     Part 6 - Networks


      ACCESS NETWORKS
      ------ --------

     For most credit card applications, the cost of the access network is
     the single biggest factor in overall costs, often accounting for over
     half of the total.  For that reason, there are many different solu-
     tions, depending on the provider, the application, and geographical
     constraints.

     The simplest form of access network uses 800 service, in one of its
     many forms.  Terminals at merchant locations across the country dial an
     800 number that is terminated on a large hunt group of modems, con-
     nected directly to the acquirer's front-end processor (FEP).  The FEP
     is typically a fault-tolerant machine, since an outage here will take
     out the entire service.  A large acquirer will typically have two or
     more centers for terminating the 800 service.  This allows better
     economy, due to the nature of 800 service tariffs, and allows for di-
     saster recovery in case of a failure of one data center.  An advantage
     of 800 service is that it is quite easy to cover the entire country
     with it.  It also provides the most effective utilization of your FEP
     resources.  (A little queuing theory will show you why.) However, 800
     service is quite expensive.  It always requires 10 (or 11) digits di-
     aled, and in areas with pulse dialing it can take almost three seconds
     just to dial 1-800.  The delay between dialing and connection is longer
     for 800 calls than many other calls, because of the way the calls get
     routed.  All of this adds to the perceived response time at the mer-
     chant location, even though the acquirer has no control over it.

     Large acquirers prefer to offer some form of local access service.  In
     this service, terminals at the merchants dial a local telephone number
     to gain access to the acquirer.   Typically, the local number actually
     connects to a packet network, which then connects to the acquirer.  If
     the packet network is a public network, the terminal must go through a
     login sequence to get connected across the packet network.  Typically,
     local calls are much less expensive than 800 service calls, and local
     calls typically connect faster than 800 calls.  The cost of those calls
     are absorbed by the merchants directly.  In those few remaining areas
     where local calls are still free from a business line, this works out
     well for the merchant.  Otherwise, the merchant can end up spending a
     lot of money on phone calls.   Usually, the acquirer has to offer lower
     prices to accepters who use local calls, to help offset this.  Even so,
     these networks are generally much less expensive for the acquirers. 
     Such networks are difficult to maintain, due to the distributed nature
     of the access network.  Since most packet networks are much more likely
     to experience failures than the phone network is, the merchant's POS
     terminal is usually programmed to dial an 800 number for fallback if
     the local number doesn't work.  Also, it is generally not cost-effec-
     tive to cover every free calling area in the entire country with access
     equipment, so some 800 service is required anyway.  There is also an
     administrative headache associated with keeping track of the different
     phone numbers that each merchant across the country needs to dial. 
     When you have tens of thousands of terminals to support, this can be
     formidable.

     Acquirers are beginning to experiment with Feature Group B (FGB) ac-
     cess.  FGB access was the method of access used to get to alternative
     long-distance carriers before "equal access" was available.  The
     tariffs are still on the books, and they are favorable for this appli-
     cation.  FGB access provides a single number, nationwide, for all mer-
     chants to dial in order to gain access to the acquirer.  The call has
     simpler (hence, presumably, faster) routing than 800 service, and the
     call is charged to the acquirer, not the accepter.  FGB access does
     have to terminate on equipment that is physically located in the Local
     Access Toll Area (LATA) where the call originated, so there is the
     problem of having distributed equipment, as above.  This also implies
     that it is not cost-effective to deploy FGB access everywhere, as well. 
     There are also some technical oddities of FGB, due to its original in-
     tent, that have made it difficult to implement so far.  

     The other big switched access capability that is likely to have an im-
     pact in the future is ISDN.  So far, this has been inhibited by limited
     availability and lack of adequate equipment on the merchant end, but it
     could be very beneficial when these problems are solved.

     Private-line networks are pretty straightforward applications of
     point-to-point and multipoint private lines.  Since private lines are
     quite expensive, engineering of the networks is challenging.   Usually,
     sophisticated software is used to determine the optimum placement of
     concentrators in order to minimize costs.  Since tariffs, real estate
     prices, and business needs change frequently, maintaining a stable,
     cost-effective network is hard work.  A typical asynchronous private
     line network will have multiplexers at remote sites, with backbone
     links to companion multiplexers at a central site.  Synchronous private
     line networks may use multiplexers, or remote controllers, or remote
     FEPs, depending on the application and the availability of real estate.

      INTERCHANGE NETWORKS
      ----------- --------

     Interchange networks physically consist mostly of point-to-point pri-
     vate lines.  In many of the large interchange networks, there is a cen-
     tral "switch" that takes transactions from acquirers (thereby acting as
     an issuer), and routes them to issuers (thereby acting as an acquirer). 
     Often the switch provider will actually be an acquirer or issuer as
     well, but this is not always the case.  Usually, the provider of the
     switch defines standard message formats, protocols, and interchange
     rules.  These formats and protocols usually comply with national and
     international standards, but sometimes do not.  Often the switch will
     provide translation between different message formats and protocols.  

     The switch provider is generally very concerned that settlement com-
     plete successfully.  Failure to settle with one or more large issuers
     can leave the switch provider with an overnight deficit of a couple
     million dollars.  Even though this is a temporary situation, it has
     significant financial impact.

     In some current networks, authorization and settlement take place on
     completely separate facilities, with separate hosts in some cases. 
     This is mainly due to the history of the industry in this country.  Re-
     call that authorizations were originally done by voice calls, and
     settlement was done by moving paper around.  These two processes were
     automated at different times, by separate means.   Thus VISA has a BASE
     1 network for authorization, and a BASE 2 network for settlement. 
     Likewise, MasterCard has INET and INES, one for authorization and one
     for settlement.  These functions are becoming less and less separated
     as communication and computer facilities evolve, and will probably be
     completely integrated over the next five to ten years.

     Interchange networks are probably the most volatile part of the ATM
     market right now.  There is currently a shakeout going on in much of
     the market, with larger, more aggressive regionals buying out
     standalone networks and smaller regionals.  This causes local banks to
     change local and national network affiliation from time to time.  So a
     card may work in a given ATM one day, but fail in that machine the
     next, which confuses many consumers.  Most large regional and national
     networks have operating regulations requiring labeling of ATMs and
     cards, so that if you see the same logo on your card and the ATM, you
     can be pretty sure it will work.

     Some regionals are interconnected, and others are not.  The two biggest
     nationals, Cirrus and Plus, have operating regulations that effectively
     prohibit a member of one network from connecting to the other.  But a
     regional on Cirrus could be connected to a regional on Plus.  In that
     case, whether a machine will take your ATM card depends on the routing
     algorithm used.  In most cases, the acquirer will have a table of issu-
     ers that are directly connected, and will send anything else to the re-
     gional switch.   The regional switch will have a table of each issuer
     it is directly connected to, and tables of which cards are acceptable
     to other regionals it interchanges with.  Anything else goes to the na-
     tional switch.  The same process happens in reverse from there.  Often
     the order of search in the routing tables is determined by fee scales,
     not geography, so transactions can be routed in completely non-obvious
     ways.

     So the easiest way to tell if your card will work in a given ATM is to
     stick the card in and try.  I don't know of any machine that will eat a
     card just because it can't route the transaction - it will generally
     give some non-specific message about being unable to complete the
     transaction and spit the card back out.   Of course, if the transaction
     is completed from a machine that you're not sure of, you also aren't
     sure what the fee is going to be if your bank passes those fees on to
     you.  Sometimes the fee will be printed on the receipt, but usually it
     isn't.  If you do the transaction in a foreign country, you may not
     know the exchange rate used.  (I once couldn't balance my checkbook for
     a month until I got a statement with the transaction I did at Banc du
     Canada in Montreal.) But if you need the money and are willing to pay
     the fee, you have little to lose by trying out just about any ATM.

     This completes the course in Credit Card 101.  Hope you all found it
     enjoyable and informative.


             Joe Ziegler
             att!lznv!ziegler
