Aligning The Back Office For Success With
BY ALICE BARTRAM
Itï¿½s a question that telecommunications carriers and industry pundits
alike have asked for years -- whatï¿½s the ï¿½killer applicationï¿½ that will
convince American consumers to adopt new mobile technologies while
increasing profits for carriers? The U.S. market has seen text messaging
starting to take off and during an hour of network television, youï¿½re likely
to see at least three ads for services such as mobile gaming, downloading
photos, and even watching short multimedia clips all on a mobile phone.
Carriers are experimenting with these different services in pursuit of
consumer adoption, but perhaps itï¿½s not only the services, but also the way
they are priced, billed, and paid that will drive the market.
Established vendors and startups alike have touted the benefits of usage
and content-based billing, especially as carriers use IP-based networks to
deliver new service options, the ability to deliver personalized services
and bill based on value of the service to the consumer becomes possible. For
example, if a mobile consumer will pay a fee to have stock updates delivered
to their mobile phone at closing bell, a carrier can see more profit from
content-based billing than a flat-rate billing structure. The big challenge
is to not only figure out what consumers really want and will pay for, but
to tackle the technological complexity that comes from trying to align the
back-office (billing and OSS) infrastructure to support usage-based revenue
and business models.
CHANGING CONSUMER AND CARRIER MINDSETS
Traditional flat rate and time-based pricing are ingrained in both consumer
and carrier cultures. But these methods limit the ways in which carriers can
market new services to consumers and leave little opportunity to exploit the
true flexibility of IP-based services. Operators are looking for revenue
from data and other value-added services based on new IP technologies to
improve margins and provide competitive differentiation. If operators solely
rely on flat rate or time-based pricing, little opportunity exists for
diversification within a market segment.
Another issue is figuring out what the consumer wants. Capturing the
value of IP-based services is difficult work. Operators must give serious
consideration to evaluating their costs, target customers, competitors, and
strategic objectives in formulating pricing strategy. Price is often a key
deciding factor for consumers seeking a new service.
An operator could charge more for a ring tone of a Top 40 hit than for an
old disco song, or for instant college football highlights versus the
ability to download video clips later in the day.
Another example is an operator offering a customer ten minutes of access
to its network. During that ten minutes, the customer uses 50MB of capacity
and accesses their e-mail. The operator could bill the customer by duration,
by megabytes of capacity used, or by number of e-mails downloaded. In
addition, the operator could charge an extra fee for high bandwidth usage if
a high-bandwidth user is degrading service for other consumers. Or it could
charge by e-mail downloaded regardless of file size.
The marketing and pricing options are nearly endless. Content or
time-based charging ability would permit carriers to be more flexible and
innovative in their marketing approach and provide greater revenue
opportunity and profitability.
So with all its benefits, why is usage-based billing for IP services not
yet widespread among carriers? Thereï¿½s the concern of whether consumers are
willing to accept new billing arrangements and if carriers can incorporate
usage-based revenue into business models. In addition, technological
confusion coupled with the complexity of implementing an IP strategy has
significantly slowed the process.
CONFRONTING TECHNOLOGICAL COMPLEXITY
Usage-based billing for IP traffic is a considerably more complex process
than for PSTN traffic. With a voice call in a traditional circuit switched
environment, the central office switch can provide Authentication,
Authorization, and Accounting (AAA), generate a Call Detail Record (CDR) and
provide a single interface to other support systems. An IP network, however,
is composed of many different network elements. Each information source has
a proprietary log file format, Event Record format, and access protocol. By
themselves, the basic transaction records generated by each network element
are not sufficient for billing.
The missing information exists in other information sources and, in most
cases, must be correlated at the time of the event because of the dynamic
nature of the reference data. For example, IP addresses are often allocated
dynamically and network paths can vary depending on network load and
availability. To generate a meaningful billing record, a mediation system
must first collect data associated with various events from several network
elements and then carefully correlate the usage records. Especially for
prepaid customers, event-based records must be processed in real-time so
that the customer doesnï¿½t exceed his or her account limits.
Once the mediation system has correlated all the pieces of a consumer
transaction, the aggregated billing record can be rated and billed to either
prepaid or postpaid accounts, depending on the customerï¿½s payment plan.
In addition, delivering content over IP networks often increases the need
for an automated revenue sharing process between service providers and
content partners. As providers deliver content from multiple sources,
keeping track of how revenues will be split can become an overwhelming task
if done through a manual process. An integrated content and revenue
settlement solution can automate this process, allowing providers to focus
on core business objectives. If the revenue settlements, mediation, and
other solutions are pre-integrated with the billing engine, providers can
reduce the costs associated with updating the technology infrastructure to
manage IP-based transactions.
Deploying IP mediation is a crucial first step in a usage-based billing
business model. IP mediation can overcome the challenge that in an IP
network, there is no single point for mediation systems to capture
information. Data exists in many network devices and application servers
such as routers, IP switches, firewalls, mail, and Web servers, IP telephony
gateways, and QoS facilitators. Additional complexity is added by the fact
that most carrier environments contain a mixture of circuit and IP services
and many customers subscribe to multiple services.
There are several options for deploying an IP mediation system. One
option for carriers with a hybrid circuit and packet-switched environment
would be to run two different mediation platforms: one to handle traditional
voice traffic and the other for IP and other non-circuit traffic. However,
this non-integrated solution creates too many interfaces into the billing
system. A better solution is to have a single mediation platform collecting,
correlating, and delivering data from all types of service events. After an
IP mediation system collects, correlates, and formats usage data, the
information can be useful to a number of front and back-end systems.
Although billing is the most obvious beneficiary of this data, other
functions also benefit, including business support tools, market analysis,
In addition to the ability to collect and correlate IP-based usage
records, the uptime of a mediation system processing IP transactions becomes
critical. A mediation application that must gather and process transactions
as the event happens and feed the information to downstream systems on a
continuing basis, must have the reliability and scalability to capture every
transaction. If the system goes down, depending on customer traffic at the
time, a carrier risks losing significant amount of profit.
In addition to putting the best technology in place, carriers need to devise
a business model for usage-based billing that perpetuates long-term growth
and generates consumer acceptance. Implementing the wrong model can choke
off demand or under-price services, even lead to unprofitable business. As
more market data is gathered, service providers will start to implement
various strategies, either in production or trial. Business models will
change rapidly to adjust to new services and changes in market dynamics.
Some service providers have implemented volume-based pricing to prevent
abuse of network resources so consumers who are heavy on downloads will pay
more to use more bandwidth than an average consumer. This process is
expensive to track and poorly understood by the users. For example, the
average mobile user doesnï¿½t necessarily understand how many megabytes they
just downloaded, but they would understand a pricing model based on cost per
download. Service providers moving toward event-based pricing, or cost per
MMS message for example, will be better able to market their services to
One of the greatest benefits of implementing IP mediation is that the
analysis and profiling of the data allows carriers to view, customer by
customer, how much a service is actually used and which services are
profitable. This information could be invaluable to help carriers understand
their customer usage patterns and help them design usage plans that will be
more readily accepted.
DELIVERING ON THE PROMISE
What a carrier needs most to deliver on this promise is true flexibility to
generate competitive pricing schemes and business strategies. Robust rating,
billing, mediation, and content settlement capabilities can empower the
operator to price voice and data services based on a variety of factors
including content, volume, flat rate, or per transaction. As such, the price
can then vary based on quality of service, time of day, bundled discounts,
or a variety of other measures. With these systems in place, a mobile
operator can ï¿½re-trainï¿½ the customer to accept pricing plans that are based
on volume, usage, and are application sensitive, creating the ability to
change pricing schemes quickly and nimbly enough to act offensively and
defensively in the market.
Alice Bartram is the director of product management for billing
products in CSG Systemsï¿½ global software and services group, responsible for
strategic product direction of billing and rating platforms. CSG is a leader
in next-generation billing and customer care solutions for the cable
television, direct broadcast satellite, advanced IP services, next
generation mobile, and fixed wireline markets. For more information, visit
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