Selecting telecommunication carriers to obtain volume discounts

During 2001 many European markets for mobile phones reached saturation. Hence, mobile phone operators have shifted their focus from growth and market share to cutting costs. One way of doing so is to reduce spending on international calls, which are routed via network operating companies (carriers). These carriers charge per call-minute for each destination and may use a discount on total business volume to price their services. We developed a software system that supports decisions on allocating destinations to carriers. The core of this system is a min-cost flow routine that is embedded in a branch-and-bound framework. Our system solves the operational problem to optimality and performs what-if analyses and sensitivity analyses. A major telecommunication services provider implemented the system, realizing two benefits: it has structured the business process of allocating carriers to destinations and cut the costs of routing international calls.