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April 1999


Customer & Billing Solutions Are Key For ISPs

BY RICHARD M. AROIAN

The Darwinian forces of the free market make it impossible to compete successfully on price alone. This is true whether you are an Internet service provider (ISP), a competitive local exchange carrier (CLEC) or an international start-up competitor fighting your deregulated post telephone and telegraph (PTT) administration. You cut your price, your competitor cuts prices, and before you know it, your rock-bottom margins are so thin you're either out of business or bought out by somebody with deeper pockets.

Something else is needed -- an approach with staying power. For example, many ISPs are evaluating the possibility of content-sensitive, transaction-based pricing. The problem is nobody wants to be the first service provider to charge customers for content they are now receiving free. And even if content-based pricing catches on, the fact remains: Competing on price may get you into the market, but it won't keep you there.

STRATEGIC DIFFERENCES
ISPs are also looking beyond Internet telephony toward other revenue sources. Rather than simply providing a physical conduit, they would like to be responsible for transactions relating to Internet commerce. One way would be to act as the credit card verification source. Another would be to act as the billing company for transactions. Or, they could physically store the transaction data, collect orders, assemble orders, and pass them on to information providers.

The Internet also provides some interesting possibilities for self care. Currently, ISP customers must make a phone call to their provider and talk to somebody in support in order to ask a question or make a change. Increasingly, however, clicking an online icon will initiate support calls, which will route requests through an automatic call distributor (ACD) to the help desk or customer support area. ISPs trying to distinguish themselves through superior customer service will be able to do so by offering this self-help customer care - available at a low cost, 24 hours per day, seven days per week.

No matter which strategic direction ISPs follow, they must add value and differentiate themselves in order to survive. This need for differentiation is particularly acute in the case of Internet telephony. In addition to facing the formidable challenge of convincing customers to abandon their trusted, plain old telephone service (POTS) in favor of this new offering service, ISPs must also prove Internet telephony can compete on quality before they can even think about claiming it competes on price.

THE KEYS TO COMPETITION
Internet telephony will likely carve out a legitimate market niche. If so, customer care and convergent billing systems will be available to offer service providers a host of competitive advantages that will enable them to add value and differentiate themselves. In addition to allowing these carriers to quickly bring new products and services to the market - within 90 days in some cases - customer care and convergent billing systems provide complete billing and account management capabilities within a single bill. These capabilities span a variety of wireline and wireless services including local and long-distance service, cable TV, pay-per-view, and Internet access.

Customer care and convergent billing systems also provide one point of customer contact across multiple account levels, service offerings, languages, currencies, and locations. Their customer management capabilities further differentiate their service provider users by allowing them to provide innovative pricing, services bundling, and cross-product discounting.

As a result of implementing this kind of system, a service provider positions itself to not only improve customer care, but to dynamically target new service offerings for specific market segments using demographic data.

Consider, as an example, the value of multiple language support for customer care. If a Portuguese customer calls customer support, they would automatically be connected to a Portuguese customer service representative. Or, if a German customer calls the carrier, the customer can receive a follow-up letter in German. This kind of attention builds customer loyalty and undercuts the prohibitive costs of churn.

TOTAL INTEGRATION
True customer care and convergent billing solutions must be fully integrated across the entire spectrum of services, allowing access to all information from any one service. In this environment, when a customer calls in, the customer service representative is able to look up any one of the services and provide information on all of them to the customer.

The customer service representative will also know if there are outstanding repair and maintenance requests on any particular service. This information is available from one system, on one screen, without the use of hot keys to toggle in and out of multiple systems. A truly convergent system integrates business functions such as customer care and contact, service order delivery/provisioning, event processing/data collection, billing, post-billing, and sales and marketing. Customer service representatives can take an order, enter it, delete it, or modify it from any one of the services they are selling at any time.

The ability of customer care and convergent billing systems to attract and retain customers has elevated them to mission-critical status at emerging and established carriers alike. This growing popularity is largely attributable to the fact that it currently costs carriers about $400 to obtain a cellular customer, and the average life cycle of that customer is nine and a half months. Making matters worse, that acquisition cost is rising at a rate of up to $100 per year. This negative scenario is compounded by the fact that wireless customers are progressively reducing their monthly usage. Customer care and convergent billing solutions are an ideal antidote for this threatening financial situation.

IMPLEMENTING A SOLUTION
ISPs and other service providers have three choices when it comes to implementation options for customer care and convergent billing solutions. The first option is purchasing an in-house system; the second is contracting for a complete, turnkey facilities management scenario.

While this scenario places the day-to-day operations burden on the vendor, it still requires the customer to purchase the software and hardware necessary to run the system. Hardware and software aside, struggling new service providers and established carriers alike would rather concentrate their attention on building out their core infrastructures and signing up new customers than spending the time required to manage a customer care and billing system.

Using a service bureau is the third choice and the least expensive option by far. By selecting a service bureau-based convergent customer care and billing system, service providers are able to slash their start-up costs, rapidly bring products and services to market within 90 days, and avoid the risks associated with implementing a sophisticated convergent package. The tremendous hard-dollar savings that flow from the service bureau option make it possible for emerging and undercapitalized carriers to compete on a level playing field with their richer competitors. In addition to saving millions of dollars in up-front licensing and hardware costs, these companies are also able to eliminate months of development and deployment times.

Moreover, they are able to do away with a plethora of additional expenses associated with recruiting, hiring, and training seasoned personnel. Throw in the savings from not paying for external consulting and systems integration, and the financial justification for this approach becomes very appealing.

In addition to cutting costs, service bureau users gain the peace of mind that comes from implementing a best-of-breed customer care and convergent billing solution. Rather than worrying about all the challenges of running their own in-house systems, they can rely on the dependable 24 x 7 operations and scalable functionality that comes with this solution. As a result, they have the time to concentrate on the things they do best.

Although the service bureau option can grow as needed, it is not necessarily permanent. After building a successful base, service providers can switch over to a licensing arrangement whenever it meets the needs of their business model.

CONCLUSION
In the cutthroat telecommunications service provider marketplace, a price-based competitive strategy may get carriers into the marketplace, but it won't support them for long. There are simply too many competitors who are willing to cut their rates in the short term in hopes of finding a way to survive in the long term.

Content-based transaction pricing may sound alluring, but there is no solid sign that the Internet market - which is addicted to free content - will pay for anything unless there is no other alternative.

This puts ISPs in a bind. Starting out with only a tenuous price-based strategy, they are trying to sell the great mass of largely satisfied POTS users a service that is widely regarded as technologically immature.

The answer for these value-starved companies is to be found in customer care and convergent billing solutions. The ability of these systems to bring customers quickly to market while providing them with complete billing and account management capabilities produces a competitive advantage that can never be matched by bargain basement pricing.

Richard Aroian is vice president of marketing and strategic alliances at Saville Systems, Inc. Saville is a leading provider of innovative convergent billing and customer care solutions for the local (fixed wire), data, long-distance, wireless, and cable and energy telecommunications markets. Saville currently employs over 1,400 employees in its Boston, Toronto, Edmonton, Galway, London, Miami, Frankfurt, Brisbane, Sydney, and Singapore offices. For additional information, visit the company's Web site at www.savillesys.com.







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