The idea of least cost routing is most certainly appealing as it enables providers to control costs and deliver better rates to customers or simply protect margins. The latest news in the industry suggests, however, that least cost routing may not be a method of focus for much longer, due to the latest interconnect rate cuts. But, one industry player suggests that this assumption may not be accurate.  

Least cost routing, or the practice of routing outbound calls by way of the cheapest route available, was a key development in South Africa, simply because the high mobile termination rates made it more difficult for service providers to be competitive. Interconnect rates have been cut, however, and further reductions are expected in March of this year, March of 2012 and again in March of 2013.

These cuts are certainly putting strain on least cost routing margins, hurting the market. As providers are passing along mobile termination rate cuts to subscribers, operators providing least cost routing are being forced to reduce their rates and the current business model in this area appears to be under pressure.  

Nonetheless, there is good news for those operating in the least cost routing space: VoIP is offering a lifeline. According to Vox Orion MD, Jacques du Toit, least cost routing does not have to depend on GSM to survive as VoIP is providing a whole new area of opportunity.

Du Toit’s company is already migrating many customers to VoIP platforms, which is being considered the ultimate least cost routing technology. VoIP offers a flexible network that makes it possible to route all traffic through the most affordable route. Vox Orion is already enjoying the additional income from local and national fixed line calls, in addition to incoming calls. This revenue stream was definitely not available when the network only offered GSM.

To further grow the business and leverage least cost routing capabilities, Vox Orion is also offering additional products, such as range of data, PBX (News - Alert), SMS, videoconferencing, virtual hosting and fax solutions. Call recording and storage solutions are already part of the company’s strategic focus for the near future.

As for opportunities in least cost routing, Du Toit suggests that there may still be challenges in migrating subscribers from GSM platforms to VoIP services. And, more should be done to make the South African telecoms environment more competitive. Bandwidth costs and access, as well as proper number portability all need focus, but least cost routing will continue to deliver opportunities where VoIP can be leveraged in the market.