Least Cost Routing: Merits and Demerits

Businesses are constantly looking for flexible communication options that scale and easily adapt to their changing business needs. They need solutions that empower systems to do more at a faster pace with less cost and effort. For most users, Least Cost Routing (LCR) provides an intelligent and value-based routing of calls.
How Least Cost Routing works to benefit a business
LCR is a program that looks for the least expensive way to route phone calls. It directs the path of outbound and inbound call traffic to a route that delivers the best call quality and rates.
To illustrate, a telephone company in California looking for a calling path to New York will assess the calling rates from select telecom companies operating in New York. The California company then chooses the provider that will successfully deliver call at the lowest cost.
For decades, least cost routing was done by directing calls to a telephone switch or private branch exchange (PBX). With the unprecedented explosion of calls, legacy system switches are unable to accept routing tables due to a limited memory of just a few million routes. Additionally, exporting calls to the switch can be slow during heavy traffic.
Today, the newer LCR models are able to handle tens of millions of routes. They use routing engines and software running on servers with sufficient Random Access Memory (RAM) that can host tens of millions of routes. Routing response time is typically a few milliseconds.
Striking a delicate balance between Quality of Service (QoS) and cost
LCR solutions were designed to optimize call processes and maximize profits. Balancing call quality and cost requires that decision-makers have a full understanding of their voice environments. Monitoring traffic routes, volumes, geographic origins and destinations, as well as peak and slump patterns is key to making smarter decisions.
Call logging is an equally important tool that provides graphical and summary reports. It helps control cost by department, trunk, or individual extension and discovers instances of telephone fraud. It helps manage the performance of operators with the aim of meeting or even exceeding acceptable target levels set by the organization. It also reports whether the system is being over or under-utilized, tracking call patterns where capacity needs to be increased or decreased to save on costs. Finally, its QoS reporting is an all-important detail that helps improve system performance and satisfy customers.
The Challenges
Routing Table Size
Seven digit routing based on 1000 block partitions is more complicated than routing on six digit NPA-NXX blocks. In the Local Exchange Routing Guide there are 166,431 six digit NPA-NXX dial codes. In contrast, there are 644,327 dial codes when routing based on seven digit one thousand blocks.
In telephone routing tables, a dial code matched with a destination (IP address or trunk group) is called a translation. Most least cost routing tables have an average of three destinations per dial code. This means that a basic optimized least cost routing tables for domestic US routing can have more than one and half million translations.
Jurisdictional Routing
For a service provider to optimize their least cost routing, they must have two routing tables, one for intra-state calls and a second for inter-state call. Jurisdictional routing is determined by the ANI (Automatic Number Identification), or telephone number, of the calling party. With VoIP calls, it is common for the ANI to be an invalid value,which are rated at the higher intra-state rate if they are completed. In addition, most major carriers will block calls that do not have a valid ANI. However, some service providers will accept calls with an invalid ANI so this creates an optimization for a third least cost routing table. One for inter-state, one for intra-state and a third for calls with invalid ANIs.
Deciphering Rates by LATA, OCN and Tier
Least cost routing is concerned with analyzing dial codes and the rates carriers charge to complete calls to those dial codes. Unfortunately, most carriers to not quote rates for US termination by dial code. Instead they quotes rate in terms of OCN, LATA and Tier.
Technicians must normalize carrier rates from OCN, LATA and Tier to E.164 dial codes. Carriers often have six to eight rate tiers per LATA. Tiers are not standard and every carrier’s tier structure is different. Manually normalizing carrier rates using the LERG is too big a task for even the most industrious technician.
Number Portability Correction
Today there are 197 million ported telephone numbers in North America. This development has a dramatic impact on least cost routing. If least cost routing is based on the dialed telephone number, up to 40% of all calls will not be routed to the lowest cost provider.

Network design in LCR selection
End users expect their phones to work perfectly all the time. The challenge for IT managers is the sourcing and delivery of a solid and redundant solution. Network design and vendor choice are major considerations when making a decision because of limitations on network design compatibility and vendor capabilities.
To get the most value from a least cost routing solution, carriers and service providers may wish to consider vendors that offer a compatible routing solution in an integrated, proven platform. And for a more powerful competitive communications edge, companies should opt for a dynamic solution that answers the challenges of changing needs.
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