less.

The folks running the grey route don’t really care about the quality of the calls. They’re most likely using a poor quality internet connection, poor quality equipment and aren’t interested in debugging or fixing problems with their setup  – as long as they can keep you on the line long enough to bill the other party. How do they achieve that? They pitch the route to the phone company who’s losing money on expensive phone calls and falsely promise them great quality.

Remember the housing market scandal where people took poor-quality loans, bundled them with high-quality loans and marked the whole package as a “safe bet”? Well, that’s not the only industry that's utilized and applied this practice.

In essence, the theory goes if only 5% of your calls go over a “grey route” then phone companies can save literally millions of dollars and most customers will “tolerate” the poor quality because it only occurs on such a small number of calls (some people in rural areas experience this quite a bit). Unfortunately, the side effects of such behavior range from broken Caller ID, Touch tone / digital transmission to audio quality cut-outs and generally poor sounding calls.

As stated at the beginning of this article...

"...request for your line / circuit be placed on their "exception list," that being if they are willing to offer this as an option for you.  This will address the issue when they make routing changes to save cost, your line / circuit would be excluded from the evaluation and subsequent route reconfiguration. 

Worst case, depending on how critical the line / service, you might need to seek a different phone service provider for the line so that you are not subjected to a periodic route re-configuration."