IP Telephony

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April 27, 2006

Risky (VoIP) Business

By Rich Tehrani, President and Editor-in-Chief


Are today’s VoIP providers exposed to more risk then they realize?

We all remember the infamous scene in Risky Business where Tom Cruise stalls the Porsche in his parent’s driveway as he backs it out of the garage. True car buffs recall this was a Porsche 928 – a car that didn’t make it because Porsche aficionados think Porsche engines need to be in the rear.

But what on earth does Tom Cruse have to do with the VoIP industry? After all, we haven’t seen any VoIP industry insiders screaming on Oprah's couch. Then again Oprah would likely never invite a VoIP insider on her show!

The similarity is all about risk and there could be lots of it. Consider that even though private companies aren’t bound by Sarbanes-Oxley (Sox) many investors are beginning to expect the companies they invest in to run as if they are bound by Sox.

A company called Aperio CI makes a point to tell the VoIP market that service providers need to be concerned about the following:
  • Fraud Detection/Prevention
  • Wholesale Reconciliation Issues
  • Legal Compliance
Aperio’s CEO Duffy Mich tells me there are a number of reasons VoIP providers are at risk. For example if a residential line is used for commercial purposes or the line gets used for outbound telemarketing.

In addition, international offerings increase risk as they have higher termination costs and the potential for premium call rates to cell phones, etc.

Another concern VoIP providers should have is telecom fraud as VoIP lines can become free neighborhood phone booths and subsequently can increase service provider cost substantially.

In addition there are wholesale reconciliation issues such as access/egress fees that could be increased by incumbents to ensure their own compliancy.

Aperio CI recommends daily, near real-time monitoring of raw switch analysis and pattern analysis. In addition they recommend a tiered response to users suspected of fraud. They think you should use three levels of notification:

Notice (first time offenders/valued customers)
Warning (Second time offenders/valued customers)
Suspension of Service (low margin/repeat offenders)

Beyond dealing with risk the company feels a business should focus on data analytics in their VoIP service business. You need, churn predication, marketing effectiveness analysis and customer support analysis.

It should also be noted that data analytics needs to be implemented to detect fraud, increase billing accuracy and meet legal mandates.

In the end every business is a risky business in that there are always potential pitfalls you can avoid. After all, you probably don’t to be the company running around in the living room in your underwear playing air guitar to Bob Seger. The question is how will you protect yourself from the risk knowing ahead of time there are things you can do to increase profit and decrease exposure?


Rich Tehrani is President and Group Editor in Chief at TMC and founder of Internet Telephony, IMS and SIP Magazines. In addition he is the Chairman of the world's best attended VoIP event, Internet Telephony Conference & Expo.

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