Starting late last year our long-distance network has been overwhelmed with calls to various for-free services. These services often appear to be the proverbial free lunch, with no apparent business model because the service is 100% free to the end user. Typical offerings include free conference calls or voice chat rooms. These services can completely destroy a flat-rate all-you-can-eat telephony service provider.
What we saw initially was increasing traffic volume to destinations that seemed to be rather out-of-the-way, not a destination one would expect to be in our top ten. We use an application called CDR Collection Manager (CCM, which is highly recommend!) from Quantum Systems Integrators that collects all Call Detail Records from our Nortel switch and saves them to a UNIX server in a searchable format. Further Analysis of these CDR showed both high number of calls and extremely long call durations. Searching Google for the called number revealed it to be a free chat room.
We spent several days wondering about these businesses before we saw the light. It wasn’t at first clear to us how they would be making money. No for-fee services were evident on the web site, there were no obvious advertisements that might’ve supported their service. Then my Regulatory Director found this link at the Heartland Institute. The article calls these businesses traffic pumpers.
So the business model of the traffic pumpers now becomes clear. The companies offering these services partner with small Local Exchange Carriers (LEC). The LEC are chosen based upon them having an abnormally high access charge. Access charges are fees, laid down in law, which long distance service providers, aka Inter-Exchange Carriers (IEC), must pay to LEC for the privilege of delivering voice traffic the last mile. The traffic pumpers try to stimulate the largest volume of incoming traffic possible to increase the amount of the access charges they collect from the IEC. Clever!
On our side, we have a flat-rate-all-you-can-eat business model. Success in this model depends to a large degree on having a low cost structure, and having subscriber usage which conforms to the norm. Extremely high volume callers can distort this model, and these traffic pumper destinations give such subscribers a reason to call.