Fraud Lessons

Fraud, the art of earning money through

the unauthorized and often unlawful use of a system, is well known in the circuit- switched telephony business. Traditional telcos have invested heavily to detect and prevent fraud - and for the most part they have been successful. In the nascent era of VoIP, many carriers are relearning old lessons.

Placing illegal VoIP calls or unlawfully using VoIP to bypass payfor- services was recently found to cost one carrier an average of $5 per call. As a result, with more than 20,000 calls per day, VoIP fraud was costing that carrier about $100,000 a day. Carriers that want to successfully participate in the VoIP world, therefore, need to understand how their customers are using and misusing their networks.

New-world VoIP carriers should learn a lesson from veterans in the circuit-switched space. They need to take a total system view of their networks, aggregate and correlate their traffic and feed their management systems with common data. Using this approach will result in lower implementation cost and prevent the ‘holes’ that often plague management systems trying to integrate point solutions.

Learning from their elders in the telephony business is just the beginning for VoIP providers. In addition to the traditional methods of telephony fraud, there are many new opportunities afforded by the convergence of the IP data networks and voice. Traditional systems historically have been closed systems and fixed locations. If one was to call from a phone, and provide fraudulent billing information, there was, at least a location from which to start the investigation. With the ‘virtual’ World Wide Web, a VoIP caller can be anywhere and easily can use unauthorized billing information or credit card details. Once the fraud has been completed, all the provider can conclude is ‘fraud happened.’ Using systems that allow for correlation of network events and application events, and allow visibility across the entire network to collect detailed information and correlate this data to a specific event, provides the beginning of an investigative trail for carriers.

While VoIP has an established foothold in the enterprise, public carriers now are starting to offer VoIP services, often as a companion to switched services and competitive to mobile services. Offering VoIP to allow mobility of what was a fixed-number location is one way that switched carries are looking to compete. The ability to use your local number while outside your country, receive your calls and place ‘local’ calls at home while thousands of miles away is compelling to many consumers. Just look at the current use of third-party VoIP services for international calling. Carriers offering both circuit-switched services and new VoIP services to complement or replace public-switched services need to have a comprehensive understanding of how their customers are using their networks and their service. It would be easy for a customer to obtain a ‘local’ number and then use it globally to offer family, friends, or even commercial customers ‘their’ service.

As carriers offer VoIP to their customers, they need to be worried not only about customers using VoIP to defraud the carrier, but also to defraud other customers. Classic scams such as personal information theft and others could see an upswing because there no longer is a location for an end point. A call may ‘terminate’ (an old term with an entirely new connotation) in another country, creating a new set of consumer rights questions.

Carriers need to understand the routing of the calls, which now are IPbased, not switched-based. The technology exists to trace IP call routes, but few carriers so far have even thought about its use.

Abuse is a cousin of fraud, where the art form is to use a system in a manner for which it was not intended, but perhaps not as overtly illegal.

Using your local Internet connection to create a paid-for VoIP hosting or termination service, while not illegal, certainly violates the carrier’s original intention of providing Internet access for a single user. As with fraud, knowledge of use, and ‘seeing’ the traffic at all levels - from network to application - is the key to managing services.

VoIP is a new and exceptional technology that can bring tremendous value to the consumer. Carriers that are playing in both the traditional and new voice worlds need to recognize the consumer trends, and use that knowledge to make business decisions regarding their offerings. Just as cellular phones have dramatically reduced the use of public phones, VoIP will, over time, reduce the use of circuit-switched networks. This trend can be seen in the enterprise world as they switch from traditional PBX to VoIP systems.

All of these trends clearly point out IP carriers need to have the ability to see the multidimensional aspects of what is happening on their networks.

It is only with this deep and wide network insight that carriers can detect fraud and abuse, and correlate the events necessarily to properly investigate. Further, this unique method of tracking network activity will enable IP carriers to anticipate shifts in the marketplace and uncover advantageous user trends to grow additional revenue streams. Investing in a system that can provide a complete view of their networks will not only help to protect current provider assets, but will provide the springboard to grow new ones.

There is money flowing in the network.

Jay Thomas is vice president of product marketing at Narus, a provider of a carrier-class IP platform. Thomas has a master’s degree in electrical engineering from Santa Clara University in California and a bachelor’s degree in electrical engineering from California State Polytechnic University, Pomona. He holds five technology patents.


Narus Inc.

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