Least-cost routing (LCR) is a simple idea based on the fact that it's cheapest for subscribers of any particular cellular network to call other subscribers on the same network. Calls to other networks or to landline numbers cost more.
So, for any organisation that makes a lot of phone calls to cellular numbers, it makes sense to ensure that all those calls stay on-network. A least-cost routing (LCR) device contains SIM cards for all the networks, switching between them according to which network the number being dialled belongs to.
So far, the routing task has been simple because the first three digits of a cellphone number have told the device everything it needs to know about which network to route the call through. Number portability will change all that, raising the possibility that LCR users could actually end up paying more if cellphone calls are routed over the wrong networks.
With an estimated 60% of South Africa's businesses having implemented LCR, the cost implications are potentially severe. Even if the predictions that only 2% of cellular subscribers will migrate in the first year hold true, that still amounts to about 600 000 during the year, or about 50 000 a month.
And there's every chance that 2%, which is based on experience in the very different markets of Europe, is a low estimate. We believe the true figure is likely to be closer to 10% within the first two years, especially when taking into account that number portability will over time be extended to Telkom numbers, VANS and the holders of Under-Serviced Area Licences.
Our calculations suggest that a medium-sized company with a normal cellphone bill of around R25 000 a month stands to lose more than R40 000 - nearly two months' worth of calls - if our prediction of 10% porting over two years is correct.
To avoid incurring extra charges, every single LCR device will need to communicate regularly with the porting database service that is being established by the three cellular networks. In the same way that Internet routers continually update their routing tables, LCRs will have to update their information preferably every 24 hours. It's too early to tell how the porting database is going to operate, but this is likely to be one of its major tasks.
LCR users should start taking steps now to ensure that they don't face nasty surprises once number portability is fully functioning. Upgrading or replacing "dumb" LCR devices with smarter alternatives that are able to handle more complex routing decisions is one avenue worth considering.
In all of this, much will depend on vendors, many of whom have had an easy ride so far installing devices that require little or no setup or ongoing maintenance. Buyers should ensure that their vendors are able to support them through the change, for example, by offering management tools that provide real-time data or something close to it.
The new environment will require much more sophisticated skills from LCR vendors; we're likely to see substantial consolidation in the market in the next few months.
