Is your bi-lat partner actually your enemy?

Peter Farmer

25th June 2024

By Pete Farmer

I’ve had the privilege this year of speaking to senior people in many large international telcos, to build relationships and reveal The Potato. This blog is aimed at them, but read on regardless if you’re interested. 

A lot of those conversations have touched on their long-term committed bilateral relationships with some UK operators, and how dirty origin surcharges work. 

The UK’s origin-based surcharge regime was cheerleaded by Vodafone and Three, at least one of whom is a significant terminator of traffic originating from abroad. 

There is significant complexity in the surcharge regime; there’s some sixty tabs on the BT transit file these days, although most coalesce around two sets of surcharges (i.e. Operator X copied BT, Operator Y copied Vodafone). Given the structure of the regime, the surcharges are capped, and, for the most part, compliant terminators should have identical surcharges. Even where they do not, the averaging effect due to scale across BT, Vodafone and a handful of others matching them, covers the vast majority of the industry. 

A surcharge is based on the originating country code (with some nuances in depth thereafter), and the terminating network and service (e.g. fixed, non-geographic or mobile). 

Simwood’s standard approach to surcharging is that we don’t charge surcharges. It’s more complicated than that, and worthy of its own blog in its own right, but essentially, where the odd call hits our network, we let it through, but too many will be rejected with whatever reason code you’ve set. 

If you have traffic originating from surcharge destinations, and are on the Global Gateway product, which was designed from the ground up to differentiate in its customer-side billing at the level of granularity required for fairness, then we have a discussion about how to handle the complexity in a cost-orientated manner. 

Others cannot (or maybe will not) approach the issue with fairness, and flat-rate. A transit operator, domestic or international, needs to blend these rates into a single ladder, and gravitates towards a high interpretation. While mitigating risk of arbitrage, this also leads to supernormal profits…

… that’s because, for example. O2, do not surcharge. With a whopping 28% (incl. Its major MVNOs) market share in the UK according to Statista in 2022, that means, the blended average surcharge from, say, Oman to UK mobile is actually 6.36 pence per minute, not 8.83 pence per minute, which is the most common surcharge for Oman originating mobile. With the charge-controlled geographic termination rate being just four-hundredths of a penny, we have a 38% swing between the true blended average cost of a call from Oman, and the simplified billing approach. Or, a whopping 2.47 pence per minute pure-profit bonus.

One-sided profiteering is not in the spirit of the traditional bilateral; we hope our friends abroad are fully aware of the full nuances of the surcharge regime, and will happily explain in detail, with worked examples, sufficient for them to assure themselves they are not being taken advantage of. 

It’s also a regime that represents those cheerleaders engaging in a wealth transfer from the poorest nations to the richest. We don’t like it, so we approach it differently. We’re still annoyed by it for this, and other reasons. When Ofcom publish their call for inputs for the next market review, we’ll be encouraging similarly minded people in the industry to make their thoughts clear. 

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