The Importance of LCR in a Growing VoIP Business

Least Cost Routing, also known as LCR, is the process of calculating the best route for a call based on price and/or call quality. The purpose is to provide the best quality call at the lowest possible price.

An LCR system will allow you to import your carrier’s rate sheets and monitor call quality. It can then use this information to calculate the best route for any given call.

The importance of proper LCR is dependent upon the size of the installation. As pricing between carriers might only differ fractions of a penny for the same destinations, LCR is all about volume.

In small installations, you might have only 2 carriers; 1 for domestic calls and 1 for international calls. As the call volume is relatively low, saving a few fractions of a penny here and there is less important and may not even warrant the effort required to configure and maintain an LCR system.

In large installations, those fractions of a penny add up, and quickly. If you are handling millions of minutes per day and you can save 10%+ in terminations fees by selectively routing your calls, it can easily save you hundreds of thousands of dollars in a single month. Implementing a proper LCR system can have a dramatic impact on your bottom line.

An easy way to determine how much you can save is to look at your ‘Minutes per Destination’ report for the previous 12 months. Choose the top 5 destinations and then shop around with 5-10 termination providers to see what pricing is available for those destinations. You can then use this new pricing to determine how much you could have saved by implementing an LCR. This simple comparison will give you an accurate depiction of how effective a least cost routing system could be to your bottom line.

Although least cost routing is primarily focused on cost savings, it can also affect the quality of service you provide to your customers. If you are monitoring ASR (“Answer Seizure Rate”) or ACD (“Average Call Duration”) then you can also route calls based on quality. If you have multiple carriers offering you the same rate for a specific destination then you can configure your LCR to take the quality of the route into consideration during its calculation. This allows you to route the call based on the best rate available to you, but also, based on the best quality route within those lower-cost routes. Ultimately, providing the best quality at the lowest price.

Advanced LCR systems can also take profit-margin protection, jurisdictional domestic, local number portability and mobile number portability into their calculation. These items are not discussed in this article.

The implementation of a least cost routing system can take on more than 1 form.

Dialplan - If you have only a couple different routes to choose from you might just hard-code the logic into your dialplan. Example: All domestic calls use RouteA, all international calls use RouteB. This is very easy to implement but has the obvious limitations of only handling a very small number of routes and no ability to take call quality into account.

Billing System Module - Your billing system may implement LCR as one of its available modules. This scenario saves you from having to license a stand-alone system and also allows for more centralized administration. Using your billing system’s LCR module offers a nice balance of cost vs. performance.

Stand-alone Device - Stand-alone LCR systems do one thing and one thing only; calculate call routes as quickly as possible. These systems typically run on dedicated hardware and are intended for large installations handling thousands of new calls per second. Although expensive, they can pay for themselves quickly if your call volume is high enough.

Effective implementation of an LCR will help you to be more efficient and ultimately more competitive.

DTH Software, Inc is a provider of commercial billing solutions. Version 5 introduces our Least Cost Routing module which allows real-time route calculation based on cost as well as quality. Information about our billing system is available at www.dthvoipbilling.com

If you have any questions, please contact us