Fraud Is Not a Source of Competitive Advantage

What would you think of a major international telco refusing to share data about frauds that hurt everyday phone users because they believe that giving information to other telcos would hurt their profits? This is not an academic question. Carriers have this kind of information. Much of it could be better used if shared. Some fraud managers, more concerned with demonstrating the value they add to their bosses than the extent to which they protect customers, refuse to work in the interests of the whole industry, or the public. They believe that retaining information, and using it exclusively to power their own anti-fraud controls, gives them a marketing advantage which can be translated into superior sales to the retail telcos that connect to them. But I doubt you will ever find the public relations teams of wholesale telcos would ever admit that their businesses behave like this, especially if they also provide retail services too. It would be tantamount to admitting that telcos would prefer more people to be victims of crime so they can charge more for telecommunications services.

There are several bodies that encourage telcos to collaborate in the fight against fraud, but it would be naive to imagine all carriers are equally diligent at making intelligence available to others. Setting up a common database to share information is easier than persuading telcos to populate it, leading to an imbalance between the givers and the takers. That is why the technology and principles behind the RAG Wangiri Consortium, an initiative that uses a blockchain ledger to exchange data on the numbers used by wangiri fraudsters, has been carefully designed to discourage free-riding by telcos who would like to take, but who are unwilling to share. Access to the blockchain is free on condition that data is uploaded as well as downloaded. Over 50 firms have joined the consortium on this basis, a tremendous result given that the production version of the blockchain was only completed this year. Anyone wanting an asymmetrical relationship, where they download data but never upload, will find they need to pay for access, if they are allowed to have any at all.

I have been speaking to fraud managers around the world about the consortium, and the overwhelming majority are supportive of its goals. There are some differences in the speed with which telcos connect to the blockchain, but it would be churlish to complain about delays when asking telcos to connect to systems that only existed on paper less than a year ago. Unfortunately, there is also a minority of fraud managers that unashamedly state they do not wish to collaborate because they want to be seen as better than their rivals. Their argument hinges on absurdity; there is nothing superior about a business that refuses to share information on a like-for-like basis because they want others to fail. Instead of appearing strong, they admit to how weak their proposition is unless bolstered by a crass argument that relies on the size of their existing network, and not what they choose to do with it.

On one hand, the carriers who are unwilling to help others fight fraud are acting like monopolists. Translating their size into an information advantage is a way of squeezing smaller telcos. Regulators are typically weak and feeble at dealing with fraud, but even the most pathetic regulator does not want to hear that smaller telcos in their country must either choose to pay a stealth tax to a dominant carrier, or else let their customers endure a higher level of crime.

On the other hand, the pessimists about collaboration are simply wrong about economics and the psychology of consumers. The ordinary phone user has no knowledge of who is to blame for fraud, or who is best at preventing it. When they suffer crime, or read about it in the news, they are more likely to blame the industry as a whole than to pinpoint the businesses who are really at fault. Their logical response is to simply answer fewer calls, and to switch to other forms of communication. This is consistent with industry statistics, and it will drive down revenues for every telco.

When it comes to shaming bad behavior, there are few in this industry that enjoy the same freedom as me. The telecoms sector allows everybody to communicate with everybody else, but its workings are opaque to all but a small number of insiders. I still find much of it to be mysterious, and I have had several off-the-record conversations with regulators who feel the same way. Taken as a whole, the industry often fails to be as transparent as it should be. Whether applying an overly complicated approach to tariffs, or giving disingenuous answers to journalists who ask serious questions about mistakes that affect many customers, there is an unhealthy tendency to obscure the truth of what is really happening. But a lot of you are good, and supportive of the need to share more information in order to better serve the interests of all phone users everywhere. Like me, you put yourselves in the shoes of your customers and want to be part of the change you would like to see in this world. So whilst we will not usurp the monopolists and pessimists overnight, please help me by making it clear to your colleagues and competitors that you intend to work with others to reduce crime, and you expect them to do the same.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.