EU local-breakout / Origin Based Surcharges

 

By Simon Woodhead

For some time now EU traffic has mostly been breaking out in-country, i.e. rather than being dumped on an international carrier and transited into the country, we deliver it to carriers who are bonafide operators in-country and they originate it locally. This is great for quality, CLI preservation, and economics but there’s been so much other excitement we forgot to tell you!

One factor here is what this means for the price. In short, calls are generally billed based on originating CLI, with a surcharge applying where this is outside the EU. Unfortunately, the level of surcharge tends to vary by origination, with them falling into several groups. Those groupings further vary by destination country, so a call to Germany may treat a call from Ghana with a different surcharge level to a call to Ireland from Ghana.

We took the decision, some time ago, that exposing this level of complexity in our rate sheets was unfair on customers and, frankly, many wouldn’t be able to handle it in routing. Thus we followed the international norm and priced to a safe level assuming a mix of traffic.

In our ongoing humungous monster rate-update project, where we’re actively price-matching key peers where possible for us to do so, we’ve noticed a few differences in the way peers are handling it. Most are following the norm and pricing safely, one refers in text to a lower rate for EU origination but doesn’t say what it might be, and another assumes 100% is EU originated, opening them up to costly arbitrage, were they to notice. Against most we look good value; against one, we look clear and coherent; against another we look expensive, but only because they’re daft.

So we need to clarify and explain our position on this further. We are going to base our prices on traffic mix, but continue our policy of dropping to beat competitive rates where possible. ‘Where possible’ catches the reality of traffic mix so we might not always beat the suicidal rates that ignore the surcharges. However, where we do, Simwood’s unique loss-prevention mechanisms may kick in.

For those unaware, one of our unique fraud prevention mechanisms exists to protect us from arbitrage. We don’t reject any call which would be loss-making as some do – rendering destinations out of service when cost rates change unexpectedly or carriers have outages. But we don’t route everything blindly either – risking death through arbitrage. We aim to always complete your calls, even if doing so incurs us a loss on that call, but we meter the level of loss by customer and destination in real-time. After a pre-defined threshold (which varies by account and is tighter for known offenders) we default to defensive behaviour. That behaviour sees us remove any onward route which would lose money, even if that means none remain and we have to reject the call. Subsequent profitable calls, of course, reset this real-time measure so it is very rare that customers with legitimate, varied, traffic ever see it in action. This feels like the right solution to this problem to us.

So, in short, expect our EU rates to continue their downward trajectory but as they do so, we will be more sensitive to traffic heavily weight to non-EU origin that on aggregate differs to our expected mix. For typical organic traffic, you won’t notice. If, on the other hand, you’ve landed the deal of the decade in a Cuban call-centre who are going to route dramatically more traffic than you’ve ever had to EU destinations, don’t rely on it completing for long! Of course, if you need a price that is workable, please speak to us.

To be clear, the UK is in the EU for origination purposes (at the moment) and has no surcharge. The UK is not a destination that applies origin-based surcharges though.

As a final aside, France has further raised the bar in combatting spoofing and nuisance calls. Effective August 1st they’ve been blocking calls originating outside France which have a French CLI. We’ve had a number of panic phone-calls from customers as other operators have pushed through confusing rate changes (perhaps realising they’ve been losing money on the surcharges that have been there 5 years) or otherwise managed to worry them. The French Regulator’s announcement gives a fuller explanation (linked above) but in short, because we originate calls mostly locally, this shouldn’t be an issue for Simwood customers, although our own stringent anti-spoofing anti-abuse policies will always apply.