Traffic study: Traffic pumping minutes rose 48% in 2010

A new study from Connectiv Solutions offers both good and bad news about traffic pumping. Also known as access charge stimulation, traffic pumping refers to a scenario in which the operator of a free conference call or chat line terminates inbound calls to a competitive local exchange carrier in a rural area that charges unusually high per-minute access charges and then shares those revenues with the conference call or chat line operator.

Connectiv Solutions offers a service to wireless and wireline carriers that analyzes calling records for their customer base and determines the volume of calls to the highest-volume traffic pumpers so that the carriers can renegotiate terminating access charges with the CLECs. The good news is that the dollar value of access charges paid to traffic pumpers for 2010 came in lower than Connectiv estimated they would be because some carriers were able to renegotiate those rates. The bad news is that the minutes involved increased 48%, indicating the increased popularity of free conference call and chat line services.

“We were surprised,” said Connectiv Solutions President Brian Silvestri in an interview. “We thought the minutes would go down. With more publicity and awareness, we thought we would see more states cracking down on it. But that’s not happening. A lot of people are waiting for regulatory decisions.”

Earlier this year, the FCC said it would address traffic pumping as part of broader access charge reforms. The commission has set a goal of adopting an access charge reform order within a few months.

Less than 1% of customers generate 9% of LD costs
Connectiv Solutions customers skew more toward the wireless side. Accordingly, its data focuses strictly on the wireless market, although Silvestri believes wireline carriers probably experience the same issues.

Connectiv’s wireless carrier clients generate approximately half of all U.S. wireless calls, and based on that data, the company projected the total cost of traffic pumping for all wireless carriers at $150 million for 2010. That’s a substantial decline from the $190 million that Connectiv in mid-2010 said it expected to see for wireless carriers for the year because some of the wireless carriers renegotiated their rates, gaining decreases of as much as 70%.

But the actual minutes of traffic delivered to traffic pumpers rose steadily during 2010. In January 2010, the total of minutes involved was just over 175 million. But by December 2010, that number had risen to approximately 240 million.

Based on this trend, Connectiv projects that the cost of traffic pumping to wireless carriers will increase to $170 million in 2011.

The Connectiv data focuses on the 25 phone numbers used by the free conference call and chat line operators that generate the highest dollar value of terminating access charges. Those 25 numbers were the focus of both the mid-2010 study and the new study.

Connectiv initially identified the phone numbers by analyzing characteristics such as call duration and through test calls to the numbers. Silvestri does not believe any new traffic pumpers with high call volumes have emerged since mid-2010.

One of the most telling findings of the new data was that only 0.7% of wireless carrier customers call any of the 25 phone numbers, but those customers generate 9% of the wireless carriers’ total variable long-distance costs.