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Managing Global Traffic Growth

By David West
Phone+
April 2000

You may have heard the punch line: "We lose a little bit on every sale, but we hope to make it up in volume."

Unfortunately, many carriers manage their networks this way. They lose money on some of their traffic, as they hope their increasing volume will offset the losses. For other carriers, the situation is even worse. With no way of connecting costs, revenue and actual call traffic, these carriers do not even know if they are losing money—let alone how much—until 30 or 60 days later.

It's easy to get caught up in the challenges of the expanding global market, worrying about increasing competition, lowering retail costs, acquiring new customers; none of these is a simple issue.

However, a focus on increasing traffic that ignores network economics is a blueprint for failure. Successfully expanding and increasing your network's profitability, particularly in the international arena, requires carefully monitoring costs, completion rates and revenue. Simply acquiring more traffic is not enough. Carriers must successfully overcome management challenges from within their own networks to succeed.

Risk Taking
As carriers seek to increase traffic profitably, they face many risks associated with increasing overall network volume. Highlighted below are some of the special challenges increased international terminations create.

At the heart of overcoming these challenges are new tools designed to help carriers monitor increased traffic levels in real time, allowing them to efficiently configure their networks and enhance profits.

With these new systems, you can join those carriers with a competitive edge among the expanding global madness.

Most carriers know when they decide to buy and sell international termination, they set themselves up for greater rewards—as well as greater risks.

"We realized early on that the international market is very volatile when it comes to price and rates," says Tina Gaynor, vice president of customer support and provisioning at CapRock Communications Corp."To keep up with the market, you have to measure minutes and costs based on quickly changing rates."

Because the international rate per minute is under pressure, carriers must lower their retail costs to remain competitive. To offset the lowered rates and to take advantage of network capacity, many carriers respond by increasing their overall network volume. Without an understanding of network architecture, rates and costs, carriers put themselves at great risk for lost opportunity, wasted capacity and even worse—negative margins which mean a hard hit to the bottom line.

Fortunately, new tools are helping carriers overcome the burdens of increasing network traffic volume. More carriers are discovering how real-time data management can make their growing traffic manageable and profitable. New systems provide carriers timely and detailed views of their traffic, links to their customers' financial status, and alerts to unfavorable network conditions.

Having up-to-the-minute visibility to these carrier operational statistics gives carriers quick access to the information they need to take advantage of competitive opportunities, especially in the fast-paced international market.

"The challenges of effective traffic monitoring are only exacerbated in the international arena," explains Russ Johnson, vice president of operations of Atlas Communications, a switch-based international wholesaler and reseller of telecommunications services. "The international market not only changes month to month, day to day, but minute to minute. You have to be able to make strategic decisions quickly, or experience great losses attributed to network inefficiencies."

Gaynor agrees. "Carriers must have a real-time way to manage their routes and margin opportunities so they can take immediate action on an issue—or determine whether or not they need to take immediate action."

High-risk Danger
In addition to the risks rapidly changing rates and costs pose, high-risk customers add another danger. Many carriers seek customers to sell their excess capacity. Often these customers are small or start-up resellers purchasing international terminations. These resellers enter and exit the market and frequently move among providers in search of the best rates. Thus, they may be more difficult to locate and hold accountable than the more established carriers, increasing carriers' exposure to credit risk.

Johnson explains, "Everybody's got a better, faster, cheaper way of doing it [in the international arena]. Companies come and go very quickly in this market."

Thus, carriers need to be cautious and have a reliable way to track their financial position with each customer. Even prepaid accounts may pose high risks, as carriers must ensure that their internal systems can monitor their usage on a timely basis.

New technology makes it easy for carriers to monitor these critical statistics by offering helpful features such as real-time visibility. A real-time view of profit margins and completion statistics provides carriers, resellers and even sales forces valuable information so they can respond to rate and network changes with up-to-the-minute accuracy and take advantage of competitive opportunities.

"Whenever carriers anticipate changes in their traffic volume, they must have a way to tie together their routing, capacity and costs," insists Johnson. He explains without quick access to this information, carriers simply can't price competitively or manage the capacity internally within their network.

Another feature, route choice alarming, actively monitors and warns carriers when their primary route choice drops below a user-defined percentage to indicate network trouble, incorrect translations or inadequate provisioning for their current level of traffic.

These systems can lower the danger posed by higher-risk customers with built-in credit monitoring functions to help locate and hold accountable customers who may violate their credit limits.

Users can establish credit limits for customers and receive alerts, either on-screen or through a pager, when a customer reaches or exceeds a percentage of the set threshold.

Switching Can Be a Welcome Change
Until recently, most carriers have had to rely on traffic measurements from a switch to try to identify trunk usage information and potential network problems. The new systems are a welcome change.

Switch statistics and other operational measurements are based on sampling techniques rather than actual billing records. Carriers now have accurate call record information at their fingertips. Switch-based reports also do not provide carriers important cost information and other critical details. Carriers relying on switch information also have had to struggle with slow and cumbersome reports—problematic especially during busy times, when access to this information is most critical.

Carriers using in-house systems to view their traffic also are finding relief with the new systems, as they provide greater flexibility and are equipped with more sophisticated alarming capabilities.

"Waiting for batch-mode reports or homegrown capture of call records is time consuming and inefficient," reports Gaynor. "The benefit of these new systems is up-to-the-minute information they provide—it allows you to be more competitive."

The systems prove to be a cost-effective alternative to in-house systems, saving carriers considerable in-house labor costs and hassle. They also provide many inherent benefits such as a centralized source of calling or country code data.

The systems can help integrate information between a carrier's multiple billing and rate management systems (often of varying data formats), so they can estimate the revenue they will collect from each customer.

In addition, such systems can utilize a company's billing data, eliminating time-consuming, labor-intensive and error-prone manual data entry for companies with large databases like CapRock and Atlas.

Increasing traffic, especially in uncertain markets like the international arena, can make adjusting your network operations to the needs of new markets daunting. In an instant, carrier rates, cost and completion percentages, and amount of traffic can change dramatically.

Fortunately, with practical network systems that put the right information in your hands, increasing traffic can be both manageable and profitable.

David West is executive vice president of Equinox Information Systems, a provider of custom and commercial software solutions for the telecommunications industry since 1986.

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