By Joseph George, Director Revenue Protection & Interconnect
Margin management is complicated by a range of factors. The core components include:
- Retail Roaming Tariff – The price an operator charges its own roaming subscribers
- Wholesale Roaming IOT – The cost associated with access to another international mobile operators’ network
- Interconnect Cost – The cost of carrying international traffic across networks
- Mobile Termination Rate – The cost associated with terminating calls on a visited network
Example; Mobile Originated Call (MOC) relationship between IOT, MTR and Interconnection rates in a roaming scenario, involving a subscriber of network A, roaming on network B and calling a number on the home network (network A)
The scenario above involves three different charging elements:
- The interconnection cost between Network B (VPMN) and the international carrier (which could be the international gateway belonging to a local incumbent operator or a wholesale carrier)
- The Wholesale Roaming IOT in place between operator A and operator B
- The Mobile Termination rate that operator A charges to terminate international traffic on its network
This cost hierarchy implies the need for an accurate and timely understanding of all the costs in the value chain, in order for all parties involved in this call to earn a profit.
Operator A: has to ensure that it covers all of its own costs, that it complies with regulatory requirements (where applicable) and also that its outbound roaming tariff is properly aligned with the wholesale roaming IOT it has negotiated with operator B. This is critical as it is operator A that sets the retail roaming tariff being used by subscriber A to make the call.
Operator B: has to ensure that the various interconnection and mobile termination charges it has to pay are less than the wholesale roaming IOT associated with the MOC that is being made by customer A. Otherwise it will lose money on the call.
Faced with increasing pressure on margins and growing complexity in the management of inter-operator relationships, mobile operators need an extra dimension associated with understanding costs and margins for roaming. By gaining accurate and automated information about true roaming costs and margins, it is possible to use such information to develop steering, re-pricing, wholesale IOT and routing strategies, to ensure optimal margins and assure revenue, without the need for time consuming manual calculations or laborious data reconciliation. Through such mechanisms, operators can ensure that their roaming businesses deliver on their revenue and margin promises and remain an important part of their businesses moving forward.