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Traffic Pumping Cost Wireless Carriers More Than $150 Million in 2010

Fri, 04/01/2011 - 7:15am
BETHESDA, Md. -- (BUSINESS WIRE) -- Connectiv Solutions recently released the updated results of a study of traffic pumping on the wireless industry in the United States covering all of last year. The “Impact of Traffic Pumping, Overview of 2010,” provides costs and trends associated with the recent exponential growth of traffic pumping across the country. The results of the study follow a detailed analysis of more than 25 billion call detail records from Tier I-III carriers, covering approximately 50% of the long distance traffic originating on wireless networks in the US.

Over the past eight years, Connectiv Solutions has helped a majority of the nation’s leading wireless carriers achieve significant cost savings across their network operations and is well-positioned to understand the impact of traffic pumping on service providers.

Traffic pumping, also known as access stimulation, refers to a telephone carrier, for example a competitive local exchange carrier (CLEC), partnering with third-party companies offering free service lines (conference bridges, chat lines or international calling numbers).

A rural CLEC can charge inflated access fees to terminate a call, sharing the revenue with a partner. With unlimited domestic long distance becoming standard on calling plans, traffic volumes and access revenues terminating to telephone numbers in more rural markets have increased significantly over the past few years. The result is an arbitrage opportunity for free conference and chat lines.

Calls terminating to carriers meeting a traffic pumping profile cost Connectiv Solutions’ clients $77 million in 2010. Extending to all wireless service providers, the cost is estimated to be more than $154 million for 2010, with this figure no doubt increasing if wireline service providers were included. Initially estimated at approximately $190 million annually, the actual figure was less following clients reducing their exposure to identified traffic pumpers. By re-negotiating long distance contracts following custom studies by Connectiv Solutions, wireless carriers were able to reduce their long distance rates by as much as 70%.

Connectiv Solutions made a number of other observations following a complete analysis of data for 2010. Although less than 1% of the wireless subscriber base called the 25 operating company numbers (OCNs) identified as traffic pumpers, these callers nonetheless accounted for an astonishing 9% of the total long distance variable expenses for client carriers.

Also, minutes of use (MOUs) increased by nearly 50% in 2010. Additionally, Connectiv Solutions estimates that the wireless industry will spend over $170 million in long distance expenses for calls terminating to traffic pumpers in 2011.

Brian Silvestri, president of Connectiv Solutions, said, “As the FCC considers a regulatory framework regarding traffic pumping, it’s important to quantify the financial impact across the telecommunications industry. Our 2010 study does this and provides tools for those affected to assess their cost exposure.”

The study is available publicly for free at: http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.connectiv-solutions.com&esheet=6666731&lan=en-US&anchor=www.connectiv-solutions.com&index=1&md5=a56c21a77ae968af908b2647309751a3.

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