WHY ARE INTERNATIONAL CALL COSTS RISING SO MUCH?
OVERVIEW
This year 2021 has seen an unprecedented reversal of the trend towards lower costs for telephone calls – particularly for International calling. These increases have been imposed by both cable and mobile networks.
So why is this, when to all intents and purposes – with the growth in coverage of fibre optic cabling and the rollout of 5G – call costs should be trending downwards?
I should make clear that this Blog concerns International Call traffic and does not relate to telecom businesses offering Broadband VOIP and PBX services to contracted residential and business customers in the UK or elsewhere.
Neither does it relate to international calls made by internet users with popular apps such as WhatsApp and Skype: this form of communication – where endusers can talk for free with friends and family abroad using the same app – has severeley impacted on the marketplace for international calling, to the extent that Telecom Service Providers previously offering international calling as their “lead product” are now relegated to niche players.
Although our niche client customers are primarily retail and resident in the UK, where the “post Brexit” scenario has been a marvellous reason (excuse?) for Networks like EE and Vodafone to re-establish Roaming charges, the general increases seen in international telephony costs are caused by other factors, which are not related to the COVID 19 crisis. For example, there have been sizable increases in the rates to call certain Mobile networks in the EU.
The reasons for these increases have not been fully revealed or explained by the networks involved or their regulatory bodies.
In this Blog, I speculate on some of the real reasons behind the increases.
REGULATION - NUISANCE CALLS
Put simply. the only influence over the PSTNs and major Mobile Networks is that exerted by the respective Regulators, who in turn are tasked by Governments to prevent unduly high call prices (competition?) and to address and/or react to the concerns of the Public. In the UK for example, the appropriate Regulator is OFCOM
One such concern which has been around for a long time is the excessive number of inbound “nuisance” calls received by the public from either salesmen or customer call centres. I have to agree – it does annoy me to receive a call from someone who I do not know on my private number (at least I thought it was private) and who tries to sell me some service or product – which may or may not be legal, and often involves the potential for fraud.
This problem became more widespread with the use of SIP/VOIP telephony and sophisticated call center programmes by the businesses involved in the practice, which allowed high numbers of “impersonal” calls to be made at very low cost, and from various countries where telephony regulation was a good deal more lax – for example India.
CLI/ANI Compulsory
In order to combat this nuisance call epidemic, and to be able to identify the “culprits”, there has been since the end of 2020 a global tightening of the rules: effectively, no inbound call can now be received without the caller’s identity being transmitted – CLI (ANI in the USA)
For the UK, OFCOM has produced more information on Nuisance calls and what they describe as “Number Spoofing Scams”
Fallout
Naturally, as with other regulatory enforcements – some “babies are thrown out with the bathwater” – and many smaller operators and telecom service providers have had to adjust their services to comply with the new caller identity directive.
The Effect on International Call Rates
Again – put simply – the International Regulators have authorised penalties to be applied to any incoming calls that do not meet the Caller Identity criteria. This of course is not a problem for the PSTNs and major networks who are responsible for 99% of call traffic – but it does mean that the smaller operators (competition?) who piggyback on these major networks have to apply increased vigilance and some of them have chosen to cease offering some call termination services, and/ or just increase rates to certain destinations to compensate: this in turn adversely affects the whole chain of telephone service providers, from the medium size to the small.
FRAUD - AN ONGOING PROBLEM
Fraud in this context does not relate to the fraud potentially involved in a Nuisance Call as described above.
I am referring to the non-payment of call charges due, usually affecting the higher priced international destinations such as countries in Africa and the Middle East, and calls to Premium Rate Numbers which has been a problem prevalent within the telecoms Industry – particularly with the “second tier” Carriers and smaller telecom operators – i.e. not PSTNs
The fraudsters range from those exploiting smartphone technology to internet hackers – who try to access mobile phones and telephone accounts and the servers hosting telephone switches so that they can open call channels to make free international calls or calls to premium rated numbers. There are also dishonest resellers who have no intention of paying suppliers for calls made by their customers.
As far as we know, the major International PSTNs and Network Operators have not been directly exposed to this problem, although there have been rumours that the “netting off” procedure described below has been abused by some Carriers or Networks from countries not regulated in the same way.
Large international telecom companies have a procedure known as “netting off” to establish who owes what: it is obviously not practical to individually invoice each call out of the millions of calls made daily: as a very simple example, 10 million minutes of calls from Indian Operator X made and delivered to the USA on Operator Y’s Network may be “netted off” against 10 million minutes made and delivered to India on Operator X’s network from USA Operator Y.
As they own the fibre optic cable networks or mobile networks, and they are dealing with other large Corporations, major telecom Operators are unlikely to suffer from non-payment. However, there have been instances of major problems with large telephone companies – WorldCom for example, 20 years ago, although this was more to do with fraudulent internal accounting practices rather than any non-payment of revenue owing.
The problems mainly affect businesses further down the Telecoms “food chain” – such as Service Providers, who do not own a network and rely on agreements with major operators to deliver their traffic. And these operators will normally require prepayment of call credit, so that they are insulated from any risk of bad debt. Even if there is no prepayment in place, the Service Provider will be liable to the Carrier for any fraud perpetrated – and their customers or endusers are normally protected.
The Effect on International Call Rates
Successfully combatting the risk of fraud and hacking attacks inevitably results in higher call prices.
COMPETITION - IS IT WORKING?
If I was the CEO of a major international Telecoms Company, for example a PSTN with an existing cable network and with a large shareholding in a Mobile Network, I would argue that many of the problems and issues described in this Blog could be avoided if telephony was left in the hands of large well funded organisations and that all customers – both retail and business – should be on a monthly contract for all their telecom and internet requirements.
However, for good or bad, most International Regulating Bodies have decided that consumers should be allowed the choice and that competition is desirable within their national Telecoms industry, particularly with regard to call costs.
The problem is that with the rise and rise of the main Mobile Networks – many owned by the Cable Networks – and with the control exerted over mobile phones and their operating systems – the opportunity for true competition is decreasing. For example, in the UK there are effectively four choices for Mobile networks (Vodafone, EE – owned by BT the UK PSTN – 02 and Three) with very similar packages available: is this competition? And since most people now use their mobile phones most of the time, as a matter of convenience, the natural choice for international calling would be either through routes provided by and controlled by those four major Mobile Networks or via internet apps like Skype.
The Effect on International Call Rates
Where no real competition exists, the only trend for prices is upwards.
BREXIT - A GREAT OPPORTUNITY?
it was inevitable that Brexit would provide an excuse for price increases, and so it has proved – with Vodafone and EE announcing steep price increases on Roaming charges (using your mobile phone abroad). It is expected that O2 and Three will shortly announce similar increases – so much for “competition”.
Some years ago, the cost of using one’s mobile phone to call home from abroad was outrageously expensive: in the UK, following complaints from the public and intervention from the Regulator, this was corrected and charges reduced to reasonable levels.
The Effect on International Call Rates.
Now – with the marvellous excuse that is Brexit – charges are set to rise again to much higher levels.
CONCLUSION - REGULATION IS NOT WORKING
Someone has to pay for the costs of Regulation and Fraud and you can bet your life that it is not the major Telecom Operators.
These costs are passed on “down the line” to the Service Providers and the public in the form of higher charges, which leaves the way clear for the empire building to continue at the top of the Telecoms tree, where the target is to build faster and larger networks – either by Investment in new networks or by Takeover (buying out the competition)
The reasons for many of the price increases in 2021 remain unclear – they cannot in my opinion be explained solely by Regulation and Fraud.
It seems far more likely that the issues outlined in this Blog have been used as excuses for the largest companies in the telecommunications sector to hike prices. So much for true competition in the Telecoms Industry.
Let us hope that the Telecom Regulators actually do their job – which is primarily to create competition and keep costs competitive.
They are failing the Public at the moment.