Billing For Long-term Success In IP Telephony
BY MICHAEL COUTURE
The value of Internet telephony to service providers comes from the long-term benefits
of a multiservice IP network and service portfolio. What will compel carriers to convert
their primary service platforms from the safe, circuit-switched, Intelligent Network (IN)
world to IP, and attract new service providers to Voice over IP (VoIP) is, quite simply,
money. And money will flow to service providers when compelling new applications and
services that make the communication experience richer for consumers and businesses are
offered at affordable prices, and when operational efficiency gains compel them to do so.
These are the applications that are either only feasible over IP, or are much more
efficiently operated over IP.
So, from a users perspective, where are all of these killer
applications that will drive IP telephony growth? Much has been made in IP telephony
circles lately over the perceived lack of progress in the deployment of these added-value
IP applications to complement the basic voice services that pioneered the industry.
Several factors are held responsible for this. Among these is the need to improve voice
quality and the need to reduce relative cost per port to the level of circuit switches.
Equipment vendors are rapidly addressing both of these issues.
One key factor in the lack of progress that is often missed is the billing system.
Quite simply, it is typically too costly and time consuming to build billing, customer
care, and service management solutions to address these needs. Without being able to
rapidly deploy and charge for new services, marketers fail to move business cases forward
for these new applications. Innovation is choked. But why is this happening and what can
current Internet telephony service providers (ITSPs) do to overcome this?
HOT VoIP BILLING
Today, IP telephony facilitates the bypass of established carrier routes with the
associated fees and high monopoly rates, and remains largely unregulated. Rapidly
improving voice quality is coupled with the inconvenience of two-stage dialing, making
price the driver of IP telephony use. With ongoing erosion of this price advantage, there
is currently no sustainable advantage over traditional calling.
Prepaid calling cards have been the distribution and billing method of choice in these
early days of this market. What is hot in the IP telephony billing space,
then, revolves around billing for prepaid calling card services, and to some extent
wholesale international transport, and fax over IP. Calling cards and prepaid services are
popular avenues for a number of reasons, including technical, financial, and established
First, most phone-to-phone IP telephony requires two-stage calling to access the IP
network via the PSTN. This is analogous to using regular calling cards from traditional
providers that do not utilize the 0+ option. This is an accepted practice when
using calling cards, and is readily adopted by consumers of IP telephony. Also driving the
prepaid calling card approach is the fact that ITSPs are generally new entrants into the
market with little established brand value. Their marketing objectives are typically not
focused on building customer relationships and cross-selling other services or
applications. Rather, they are focused on rapidly driving the number of minutes through
their gateways and over their networks. Consequently, the service relationship is highly
transactional subscribers/users are transient and, in some cases, even anonymous to
the biller (that is, they are typically just card or PIN numbers). This suits calling
card, and prepaid, services very well. Furthermore, calling cards allow for easy retail
branding and may expand sales channels and the addressable market through wholesale and
private-label arrangements. This is ideal for providers with little or no brand equity
trying to rapidly build minutes, manage costs, and improve margins.
In addition, value for the service is also very relevant today. As noted, voice quality
is not yet up to circuit-switched standards, but its getting there. With little or
no brand identity and very low rates, this is not a major consumer or provider issue at
this stage of the market. Prepaid card users, particularly international callers, are
conditioned to, or at least resigned to, lower quality in exchange for very low rates.
Other reasons that prepaid is so hot include the credit and fraud issues typically
associated with international calling. With its built-in authorization and authentication,
and a prerequisite of money in the bank, prepaid services reduce the risk of toll fraud.
But underpinning all of this is the fundamental driver of lower rates. As deregulation
of international telephony accelerates and the threat of regulation for IP looms larger,
it is clear that this arbitrage will evaporate. Value-added applications, single-stage
dialing, and higher voice quality must take over to drive IP telephony to its potential.
Equipment vendors are furiously working on solutions that address the latter two issues
of quality and convenience, and significant progress is being made. New applications also
abound unified messaging, collaborative workgroups, distance learning, video on
demand, Internet call handling, multimedia conferencing all will serve to attract
new users of IP telephony. But where are these applications in the market? How do I get
them as a consumer, and from whom? One of the key reasons we do not see a proliferation of
new and amazing services at the market level yet is the bottleneck of billing. The classic
telco problem: We can build that service/feature/product, but we just cant bill for
it. This must change for IP telephony to close the immense gap, by sustaining or
accelerating conversion rates.
THE STOVEPIPE TRAP
This focus on prepaid calling cards has given rise to a familiar pattern in the
evolution of service-specific billing solutions. That is, the stovepipe
approach to building or buying infrastructure. This was also evident in traditional
telephony and in the early years of IP in general to support the handful of new IP
services. For each service, this approach served the purpose of getting service providers
to market relatively quickly that is, in a matter of a few months at a reasonable
cost. It also allowed providers to tailor the infrastructure solution, including
provisioning, subscriber management, billing, and distribution, to each specific service
offering and specific customer segment sometimes even to each specific pricing
plan! So the corporate e-mail, residential dial, and SOHO Web hosting each had their own
While the effective short-term potential of such a solution is great, this
stovepipe approach serves as a major bottleneck to the growth of IP voice
applications in the evolution of the new public network. Stovepipes make introducing new
services or changing the billing approach or pricing plans cost- and time-prohibitive. As
new service features become available to help differentiate the basic offering (for
example, a new QoS metric), major projects are required to take advantage of the new
service attributes that need to be exposed for billing, or to facilitate some kind of
usage-based pricing. The new service feature is either given away or ignored, and the
cycle to commodity status continues. New service introductions require new stovepipes to
be built. As these new services count from three to 12 to 100 services, this approach
becomes completely unfeasible. Projects take months and cost hundreds of thousands, if not
millions of dollars, to complete. Scarce internal IT resources compound this problem, as
new code is required for every change.
The proliferation of stovepipes sometimes supporting the same basic network
service but for multiple, different offerings or segments within the same service provider
is highly inefficient. The investment in the infrastructure yields no scale
economies, impacting larger service providers most significantly. In addition, the
bundling of services into attractive offerings tailored to suit the needs of various
market segments or user niches is nearly impossible in a stovepipe approach. This makes
service differentiation a further challenge.
Finally, the stovepipes are typically built or purchased as short-term solutions. The
longer-term needs for scalability, availability, and performance are often not considered.
Consequently, the stovepipes can not keep pace with the phenomenal subscriber growth, and
are certain to be even more of a problem as IP voice applications mature.
SOLUTION: BILLING AS A BUSINESS OPERATING SYSTEM
By breaking down the stovepipes and introducing a single, layered, multiservice IP
infrastructure, ITSPs can dramatically improve operating efficiencies, add new services
quickly to increase the addressable market, and host multiple, branded resellers to more
effectively target new segments. The layered model allows underlying value in the network
to be commercialized in products and pricing plans, extracting the value from the network
for improved margin and differentiated services.
This layered business model and multiservice capability is the key to the success of IP
telephony and ITSPs in the longer-term evolution of the new public network. With ample
bandwidth, inexpensive and innovative network applications, low-cost and rapid
commercialization capabilities, and the ability to leverage any strong brand to target any
market niche economically, the back-office function of billing is transformed into a core
differentiator. Billing becomes the business operating system for rapidly deploying new
voice and other IP applications, and for entering new market segments or channels. ITSPs
are able to enter the market on the coattails of rate arbitrage, build their network, and
rapidly drive marginal revenue by deploying complimentary voice and other IP applications.
Michael Couture is product manager, IP telephony solutions, for Solect Technology
Group. Solect has been immersed in the evolution of IP networks since the inception of the
Web. Solects IAF Horizon is used by customers including GTE Data Services, Telecom
Eireann, Saritel, and AT&T Canada. IAF (Internet Administration Frame-work) was
developed working closely with industry leading partners, and incorporates the latest
technology in a flexible, integrated framework that allows service providers to offer a
diverse set of services. For more information, visit the companys Web site at www.solect.com.
BY ZEEV BRAUDE
The Internet telephony revolution has not skipped the billing world. As opposed to
traditional telephony service that uses batch-billing methods based on CDRs, Voice-over-IP
(VoIP) billing requires real-time call handling. Furthermore, the IP environment dictates
that a real-time billing and customer care system resides at the heart of the network,
managing and controlling the Internet services.
Prepaid calling cards and debit customer accounts are growing trends in the VoIP
market. Indeed, the overwhelming majority of VoIP service providers intend to offer
prepaid services and prepaid service mandates real-time call handling. The VoIP
billing system interacts, using a real-time protocol, with the gatekeeper/gateway
(depending on the equipment vendor). The billing system must perform authentication,
authorization, and accounting (AAA) in real time.
Customers making a call are authenticated according to the user ID and PIN or ANI.
Authorization for the call is based on the accounts balance, customers dialing
plan, and the desired call origin and destination. The call authorization is returned to
the gateway with the maximum call duration. When the call is completed, the billing system
will immediately update the billing database.
BILLING IN REAL TIME
VoIP service volume is still not comparable to standard PSTN telephony service,
and is not predicted to reach PSTN telephony service volume in the near future. While this
assessment may be accurate, the volume of VoIP call traffic is growing at a rate that
exceeds most predictions. There are increasing numbers of telecommunication companies that
are entering the VoIP field and commercially testing the service. The need for real-time,
carrier-grade billing is an actual one.
Service providers are looking for secure, reliable, and scalable carrier-grade VoIP
billing. A reliable solution will support 7x24 service with minimum downtime. Scalability
is required in order to manage millions of customers and thousands of simultaneous calls.
The solution must also provide a secure way to transfer data between the billing system
and the gatekeeper/gateway.
Carrier-grade VoIP billing is a mission-critical application. Service providers should
not tolerate service downtime. The billing system must ensure high availability, 7x24
service. Redundancy assures that there is no single point of failure within the billing
system architecture, and backup is required at every point in the system.
Security is mandatory, since VoIP networks are deploying services using the Internet.
Database access should be secured as well, although typically the database resides behind
the firewall. All database users must enter login and password information, and system
privileges are defined for user groups in the system. The database access must also be
secured. Irrespective of the fact that the database is typically located behind the
firewall, it still needs to have restricted access.
The new VoIP technology is particularly dynamic and challenges billing providers to
come up with solutions for new market needs. Service providers, competing for market
share, deploy new services quickly. Billing and customer care solutions must be able to
accommodate these changes at the same rate. Carrier-grade, real-time, flexible billing
systems are required now and will be in even greater demand in the future.
Zeev Braude is VP, product line management for MIND CTI Ltd. MIND, with
headquarters in Yoqneam, Israel and a U.S. office in New Jersey, provides software
solutions for billing, accounting, and management for Internet telephony, switches, and
Internet-based data services. MINDs systems are integrated with all major gateway
and gatekeeper vendors and used by leading telcos such as China Telecom, Deutsche Telekom
and Telia Light. For more information on MIND and its products visit the companys
Web site at www.mindcti.com.