Billing Combining Pre-paid and Post-paid

The mobile telecom world has long been fundamentally divided.
Part of the world pays for the services it uses upfront (pre-paid) and the other
part pays after it has used the services (post-paid). Now these two poles are
being increasingly brought together. This is because commercial and consumer
imperatives make the integration of these two payment options not only highly
desirable, but also essential.

Before considering technical issues, let us first examine the
origins of the divide. Mobile pre-paid was first rolled out in Italy and
Portugal, in the mid-90s. At that time, it was positioned as a second-class
service, more of a method to control bad debt than a discrete offering for a
certain market segment. Targeted at the young and lower-income level people, it
was seen, at best, as a step towards a signed contract and a necessity to
safeguard operators from people who were seen as bad credit risks. The post-paid
model, on the other hand, was deemed more suitable for consumers with strong
credit history and companies for whom reliable communication rather than cost
was the main consideration.

A large number of customers, recognizing pre-paid as an
efficient way to keep control of their call spending, started to sign up to the
service. The growth of mobile pre-paid services uptake has also been fuelled by
the mass production of affordable handsets as well as the arrival of the more
sophisticated technology.

For over three years now, pre-paid mobile services have been
the main driver for the explosive growth of cellular subscriptions in many
countries worldwide. The numbers are impressive. By mid-2000, pre-paid users
accounted for 55 percent of the western European mobile base. And in Italy and
Portugal, pre-paid penetration reached 84 and 74 percent, respectively,
according to the ‘Pre-paid Cellular in Western Europe: What Lies Ahead?’,
report by the Yankee Group Europe (2000).

Pre-paid has proved immensely popular, but it does bring with
it several disadvantages. The set of services available for pre-paid customers
has traditionally been limited to simple voice telephony and in some cases Short
Messaging Service or SMS, and voice mail. Unlike post-paid billing systems,
pre-paid platforms generally do not support either innovative marketing offers
or more sophisticated services like international roaming, for example, as this
requires credit authorization for call setup. As for GPRS or 3G services,
current pre-paid systems are limited to time-based, real-time rating, and do not
easily serve data-led functions. Inability of current pre-paid systems to
support event-based rating and provide credit authorization, in some cases, may
prevent communications providers from offering next generation services. For
example, a user downloading an MP3 file can be cut-off in mid-transfer due to an
overdraft. Since the pre-paid system does not allow the operator to offer
credit, he will have to reimburse the cost of incomplete transaction to the
customer’s account. This is not an ideal scenario for service providers intent
on cutting operational costs.

Due to the above limitations and to the fact that pre-paid
customers have no contract, they are more likely to switch between operators,
thus increasing churn. Fighting against this problem is not an easy task for
operators, because pre-paid subscribers stay anonymous and their usage patterns
are not readily available to support service providers’ decisions on targeted
marketing offers.

Another problem with pre-paid is decreasing Average Revenue
Per User (ARPU). According to the Yankee Group analysts, pre-paid ARPU is
estimated to total between 20 and 40 percent of post-paid ARPU. This is
explained by the fact that pre-paid customers have fewer services available to
them and are more inclined to control their spending. Moreover, when pre-paid
subscribers accounts are shut off, they are not making calls and spending money.
Higher usage could be encouraged by offering credit and/or complex service
bundles, which is not possible with current systems.

Clearly pre-paid has a number of disadvantages, but the fact
that so many subscribers have been weaned on this payment model, ensures its
survival. Ultimately, the pros and cons of both types of payment systems are
immaterial because of the clear need to integrate pre- and post-paid customers.
Today’s technology gives service providers competitive advantages in the harsh
market environment by enabling such integration. Seamless interfacing between
billing systems and pre-paid platforms means that pre- and post-paid customers
can enjoy the same tariffs, discounts and marketing offers. Not only is pre-paid
style financial control available to post-paid customers, but the switching of
customers from one style of payment to the other is becoming easier to
implement.

Such flexibility is a competitive differentiator for
communications providers and an effective response to current market needs. For
instance, parents want to control how much their children spend on their mobile
phones by pre-paying the allocated sum to their balance. Yet, at the same time,
they want to charge all family calls to their post-paid accounts and to make
sure children can make emergency calls. Corporate clients, in turn, are in need
of a combination of pre- and post-paid services for their employees. They also
want to have a single converged view of all products, tariffs and marketing
offers available on both pre- and post-paid basis.

As a result of pre- and post-paid integration, the usage
information generated by the pre-paid platform can be loaded in the billing
system. This gives service providers an opportunity to track and analyze
pre-paid subscribers’ usage patterns through the billing system’s reporting
functionality. Such information can later be used by customer service
representatives to provide unified customer care for pre- and post-paid
subscribers. It can also serve as a foundation for granting credit to loyal
pre-paid customers.

Most intelligent billing systems can track bad debt and help
identify clients with poor credit history. Terminating all services for such
subscribers altogether would mean increasing churn, which is not a favorable
option for service providers focused on retaining their customers. Instead, the
operator can transfer these subscribers to the pre-paid basis, thus reducing
risks and helping customers to control their spending.

New integrated solutions can handle post-paid billing, yet
also provide pre-paid statements. So customers have a single view of pre- and
post-paid accounts, and can drive financial reporting from a single system.
Innovative pre-paid and family group discounts are effective anti-churn
measures. The facility for reverse tax calculation for multi-service pre-paid,
and multi-party settlements with content partners, is important for the
provisioning of next generation services.

Networks are beginning to understand that the integration of
pre- and post-paid models promises to create more flexibility for all types of
users. The value of such integration to both customers and communications
providers can be illustrated by the following scenarios. It must be taken into
consideration though that implementation of any of these scenarios may be
limited by the capabilities of a pre-paid platform.

Pre- and post-paid integration is possible within a family
unit, for example. The father of a family may have a single account with the
mobile phone operator and four different handsets for his family. He would be
able to pay for his children’s calls in advance, and so limit their usage,
while post-paying for the calls he and his wife make. Of course, he would also
have a view of all of their customer transactions. This flexibility also extends
to the sophisticated marketing techniques. On the last day of the month, for
instance, the father could receive 10 percent off the numbers he or his family
have called most often, a discount credited back to his pre-paid account.

A corporate client may be interested in having pre-paid
accounts set up for its employees. The company will allocate a certain sum for
the employees’ business calls at the beginning of each month. All spending in
excess of this sum, presumably personal calls, will be covered by each employee
on a post-paid basis. Thus the company can control mobile usage and drive down
operating costs. At the same time, it will appreciate qualifying for a discount
if the average use per employee passes a certain amount of time (minutes).

If a subscriber uses another network to make a call (i.e.
roams), his home network will owe an overseas operator for that call. Problems
could arise if the customer is allowed to run up a hefty bill, which he then
either disputes or simply does not pay. There are various ways around this. One
option is for the subscriber to temporarily transfer to the pre-paid method and
thus, limit exposure to a certain pre-allocated sum, thereby capping any
potential bill. Another is to track in real-time how much the user owes,
cross-referencing this with his particular credit ratings.

The possible permutations are endless; the bottom-line is
that such flexibility cannot fail to endear the communications provider to its
customers.

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At present mobile operators have a wide choice of billing
solutions from various vendors. But, not all of them allow for the seamless
integration, with pre-paid systems.

A convergent billing solution should allow communications
service providers to have a cross-product view of both pre- and post-paid
customers in one system through the integration of Customer Care and Billing (CCB),
supporting different pre-paid platforms. An integrated mediation device collects
information from pre-paid systems, transforms it into the unified format and
feeds it into the billing system. An effective mediation system will be one that
is both northbound and southbound, which means it not only collects CDRs but
also activates or deactivates customer services on various types of network
elements.

Effective pre- and post-paid integration ensures a uniform
customer relationship management view and convenient subscriber migration
between pre- and post-paid payment methods. As a result, service providers can
offer unified customer care, unified technical support and a more
failure-resistant solution, simply because the entire system is produced on one
ideology and its modules are perfectly compatible with each other.

All customer information in some systems, such as Protek’s,
are stored centrally and can be accessed and analysed across multiple dimensions
to guide the service providers’ marketing decisions. By providing the
information on customer usage patterns, CCB allows operators to identify their
most profitable customers, and focus on keeping them via targeted marketing
activities and VIP customer service.

This type of unified approach will prove indispensable once
3G mobile services arrive. With data due to account for much more traffic than
voice, the disparity between user levels is set to increase dramatically. Mobile
phone use will start to be priced according to volume and quality of data,
rather than time as now. This new structure will give rise to numerous new
pricing models, such as price per download, per ticket or per stock quote.
M-commerce transactions will also become much more prevalent for pre- and
post-paid customers. The value of such transactions will vary widely and may be
determined by a party beyond the operators’ control. This brings new risks of
fraud and over-spending by the customer, making a spontaneous and reversible
transition to the pre-paid option, a useful safety valve for service providers.

Ultimately, the integration of pre- and post-paid systems
will serve as a useful ally to the communications providers who depend on
customer satisfaction for survival. Not only will their customers appreciate the
greater flexibility for themselves, but the operators will also minimize the
financial risk they incur. It needs to be understood, however, that pre- and
post-paid integration is not merely an emergency measure to be used in extremes,
but rather a crucial customer service differentiator. If communications
providers fail to provide such services, their customers will go elsewhere.

Jatindar Ahuja director, sales
(South Asia), Protek