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Article : Fraud Rings True with VoIP

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 telco's have invested heavily to detect and prevent fraud—and they have largely been successful. At present, in the nascent era of Voice over Internet Telephony (VoIP), many carriers are relearning old lessons. Placing illegal VoIP calls, or unlawfully using VoIP to bypass pay-for-services was recently found to cost one carrier an average of $5.00 per call. As a result, with over 20,000 calls per day, VoIP fraud was costing that carrier about $100,000 a day. Carriers who want to successfully participate in the VoIP world need to understand how their customers are using and misusing their networks.

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


Jay Thomas
Vice President
Product Marketing
Narus

Developing point solutions to address fraud, which are disconnected from the billing system, network management system, and security system is very expensive and will ultimately result in lost efficiency.

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 have historically had 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 can easily use unauthorized billing information or credit card. Once the crime has been completed, all the provider can conclude is that that a bad credit card was used. Leveraging systems that allow the correlation of network events, application events, and have the ability to see across the network, collect details information, and correlate it to a specific event, provides the beginning of an investigative trail for providers.

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.

And while not fraud directly, one also has to consider that there are few systems today that allow the tracing or lawful monitoring of VoIP calls, especially in unmanaged networks that are growing in leaps and bounds across the Internet.

Further, carriers who offer both circuit switched services and new VoIP services need to attain a comprehensive understanding of how their customers are using their networks. When carriers don't understand the real use of IP networks and the differentiated and value based services for which they can offer and bill, they lose out on valuable call revenue to VoIP.

While new and exceptional technology brings value to the consumer, carriers who are playing in both the traditional and new voice worlds, need to recognize the consumer trends, and then make educated business decisions regarding their offerings and the packaging of 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. Currently, this trend can be witnessed in the enterprise world as they switch from traditional PBX's to VoIP system.

All of these trends clearly point out that IP carries need to have the ability to see the multidimensional aspects of what is happening on their networks. This knowledge will allow them to 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.


About Jay Thomas:
Jay Thomas brings to Narus an extensive background in telecommunications, with vast experience in development, technology, technical marketing, and alliances. He began his career as an engineer for a major carrier in the development of telecommunications digital carrier equipment. Later, Jay joined ROLM/IBM/Siemens, where he was responsible for leading numerous successful projects as vice president of messaging development and vice president of technology. Most recently, Jay provided consulting services for several start-ups, helping companies differentiate themselves by bridging their technology knowledge to business value and opportunity. Jay 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 5 patents in technology and is an elected school board member in his community.

About Narus:
Narus has led the industry since founding the real-time OSS mediation market in 1997. Narus co-founded IPDR with AT&T, ran the world's first mediation benchmark, and is the first vendor to offer mediation products and ServiceSets for the specific needs of today's service providers. Based on a recent benchmark with IBM and Intel, Narus is the world's convergent mediation performance leader and offers the lowest cost of ownership. Narus has also been a leader in the more recently emerged Intelligence Support Systems (ISS) market. Narus developed a family of comprehensive IP surveillance systems to enable government & law enforcement agencies to monitor, target and intercept intelligence from global networks for national security purposes.

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Published: Wednesday, June 9, 2004

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