Director at AB Handshake Corporation with over twenty years of leadership experience in the telecom sector.
We don’t always pay close attention to how often we use telecommunications and how much influence the voice on the other end has on us. However, we live with telecommunications on our side, rarely turning off our devices and cutting off the flow of communication. Telecommunications is one of the most dynamic industries that never stops and never sleeps, helping us all stay connected and communicate remotely.
A closer look at telecommunications reveals that without access to information, many of our business and personal lives would be shut down. Moreover, the economic development of a region linked for the health of its telecom sector. This industry is an essential piece of the puzzle, connecting all aspects of everyday life.
Telecommunications can be defined as the transmission of information over a distance. Generally, it is divided into four categories of companies: wired and wireless telephone operators, cable companies, satellite companies, and Internet service providers. Telecommunications is one of the largest sectors of the global economy, with total global revenues of $1.37 trillion for 2021.
Maintaining high standards in the industry requires the work of many players. Having worked in this industry for over twenty years, currently as a director of a fraud prevention company, I certainly find the ongoing telecom fraud problem one of the most disastrous for all parties involved: suppliers, carriers, end users and society. This article takes a look at the various factors influencing the evolution of telecommunications. I describe its complexity and show how existing problems result from specific industries.
The origins of the industry go back to ancient times, with a courier service as an old example. However, the events that most influenced the development of the industry occurred only in recent decades.
Telecommunications goes hand in hand with technical evolution. The industry is receiving another wave of rapid growth with the emergence of new technology, changing or improving communication transmission. Examples are the telegraph and telephone, broadband and the Internet.
Due to its huge impact on all aspects of life, telecommunications has long been under the careful radar of regulators. Governments regulate telcos differently from region to region and add nuances to the development of this sector.
Many governments started regulating telecommunications as it became a fundamental force in national economies. In the beginning, many telcos were monopolies, with governments completely controlling prices. Today, states still regulate the cost of some services, but as the market has become more and more competitive, I have noticed that prices have become much fairer. Many regulators have shifted to focus more on ensuring price transparency.
Regulatory initiatives have paralleled the development of the industry. One of the most discussed topics today is fraud. Regulators are focused on protecting telcos and end users in a world of rapidly evolving fraud schemes.
Market Complexity and the Origin of Telecom Fraud
The telecom market has become increasingly complex over time. Over time, regulators have introduced new rules and protocols that govern various aspects of telecom operations. For example, it would be difficult to pass information directly between most operators. Plus it would be way too expensive. Responding to this market need, intermediaries have appeared in the chain and the market has shifted to a composition of wholesalers and aggregators. This introduced an important element of complexity.
Aggregators and carriers provide connections between operators. There are a large number of carriers operating on a small margin, and part of the market is arbitrage, meaning carriers often resell minutes to each other. These interconnection points are where I’ve noticed a lot of the fraud story starts. In practice, the originating operator and the terminating operator are not aligned with key call details. They lack the means to cross-validate them as conversations are set up.
Telecommunications fraud poses a serious threat to operators, enterprises and end users. Criminals misuse telecommunications services to make illegal profits. Fraud is a major pain point for the industry. In 2021, the global telecom revenue loss reached a staggering 2.2%, or about $40 billion. However, there is not one uniform solution to the problem.
The current state of telecommunications brings us to a turning point. I have found that the current problem is the result of a lack of transparency in the international transit area. It cannot be solved with regional regulations. Locally accepted protocols and standards only address some of the fraud, but cannot eliminate it. I think it requires a joint approach, through cooperation between international carriers. Such a paradigm shift is needed to eliminate this threat for good.
To tackle the fraud problem, I advise market participants to opt for more transparency and an open dialogue. In my opinion, the most effective way would be to unite in professional anti-fraud agreements, organizations or similar structures. Collaborating and freely sharing information between members of such a network, combined with implementing the latest tools and strategies to detect fraudulent acts before they happen, is the most viable way to deal with these gray schemes. In addition, regulatory initiatives that set new industry standards could help bring new anti-fraud mechanisms to adoption much faster, helping us all win this battle faster.