[December 14, 2000]
Beyond Flat Rates And Flat Revenue: IP
Mediation Helps ICPs Bill For Usage And Boost Profits
BY GEOFF COLEMAN
Successful integrated communications providers (ICPs) have one thing on
their minds as they set out to grow their customer bases: convergence.
Convergence today means offering a mix of switched voice and Internet
protocol (IP)-based services that companies increasingly rely on to do
business every day. The increasing demand for IP services such as fax over
IP and videoconferencing provides ICPs with an unmistakable opportunity to
However, having the right billing architecture means the difference
between taking advantage of that profit potential, or letting it slip
away. ICPs with highly configurable and flexible single-platform billing
architectures that manage billing and customer care for both switched
voice and IP services will have the best chance of efficiently and
cost-effectively meeting customer needs. Architectures that incorporate IP
mediation technology let ICPs move beyond simple flat-rate billing for IP
services, and charge customers based upon the type of service (such as
videoconferencing), when they use it, the quality of service (QoS)
delivered, and more.
A Changing Landscape
IP ignited a feeding frenzy that sent service providers scrambling to grab
first-mover status -- they implemented flat-rate billing quickly so they
could deploy IP services faster. This saved months of time on custom
coding and systems integration. Time-online billing also helped quickly
build customer bases because the bills were easy to understand and
attractive to new customers.
However, as more IP services became available and customers grew
tech-savvy, they became less interested in the delivery network and more
focused on getting the right mix of services at the right price. Business
customers now want their ICPs to provide them with custom-tailored service
packages, which means establishing operational support systems (OSSs) that
converge services onto one bill.
For many of the early adopter IP service providers, this type of
convergence is challenging because they launched their IP services on a
separate platform from their switched voice services. That separation
limits their system by not efficiently handling charges per event. A more
traditional telephony company's billing system may not be able to charge
based on the multitude of parameters used in the IP world. Running
separate billing operations for each platform costs more, and typically
requires more manpower than if both IP and public switched telephone
network (PSTN) services resided on one platform. Multiple billing
platforms not only hamper convergent billing features like cross-product
discounting, they also deny service providers a unified view of each
ICPs in this position need billing systems flexible enough to collate
usage information from both switched voice and IP services so they can
bill for customer usage activity across all of their services. Deploying
billing systems that can easily add and change new services -- regardless
of what network they're delivered on -- helps ICPs avoid constantly
re-engineering their billing platform each time market conditions shift.
ICPs that launched their IP and switched voice services from a single
platform are also in a better position to adopt IP mediation technology
that will help them graduate from flat-rate billing.
Born of the desire to treat IP services more like switched services, IP
mediation allows service providers to rate an event based on what was
delivered to the end user (not just based on a packet count), and bill
accordingly. A service provider, for example, can charge a business client
a rate based on the quality of the voice over IP (VoIP) service it
delivers. Or it could charge a reduced rate for wireless messaging
services after business hours and on weekends. Alternatively, it could use
the information from the mediation system to settle third-party charges,
such as Web-based advertising.
An IP mediation system typically sits between the IP infrastructure and
the billing system. It collates information from a number of systems --
routers, Web servers, authentication servers, etc. -- and generates Event
Records per session. While these Event Records are analogous to a Call
Detail Record (CDR) from a switched services network, they will often
include more parameters to determine not just session length but also data
volumes, peak data rates, type of content, and other factors that affect
rates. To streamline their operations, service providers can directly tie
these mediation devices to other business applications aside from billing.
Adapting The Architecture
ICPs should consider how adding switched voice or IP services would affect
their existing service delivery architecture. Switched voice service
providers can probably more easily add IP services to their menu than IP
vendors can add switched voice. The reason? Switched voice service
providers have experience in event rating (i.e. Call Detail Records) when
handling interconnect charges, for example. Their billing architectures
must account for the length of the call, the origination and termination
point, and time of day.
This kind of tiered rating knowledge, coupled with a billing system
that can handle it, gives switched voice operators an advantage for
rapidly integrating their voice and IP services and billing for them
beyond time online. Unfortunately while the operator may understand the
underlying concepts, they may not be able to easily change their legacy
billing system so it can accept the new parameters needed for rating and
billing IP usage effectively.
Because most IP service providers launched their services with
flat-rate billing systems, too, they face tough decisions about how to add
switched voice services and implement event-based rating. Their billing
systems typically won't be flexible enough to easily handle event-based
rating. Those systems also won't be able to collate customer usage
information between switched voice and IP platforms. Rather than spending
months trying to rewrite computer code, these service providers should
deploy a convergent billing system that accommodates event-based rating.
This system should also provide their service representatives with a
single view of their customers to maximize the effectiveness of their
Competitive Billing Advantage
Event-based billing flexibility means competitive advantages that turn
into profits for service providers. It allows ICPs to sell packages of
bundled services such as local and long-distance voice -- along with IP
data -- at a discounted rate. Such cross-product discounting builds
revenue. By engaging customers in tailored packages of bundled services,
ICPs can sell more services and stem churn.
While flat-rate billing offers the illusion of the best deal from the
customer's standpoint, it is often more expensive because it focuses on
global charges for services business customers don't always use. For
example, why should a business be charged the same rate for data transfers
from 8 P.M. to 7 A.M.
as they are during normal business hours? Billing for actual usage --
based on the volume of data, when it was used, bandwidth used, etc. -- can
prove to be more cost-efficient for the customer in the long run.
As IP services continue to enter the workplace, service providers will
re-configure their billing structures to accommodate event rating and
billing. In time, the majority of an ICP's customer base will likely see
their bills decrease slightly as they pay for their actual usage rather
than flat fees. However, the ICP's biggest business clients will likely
see their bills increase moderately because they have requested customized
bundles of converged services to better suit their needs.
IP: The Next Generation
In the future, adoption of Internet
Protocol Version 6 (IPv6) will increase the rating and billing
possibilities for content delivered over the network. This identification
will become more important as customers increasingly care more about what
specific services they purchased and at what price, rather than
whether or not the service was delivered via the IP network or via frame
relay. Both ICPs and customers will know exactly what service was billed
for, at what time, and at what rate. Combining this technology with a
billing architecture that can handle more parameters will enable ICPs to
further increase their revenue stream by billing for services and content
in different ways.
Geoff Coleman is a product manager at ADC
Telecommunications, Inc. ADC is "The Broadband Company."
ADC's fiber optics, network equipment, software and integration services
make broadband communications a reality worldwide by enabling
communications service providers to deliver high-speed Internet, data,
video and voice services to consumers and businesses.