Arbitrage / Tromboning
Arbitrage is a common practice in the telecoms industry. It is generally frowned upon.
Wikipedia defines arbitrage as: “In economics and finance, arbitrage is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something for a low price and sell it for a higher price.”
“Arbitrage is routing traffic via an intermediate country to take advantage of the differences in settlement rates. If country B has much lower settlement rates with country C than with country A, it might be cheaper for country A to send its traffic for country B via country C. One of the first larger arbitrage routes was for traffic between Australia and the US, which was cheaper if sent via New Zealand and Canada. Arbitrage is and was practiced even before the spread of de-regulation”.