[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 increase profits.

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 customer.

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.

Usage-Based 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 customer care.

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.