Least Cost Routing: How LCR Chooses Outbound Calls

Least cost routing (LCR) is a telephony method that automatically selects the cheapest available carrier or route for each outbound call, based on destination, time of day, and current rates. It works by comparing the per-minute costs of multiple carriers in real time and routing the call through the one with the lowest price for that specific call. This article explains the mechanics of LCR, how routing decisions are made, and what to consider when implementing it.

Formula

The core calculation for LCR is straightforward: Cost = Rate × Duration. For each call, the system computes the cost for every available route using that formula, then picks the route with the lowest cost.

Variables:

• Cost – total price of the call in dollars ($).
• Rate – per-minute charge from a carrier, in dollars per minute ($/min).
• Duration – length of the call in minutes (min).

Real LCR systems also factor in setup fees, rounding intervals (e.g., 6-second vs. 1-minute billing), and quality scores, but the base math is the same.

Worked Example

Using the default values from the calculator above:

• Duration = 5 minutes
• Carrier A rate = $0.020/min
• Carrier B rate = $0.015/min

Cost via Carrier A = 0.020 × 5 = $0.10

Cost via Carrier B = 0.015 × 5 = $0.075

The LCR system would route the call via Carrier B, saving $0.025 on that single call. The calculator shows the same results.

How LCR Works in Practice

LCR is not a single static table; it’s a dynamic decision engine. When a user dials a number, the system:

1. Identifies the destination (country, mobile vs. landline, special service number).
2. Retrieves current rates from all connected carriers for that destination type.
3. Applies business rules (e.g., minimum quality threshold, maximum price cap).
4. Calculates the total cost for each route, including any per-call fees.
5. Selects the route with the lowest cost that meets quality standards.
6. Completes the call over that route.

This decision happens in milliseconds, often without the caller noticing any delay. The system continuously updates rates, sometimes multiple times per day, to reflect wholesale market changes.

Key Factors in Route Selection

Cost per minute is the primary factor, but not the only one. A good LCR implementation considers:

• Destination type – mobile numbers often cost more than landlines; international calls have wildly varying rates.
• Time of day – peak vs. off-peak rates differ, especially for international calls.
• Call quality – a cheap route with poor voice quality or high dropout rates can harm business reputation. Many systems set a minimum MOS (Mean Opinion Score) or maximum latency.
• Billing increments – carriers may bill in 1-second, 6-second, or 1-minute increments, affecting the effective cost of short calls.
• Setup fees – some carriers charge a per-call connection fee, which can make a slightly higher per-minute rate cheaper for very short calls.
• Carrier reliability – historical completion rates and downtime are factored into routing decisions.

How to Choose an LCR Strategy

Implementing LCR requires a clear strategy. Steps to follow:

1. Audit your call traffic – know your top destinations and call volumes.
2. Gather rates from multiple carriers – negotiate or obtain wholesale rate cards.
3. Define quality thresholds – decide the minimum acceptable voice quality and maximum acceptable latency.
4. Set routing rules – for example, always use Carrier A for calls to country X, but allow Carrier B for mobile numbers.
5. Test and monitor – run test calls, monitor call detail records (CDRs), and adjust rules as rates change.
6. Review regularly – rates change; a monthly review prevents cost creep.

Common Problems and Misconceptions

One common misconception is that LCR always picks the lowest per-minute rate. In reality, a route with a higher per-minute rate but lower setup fee or better billing increments can be cheaper for short calls. Another issue is “tromboning” – when a call is routed through multiple carriers unnecessarily, degrading quality and sometimes increasing cost. Quality issues are also frequent: the cheapest route may be overloaded or have poor voice codecs, leading to customer complaints. Finally, some assume LCR is only for large enterprises, but even small businesses with a few lines can benefit from simple LCR rules.

Costs and Savings

The savings from LCR vary widely. For a small business making a few hundred international minutes per month, savings might be tens of dollars. For a call center with millions of minutes, savings can be substantial – often 20-40% compared to using a single default carrier. However, LCR itself has costs: software licensing, carrier integration, and ongoing management. The calculator above demonstrates the per-call savings; multiply that by your monthly call volume to estimate total savings.

Safety and Accuracy Considerations

When implementing LCR, accuracy is critical. A misconfigured route can send calls to the wrong carrier, causing billing errors or failed calls. Always test with real numbers before going live. Also, be aware of regulatory requirements: in some regions, emergency calls must be routed through a designated carrier, and number portability can affect routing. Ensure your LCR system respects these rules. Finally, monitor for fraud – some carriers may route calls through premium-rate numbers without your knowledge.

Alternatives to LCR

LCR is not the only way to manage call costs. Alternatives include:

• Single carrier contract – negotiate a flat rate with one carrier; simpler but may not be cheapest.
• VoIP and SIP trunking – use internet-based calling with lower rates, but quality depends on your internet connection.
• Call-back systems – for international calls, the system calls both parties and bridges them, often cheaper.
• Mobile apps – apps like WhatsApp or Skype bypass traditional telephony entirely, but require both parties to have the app.

Frequently Asked Questions

Does LCR work for mobile calls?

Yes, LCR works for mobile numbers too, but rates for mobile destinations are often higher than landlines. The system treats mobile numbers as a separate destination type and applies the appropriate rates.

Can LCR cause call quality issues?

Yes, if the cheapest route has poor quality. That’s why quality thresholds are essential. Most LCR systems can be configured to exclude routes below a certain quality score, even if they are cheaper.

How often are LCR rates updated?

It depends on the carrier and the LCR provider. Some update rates in real-time, others daily or weekly. The more frequently rates change, the more often your LCR system should refresh its data.

Is LCR legal?

Yes, LCR is a standard business practice. However, you must comply with telecommunications regulations, such as ensuring emergency calls are routed correctly and not using LCR to bypass legal requirements.

What is the difference between LCR and a least cost router?

LCR is the concept; a least cost router is the software or hardware that implements it. The router contains the rate tables, decision logic, and call control functions.

Can I use LCR with my existing phone system?

Most modern PBX systems and VoIP services support LCR. You may need to configure it in the system settings or add a separate LCR appliance. Check with your vendor for specific instructions.

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in t | Call duration | min | 5 | 0 | 1440
in r1 | Carrier A rate | $/min | 0.02 | 0 | 10
in r2 | Carrier B rate | $/min | 0.015 | 0 | 10
out cost_a | Cost via Carrier A | $ | r1 * t | 2
out cost_b | Cost via Carrier B | $ | r2 * t | 2
out saving | Savings using cheaper carrier | $ | abs(cost_a - cost_b) | 2