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What is Least Cost Routing?

Updated on March 26, 2014
Hosted call routing
Hosted call routing

Alternate Routing

LCR or Least Cost Routing is a process of finding the most inexpensive way of routing a call to its destination. Telecom carriers interconnect with other operators throughout the world, buying and selling call termination contracts. The prices might vary based on demand/supply, capacity, quality and even the time of day, so the cheapest route for a call will not always be the same.

Traditionally, least cost routing was performed by technicians who manually calculated the cheapest routing tables which were then loaded onto switches. The telecom operators also had to constantly monitor call rates and volume in order to quickly switch routes in case of a price increase. The popularity of VoIP has dramatically altered the landscape of least cost routing. Carriers now have peering agreements with hundreds of operators as opposed to a handful and millions of routes may be possible for any given call.

Routing Parameters

Cost is also no longer the only consideration for call routing. VoIP call quality depends on many variable factors which have to be taken into consideration when routing a particular call. For example, a VoIP operator may decide not to utilize the cheapest option because it does not meet the minimum expected quality standards. Today, telephone carriers change their prices constantly and even a small delay in propagating routing changes can result in six-figure losses for a company, which can be devastating when the margin per call is already very low.

There were other difficulties as well. Routing tables had grown so large and complex that switches were not able to handle them and loading them could take hours, bringing the network to a halt. The presence of mobile devices and number portability also impacts the price of a call and these considerations have to be included when determining the optimal path. VoIP vendors now utilize automatic call routing software which require as little human intervention as possible.

Automated Routing

LCR software may perform any or all of the functions related to call routing such as loading price schedules, keeping track of capacity and call quality metrics, calculating optimal routing paths as well as transferring the necessary data for billing purposes. LCR applications range from simple spreadsheets to complex products which can cost thousands of dollars per installation.

Automated least cost routing enables operators to improve reliability and call quality. Such software is capable of determining optimal routes on a call by call basis in real time, making it possible for hosted VoIP carriers to take advantage of changing prices in order to increase margins while also reducing charges for end-users.

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