August 1999

Backbone, Billing, And Blended Voice Services Propel Alternative Carriers

BY PAUL WALLNER

To many incumbent voice service providers, Internet telephony is a necessary evil at worst, a way to cut costs at best. But next-gen carriers, ISPs, and entrepreneurs see potential: A way to leverage the instant, global force of the Internet to gain ground on incumbents, and generate profits.

With the doors to competition thrown open and industry pundits heralding a multi-billion dollar IP telephony market by 2002, the key for providers is to move fast. But is Internet telephony happening on “Internet time?” Today’s estimates of total minutes would suggest that it isn’t, but not for lack of demand. Why then?

VOICE AS A SERVICE
The main reason may be that becoming a phone company isn’t so easy. Dial tone is sacred, with little room for “best-effort.” And rolling out carrier-class services entails more than just doing IP right. Voice services involve different billing systems, support, marketing, sales channels, and loyalty programs than most ISPs are accustomed to. In order for providers to turn new services up in time to take advantage of the market window, suppliers must step up with integrated solutions.
To date, IP gateway providers have offered boxes. In the voice world, suppliers serve as integrators, consultants, and logistics coordinators. First-time voice carriers need partners that can help with the business model and the technology blueprint. Like the picture on a puzzle box, service road maps must make sense of all the pieces, precluding difficulties new carriers can scarcely foresee:

• Multiple vendor relationships;
• System integration;
• Building a payment mechanism with financial integrity;
• Variances in dealing internationally;
• Lack of voice experience; and
• Lack of a competitive billing and payment infrastructure.

Uniting the business and technology resources needed for rapid-fire success and sustained differentiation can decrease time-to-market by 60 percent, reduce investment risk, and help preclude churn.

Turnkey infrastructures maximize efficiency and eliminate surprises that delay return on investment (ROI). New Internet telephony carriers must be prepared to invest in areas with seeming counterparts in the ISP business. Yet with voice, each area presents distinct challenges.

THE BACKBONE
First, carriers must replicate voice-world reliability, features, and quality using technology geared for “best effort” data transport. Then they must ensure scalability for their own growth, and interoperability for the industry’s growth.

Few, if any IP telephony carriers rely on the open Internet — dedicated IP networks or secured Virtual Private Networks (VPNs) almost always carry voice. Still, certain measures must be taken to build a competitive service backbone, beginning with a foolproof strategy for 99.999 percent reliability. Starting with the gateway itself, the service should be built on full redundancy, featuring a parallel processing architecture that prevents the gateway from being a single point of failure.

At the device level, a true carrier platform would not run on PCs with architectural limitations, as many early approaches did. To protect carriers’ competitiveness, redundant architectures must scale to support thousands of T1/E1 circuit connections per node, at low per-port costs. More importantly, when viewed in the context of a high-level, turnkey design, backbone gateways impact the reliability of the whole network — and increase revenue margins.

For example, integrating automatic recovery to a backup network within the gateway helps give carriers the control needed to frame service level agreements (SLAs), and performance-based pricing linked to quality of service (QoS). Seamless integration with the PSTN also aids profitability by adding least-cost routing flexibility, driving transmission overhead way down.

The integrated backbone approach enfolds key features that would otherwise take time and effort to source and configure:

Interactive Voice Response (IVR)
IVR should rank high on the checklist. Calling card transactions typically involve a series of user prompts such as, “Please enter your calling card number and PIN now.” Traditionally, these prompts are supplied by IVR systems that reside on expensive databases or central office (CO) switches. Migrating IVR into the backbone reduces voice-prompt traffic, and in turn bandwidth utilization, thus cutting costs dramatically.

Least-Cost Routing
Least-cost routing can also be distributed across the gateway network, building circuit switching into each node. Seamless toggling between the PSTN and IP network lets carriers take advantage of the most cost effective call routes among locations, striking the optimal balance between cost and quality.

Call Supervision
Nothing sends customers back to the incumbent faster than billing errors. Internet telephony gateways do not generally have the same sophisticated call detection capabilities found in CO switches. Without some form of external “call supervision,” the gateway would consider any call commenced as soon as connection is made between the gateways. Billing begins, whether the call is actually answered or not. While separate switches and central billing systems compensate for the gateway, variances in carrier signaling across multinational networks can cause some errors. As with IVR, driving call supervision across the backbone protects carriers from jeopardizing customer relationships.

THE BATTLE FOR TOP BILLING
Usage-based voice service billing systems are complicated from the start, not to mention costly and wasteful of real estate in the CO. And with the movement to IP, electronic commerce interfaces add a new layer of complexity. To date, IP telephony providers have had to make a difficult choice between patchworking best-of-breed solutions and compromising performance to obtain single-vendor solutions. Integrated solutions enabled by vendor alliances must transfer this burden from carriers to suppliers with complementary expertise.

A comprehensive platform includes an IVR driver, authentication systems for pre- and post-paid calling cards, and a customer database to track account balances and PIN numbers. The platform must generate bills, either printed, or via the Web. And to truly enable competition with major carriers, the overall billing/payment solution should transcend calling cards and accommodate credit card authorization as described below.

By moving account management to the Web, ISPs and carriers can save a virtual fortune on customer service. Clients can go to providers’ sites and check on account and billing status, payment due dates, minutes left on prepaid services, etc. They can even add minutes to “virtual calling cards,” make e-payments, and subscribe to new features and services.

MAKING SURE IT PAYS
Getting customers is one thing, getting paid is another. From both the business and technological perspectives, implementing a system that tracks billing and enables many forms of payment is essential. It’s also one of the toughest areas in which to gain ground on established carriers. End-to-end solutions that round out payment strategies with components supporting regular credit and debit cards level the playing field. Adding “e-payment” to the mix can bring a decided advantage.

To date, calling cards have been a driving force in Internet telephony, enabling small carriers to set up shop without having to establish relationships with credit card processors and banks, or invest in real-time bill-generating systems. But calling cards have limitations. Prepaid cards require development of distribution channels, an intensive effort that dips into profits. The channels must then maintain inventory and infrastructure, and front-end activation costs. Post-paid calling cards offer an alternative, but require systems for generating bills and tracking payment. Payment is also not instantaneous, and the risk of delinquency is greater.

By utilizing the Internet to create “virtual calling cards,” both the service provider and the consumer reap the benefits of e-commerce. Providers no longer have to carry the cost of management, production, and distribution of the calling cards; and through credit card acceptance, revenue is instantly recognized. Additionally, consumers gain control, managing calling card accounts in real time, right down to monitoring the costs of calls as they happen.

IP telephony carriers can’t lose sight of the fact that, despite the allure of lower cost, customers resist change. Incumbent carriers “own” customer relationships, and competitive carriers must ideate ways to forge them — without the million-dollar marketing engines. That’s where electronic commerce and the advantages of Internet-oriented business operations come in.

MAKING IT EASY
None of the aforementioned strides make much difference unless IP telephony carriers can attract customers. Along with changing the voice service transport mechanism, the Internet can revolutionize the whole industry, transforming the way minutes, features, and services are sold, marketed, and serviced. The more administration occurs in cyberspace, the higher the cost efficiencies.

Recent strides in e-commerce enable next-gen voice service providers to use their Web sites for front-end billing and payment systems so end-user customers and resellers can make payments, check account balances, recharge calling cards, and more. Carriers can even use Web sites as a forum for signing resellers, a compelling business model given that close to half of all Amazon.com sales are said to come through affiliates.

Resellers, in turn, can track sales, call traffic, customer account balances and payments, response to marketing promotion, and more through the primary carrier’s site. Both sites become forums for selling virtual calling cards, and for customers to recharge them, with all account information current and available to all.

And if they make it this far, every carrier ultimately faces the issues of churn and retention. Without engaging in a multi-million-dollar advertising war, providers can use e-commerce to address these dynamics by tailoring interactive account management and rewards for customer patronage.

NET IMPACT
Rather than having to keep up on the latest iterations of billing systems, credit card platforms, and countless other adjuncts to provisioning voice, new entrants to the Internet telephony market gain ground by effectively outsourcing these concerns to their own providers. This makes for a new trend in vendor relationships, making the rhetoric about long-term partnerships a reality, even a necessity.

In launching Internet telephony services, getting organized and getting there first are key. And if a provider is willing to take on the demands of voice services, they might as well demand high-touch partner relationships that traditionally offset the pressures. Ultimately, closer strategic planning with manufacturers at the outset will make technology components themselves commodities. Sort of like minutes. But for starters, this emerging model will enable Internet telephony on Internet Time. c

Paul Wallner is president of Hypercom Network Systems. Mr. Wallner’s architectural vision provides direction for Hypercom’s e-Telephony and IP.tel service provider solutions, and for its Integrated Enterprise Network (IEM) family of enterprise WAN access solutions. For more information, visit Hypercom’s Web site at www.hypercom.com.