Least Cost Routing: Then and Now
Isn’t it just a matter of putting the suppliers in Least Cost Routing order?
The world of voice telecommunications is a dynamic, ever changing one with creative destruction seemingly the Modus Operandi. AT&T, has been around a long time. Since 1885 or maybe earlier in a different form. Even after they were forced to break up, they influenced the industry for how to run a voice services business in the U.S.
When it came to the management of how to handle calls that were designated to international phone numbers in countries where they didn’t have network or a subscriber base, how did AT&T handle it? Pretty simply actually. They used what is now called “interconnect voice” whereby they would create inter-network connections between them and their voice terminating partners in other countries. These include companies like Cable & Wireless, Bell Canada, NTT, BT, etc. They would “connect” their networks using PSTN “links” and, then, AT&T could seamlessly route calls to the desired number at a specified price. Because there wasn’t a lot of competition, AT&T didn’t really care what the termination costs were. They would mark the cost up and charge their customers whatever they wanted. That’s how a a real monopoly works.
Sometimes, in a competitive market, there would be multiple voice service providers AT&T would “interconnect” with in case the one supplier couldn’t handle the traffic volume that AT&T would generate. As a result, AT&T had to figure out how to decide in which “order” to send the calls; Carrier 1 or Carrier 2. In some cases, there could be more than two carriers.
AT&T really didn’t care about the costs, since they would simply mark up the cost. Therefore, they used a very basic algorithm to determine which carrier got the call. It was called, “Least Cost Routing”, or, LCR for short. Least Cost Routing is exactly what you think it is, you put the cheapest or Least Cost first in route and the next cheapest cost second in route, and so on and so on.
No science, or intelligence. Luckily for AT&T, the PSTN (Public Switched Telephone Network), was an incredibly reliable, and stable network that would deliver the same quality in developed nations. So, AT&T didn’t care about quality, they only cared about price, and even then, they barely cared about price.
LCR ruled the voice interconnection market for decades and decades.
Today, LCR is an anachronism. It oversimplifies the engineering and business algorithms that go into deciding how to manage a carrier’s voice interconnect business and operations. While the term is slowly starting to be replaced by voice interconnect, it will be around for many years to come. But, LCR is no longer the way carriers manage their interconnect voice business.
