September 2007 | Volume 10 / Nuber 9
Billing & OSS in Cable
By David McNierney
Cable MSOs are undergoing a renaissance, experiencing significant demand for their broadband services and deriving new revenues from services like DVR, VoIP and VOD. Many industry analysts now view pure play VoIP providers as doomed due to cable’s increasing stranglehold on the VoIP market. MSOs are also reaching into other new sevices, such as mobile to complete the quadruple play, and into new customer segments, such as SMBs and enterprises.
However, forward-looking MSOs also see threats on the not-too-distant horizon. Fiber connections with even greater bandwidth are being deployed at ever increasing rates with initial deployments targeting major metropolitan areas and residential communities. Meanwhile, WiMAX promises ubiquitous wireless bandwidth sufficient to deliver TV-quality video.
The threat of disintermediation looms with the introduction of direct-to-consumer offers from media companies. Pressure from both the marketplace and regulators/legislators to unbundle video services by providing a la carte offers is increasing. And the ever increasing threat of the core video services market shrinking as teens while away the hours on YouTube, MySpace and other social networking and UGC sites rather than sitting in front of the TV is becoming a reality.
All of this change presents significant challenges for a legacy billing & OSS infrastructure that was designed for traditional cable TV services. Many MSOs now find their hands tied by their existing infrastructure and now seek ways to enhance their systems and processes without disrupting their ongoing operations and revenues.
Billing & OSS Then
Cable MSOs are notoriously conservative in their infrastructure spending and this has served them well. Nevertheless, as the cable businesses grew throughout the 1970’s and 1980’s from a niche market to a core lifestyle service, the need for robust operational systems became apparent, as did the difficulty and costs of maintaining their own homegrown systems. As a result, third party solutions from companies like CableData (later DST Innovis) and First Data’s Cable Services Group (later CSG Systems) became commercially available.
These solutions focused on the business challenges faced by cable operators during this period. Consider the service offerings of the time: bundles of TV channels with two or three tiers - basic, enhanced, premium - with options for a couple of movie channels. As a result, the resulting operational systems focused on the ordering, provisioning and billing of these simple bundled video services and tasks like scheduling truck rolls and managing inventories of set-top boxes became the priority. Billing systems were often referred to as Subscriber Management Systems (SMSs) because rather than complexities in services and offers, these systems, which closely resembled those from the utilities industry, focused on order scheduling, customer car, payments, and collections.
Vendors like DST Innovis, CSG Systems and others built large-scale statement production and outsourced contact center facilities to assist with the purely operational aspects of the cable industry. The software products and services from these and other companies served the industry well as it grew from a cottage industry into multi-million subscriber operations with a service as pervasive as electricity or phone service.
However, along with the broader communication and media industries that surround it, the cable industry is undergoing fundamental change.
Competition in the old cable world revolved around franchises from state and local governments. Once an operator received a franchise, they enjoyed the position of exclusivity until the first signs of competition arrived from satellite providers like DirecTV and Dish TV. Today, cable operators offer an advanced portfolio of communications and media services while the triple play of voice, data and video services is quickly morphing into a quad play including mobile. As a result, competition comes from not only the DBS providers, but also from telcos, mobile operators and others seeking a play in the “online world”.
Even the tight and sometimes strained relationship between the cable MSOs and their business partners, the broadcasters, is undergoing change. In the world of video, 75% of programming comes from fives companies: Disney (ABC), General Electric (NBC), Viacom (CBS), News Corp (Fox) and Time Warner (CNN). With DVR’s time-shifting and ad-skipping capabilities, the relationship between the MSOs and the programmers has come under increasing pressure as both try to balance new, technology-enabled services with the existing advertising-based business models.
How do services like DVR and mobile impact billing and OSS systems? By offering mobile, MSOs now compete with the incumbent mobile operators who have always delivered innovative offers and promotions. Within the telecommunications industry, mobile operators have traditionally been the most innovative when in comes to service packaging and promotion. Cable billing & OSS systems were neither built to deliver mobile services nor designed to support services with such a high degree of subscriber churn.
Cable billing & OSS systems were not built to facilitate experimentation with new business models either. Services like DVR and VOD now require MSOs to balance the uplift in subscriber revenues with the potential of decrease ad revenues, not to mention the strained relationship with their broadcast partners. They also need to manage the “cannibalization effect” of introducing new services that impact other discretionary services like pay-per-view that represent existing revenues streams.
Much of the cable market transformation has been enabled by technological developments and next-generation networks. Operators like Cox have invested significant resources in multi-service architectures like IMS - another example of a technology with a profound impact on back-office systems. For example, the IMS specification calls for rating, charging and balance management capabilities that introduce both functional gaps integration challenges in MSOs
Another significant market transformation impacting the billing & OSS systems is the introduction of both IPTV and internet video. As fiber operators like AT&T and Verizon rush to emulate the video packages offered by MSOs, cable operators are now facing competition on their “home turf”. While they have increased their revenues by winning the battle for VoIP services, they now face a similar challenge that will require them to be even more creative and nimble with their core services.
Meanwhile, teenagers are increasingly spending their free time on YouTube and MySpace, or playing online games, rather than being the couch potatoes of the past. While the short-term impact on the business model and ad revenues remains unclear, the potential for IPTV and internet video to be as devastating to core video revenues as VoIP has become to the telecom industry is very real.
Billing & OSS Now
The cable community, which is a tight-knit group of peers that often share best practices, understands the need to re-tool itself for this new, multiservice world. Marketing and product management executives within the MSOs understand that the competitive landscape is changing, yet their hands are often tied by their existing billing & OSS systems and vendors.
The demands of the MSO marketing executives also need to be reconciled with a legacy of tightly-controlled infrastructure investment, resulting in a demand for billing & OSS solutions that can clearly demonstrate return on investment. This presents a difficult challenge - how do you quantify market agility in the face of s uch diverse competition and rapid technological change?
With a view towards convergence through IP and the internet, an entirely new generation of vendors has emerged, leading the effort to “turbocharge” existing MSO systems infrastructure. The challenge for the incumbent cable operators parallels the challenges faced by incumbent telcos: upgrade the back-office infrastructure to meet the new challenges while leveraging existing investments.
Challenges with high-profile initiatives like Comcast’s project Bedrock, which consolidated provisioning systems from Comcast and the acquired AT&T Broadband, underscore this need. Many MSOs have deployed billing & OSS enhancements on a service-by-service or segment-by-segment basis. For example, MSOs have introduced new usage-based billing capabilities into their existing billing infrastructures for the introduction of new mobile services.
Other MSOs have implemented new billing capabilities for new customer segments like the commercial segment. SMB and enterprise customers have very different requirements, including contractual and reporting requirements, so it makes sense to focus on solving these new requirements without disrupting the systems that support the existing consumer segment.
Industry standards bodies, such as the Telemanagement Forum’s OSS Through Java Initiative (OSS/J), have also contributed to the enhancement of existing billing & OSS systems to meet the new market needs. They and others have invested considerable effort to demonstrate how third-party billing & OSS systems can interoperate with existing systems and other third-party products to deliver a ‘New Generation OSS’. The IPDR organization has worked diligently to standardize the flow of information from networks to the downstream billing & OSS systems.
The Way Forward
As cable MSOs race to win the broadband war while preventing disintermediation and fighting off newcomers like Google, the path to a nimble yet cost-effective billing and OSS infrastructure may not be so clear. Introducing new capabilities like prepaid, eWallets or IMS-capabilities like charging, requires MSOs to evaluate the various ways to solve the problem. Should they rely on their existing vendors, build strategic capabilities internally, or leverage the new generation of third-party products?
Operators like Canada’s Videotron have already deployed billing & OSS enhancements to enable them to compete more effectively in the multiservice world. Rather than rolling out these capabilities to all segments and all services, they focused on enhancements that would facilitate the rapid introduction of their new mobile offering, enabling them to win customers from the existing mobile operators. Their new pricing & rating capabilities are now being deployed for the remainder of the quad-play services and will deliver unconstrained pricing and packaging capabilities to their marketing organization.
MSOs must also consider new competitors in the form of technology companies like Google and broadcasters like Disney. These companies do not carry the baggage of old, monolithic billing & OSS systems. Instead, they are designing back-office architecture with a clean view of voice, video and content services and their associated business models. Analysts such as HeavyReading’s Caroline Chappelle have acknowledged that many of the new entrant’s architectures heavily leverage the ERP model rather than the old-world billing systems from traditional vendors.
Those MSOs that wait to turbocharge their billing & OSS systems may find the multiservice wave has passed them by. These days, a renaissance does not last very long. IT
David McNierney is Vice President, Market Development, Highdeal. For more information, visit http://www.highdeal.com.
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