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IIML-V&D Joint Initiative: Challenges of Convergent Billing

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VoicenData Bureau
New Update

Billing is a means of collecting revenue for the products or

the services without which an organization cannot survive. It is no less

important for a telecom service provider. It is one of the media through which a

subscriber creates an image for the telecom operator.

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Billings assumes a special significance for telecom service

providers in the context of convergence. With the dividing lines between the

various communication services vanishing, billing presents, on one hand a

technical challenge, and on the other a great opportunity. The technical

challenge lies in developing appropriate mechanisms for billing the customer for

a variety of services that are offered through the same medium and the

opportunity lies in "cross-selling" of services and creating superior

value proposition for the customers.

Convergence

By convergence, we mean the coming together of communication

media. For example, the telephone line that comes into the house not only

provides plain old telephone service, but also provides Internet access today;

the television cable not only carries TV signals but also carries data traffic

with the help of a cable modem. Today, even the cellular phone is capable of

connecting the subscriber to the Internet. What does all this mean? This means

that today, a company that earlier operated as a purely telephony company can

provide a wide range of value-added services through the same medium.

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This requires the telecom operators to develop systems that

enable it to collect revenue for the multiple services in a way that makes it

profitable for the operator as well as avoids "bill-shock" to the

customer.

Broadly, convergence can take place through two media —

Wired and Wireless.

The Wired Medium

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In wired services, the various services that can be bundled

together and the basis for billing them are shown below:

As can be seen above, most services are billed for time of

usage along with a fixed subscription fee. The fixed subscription fee is usually

charged by the operator for providing the infrastructure, the telephone line

that comes into the home or the cable that is provided by the cable operator.

But, when the same medium gets used for multiple services, there emerges a great

scope for cross-subsidization.

The Wireless Medium

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As in the case of wired, wireless communication also offers a

number of possibilities:

In both wired and wireless arena, convergence offers an

opportunity for the service providers to differentiate themselves from the

competitors through creative bundling of services and billing strategies and

thereby increasing customer loyalty.

Thus, as service providers add newer services to their

offering, it becomes imperative for them to develop an integrated billing

mechanism, that is being generally referred to as "convergent

billing".

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Convergent Billing

The objective, from a carrier's perspective, is to lock in

customers to a certain degree by offering bundled services. By billing for these

services on one invoice and offering the customer a volume discount, the carrier

is aiming to reduce his churn rate. Also, if customers are getting a single

total price for their telecommunication services it will be much more difficult

for them to "single" out a specific service for competitive

comparison, i.e. the customer will be less likely to shop around.

The term "convergent billing" is often confused

with the terms consolidated and combined billing. For the purpose of this paper,

consolidated billing is a product the industry has offered for a long time,

primarily to large business customers, by aggregating department and/or

subsidiary billing to a higher level for single bill payment and customer

analysis. Combined billing is a more recent term used to label electronic

stapling for providing wireline and wireless billing, from divergent platforms,

in a single envelope with summary pages, limited cross product discounting and a

single balance due. Convergent billing defines a new paradigm of integrating all

processes of customer care and billing into a new businesses operating model.

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Billing as a Marketing Tool

Convergent billing has a strong correlation to marketing

activities, in that telecom service providers commonly "bundle" their

services and "cross-sell" services to existing customers.

Bundling and cross-selling are two principal methods to

increase revenues with existing customers. What do we mean by bundling? It

simply means that a service provider sells a combined set of services to its

customers. A good example of bundled services is a paging service that also

includes stock quotes and weather information as part of its service.

Cross-selling involves selling additional services to existing customers–such

as promoting three-way calling to a current call waiting subscriber.

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Like other marketing promotions, bundling and cross-selling

frequently require an integrated approach to customer management and support.

This approach is necessary because customers interact with service providers in

a variety of ways:

Presentation

For many customers, the monthly bill is the interface with a

given vendor, making the choice and arrangement of information on the document

strategically vital.

Customer Service

Each customer inquiry made to a call centre–whether to ask

a billing question or to respond to an announcement on the bill–creates an

opportunity to cross-sell services, as well as to enrich a carrier's warehouse

of customer data.

Retail

Retail environments such as telephone concept stores,

computer stores and office supply chains offer unique opportunities to bundle

services that may range from cellular and long-distance services to Internet

access and Caller ID at the point of sale.

Web and Electronic Data Interchange (EDI)

Transactions enabled by the Web and EDI also provide

important opportunities for customer interaction and creative marketing.

Effective marketing demands not only solid coordination of

all of these communications channels, but also their full exploitation. Each

channel has its own unique advantages and attributes, and carriers must maximize

the impact of a given message, rather than causing more confusion among

customers.

Caller ID and voice mail are services that are commonly

cross-sold to wireline telephony customers. Cross-selling often occurs when a

customer calls a Customer Service Representative (CSR). A call for phone line

maintenance, for example, provides an excellent opportunity for a service

provider to sell a maintenance plan for in-building wiring.

Limiting Factors

One problem service providers have is that they can think of

services, bundles and cross-selling opportunities more rapidly than they can

deploy the actual services and marketing programmes. Each opportunity requires a

business process closely coupled to the service provider's IT infrastructure.

Very few of these processes are fully automated, with many service providers

reverting to the 80/20 rule for automation–80 percent of the work is

automated, while the remaining 20 percent require manual intervention.

What are the real business issues around convergent billing?

Beginning at the end with a single bill, we can look back

through the full scope of customer care and billing processes to reveal the

devil in the detail when offering convergence. This can best be done by

considering three vantage points: the customer, the service provider, and the

underpinning technology.

Customer

Those who choose a single bill option will be savvy customers

who understand their telecommunications options and expect high quality service

at reasonable cost. Their choice of a single bill will manifest these

expectations into options for cross product discounts and a knowledgeable single

point of contact, with personalized service, for their full range of product and

service requirements. In essence, offering customers convergent billing and

payment options will be viewed as a new way of doing business with their

provider and raise expectations of customer service in response to giving all

their business to one company. One caveat here, is sticker shock and whether

large payments due in one envelope will trigger a curtailment in services to

reduce cost. An analogy would be why so many of us carry several credit cards–we

would rather see a Rs 2,000 balance on three cards than a Rs 6,000 balance on

one. The jury is still out on this issue.

Service providers

Convergent view of the market as one for all products and

services instead of segmenting the market for specific offerings, will change

the way providers sell, service, and use customer information. Positioning this

for some, will require new ventures, partnerships and acquisitions, in order to

provide the full range of wireline and wireless products and services customers

want with a single bill offering.

Technology

Several vendors are on the verge of offering truly convergent

customer care and billing systems that can process, rate, discount, and bill

multiple services on one platform. However, the preceding customer and service

provider issues will need adjunct technology and systems integration to

effectively blur the distinction among the individual legacy platforms

proliferating the industry today.

Technology Issues

The challenges facing the billing community are many. One of

the most important aspects is rating. Rating is calculating the price for a call

after executing a set of procedures such as number analysis, identifying call

patterns, and applying the rating method, which calculates the tariff or rate

for the call. Along with the rate is stamped other information needed by the

operator for the post-processing system. Invoicing module can be thought of as

one of the post-processing system.

Billing consists of the following operations.

  • Collection and

    validation of call detail records from the various switches (Collection

    Engine)

  • Computation of

    the charge of the call and passing information required for the

    post-processing system (Rating Engine)

  • Forwarding of the

    rated call detail records generated by the rating engine to the

    post-processing system (forwarder module). The system could be a carrier

    access billing system, invoicing module.

Gone are the days of "waterfall model" and we

should face the world that has moved towards the spiral model where we follow

iterative approach to cater to the changes in technology. Now when the world is

moving towards a "component-based model" it becomes all the more

imperative for the people involved in such systems to gear up to the demands of

the technological revolution.

Many operators have integrated billing solutions which

comprise rating, invoicing, customer care, credit control, etc. The question is

why should an operator have an independent rating engine?

It is best to get the specific job done by people best suited

for it. The billing world revolves round the legacy systems and it is very

difficult to get rid of them quickly. So what is the solution to the problems

faced by the operators who use such systems but also want to gear up to the

demands of the new era?

Well, one of the best solutions that come to mind is to have

an independent module, which takes care of different aspects of billing.

Independent rating engine is one of the most important aspects in this line of

thinking.

The essential characteristics of a rating engine are

accuracy, flexibility, convergence, scalability, and affordability.

Accuracy

One must understand that a minor billing discrepancy can cost

thousands of rupees. Take for example a rate plan, which describes rates for a

call in terms of units other than supported by the rating engine. Now

approximating a given unit in terms of the units could be costly to the

operator. So, the rating system should be able to handle this problem

accurately.

Flexibility

This is, perhaps, the most important aspect of a component in

billing world. If a component cannot support different interfaces the whole

concept of modularization would be lost. So where is the flexibility needed?

Well, to start with there must be a flexible input and output from the system.

The rating module should be able to respond to user-defined interfaces. Next,

the rating system needs flexibility in rating different kinds of calls. Today if

the calls are rated on the basis of distance, tomorrow it is possible that the

operator might need a zone-based rating. The ability to adopt different rating

methods by the rating engine is also an important aspect of independent rating

system.

Another feature, which is perhaps occluded by most of the

rating systems, is state-based rating. Most of the systems, which we encounter,

are stateless. This is a major drawback as the state forms an important part in

rating. Every rating cycle has transition from one state to another. A typical

example is usage-based discounts.

This kind of discounting is based on the volume subscriber

consumes for a specific unit. This scenario cannot be achieved without

preserving states in the programme. A state can be defined as a category under

which a user falls for a specific amount of time. Such a rating is again a great

challenge in itself for a designer. But event- and state-oriented rating engines

are the next-generation engines.

Convergence

This is often the theme of many telecom management companies

and certainly carries a lot of substance for the next-generation rating. Today,

we find operators going in for global roaming, virtual private networks (VPNs),

exchanging services among the operators. All these require rating support. We

hear services like Ipass coming up among the ISPs. With this service a

subscriber can have local numbers access to the Internet in more than one

international locations in spite of the fact that the subscriber has just signed

up with one ISP.

What this service would need would be a unified rating engine

across all the service providers. This rating engine can then produce the

charge, which can be shared with the different billing systems of each service

provider. A VPN is also a step towards this direction where in order to

establish such network one needs to utilize other operator’s network. So the

generic-rating engine would not only provide support for telcos but also the

ISPs. Hence, rating engine needs to have robust bundling and cross-product

discounting abilities.

Scalability

The architecture of the system should be such that it gives

alternatives at every path. The architecture should not become an obstacle in

providing new services or adapting to the changes in technology. For example, if

a business model were object-oriented it would be wise to support it with

object-oriented language. If the decision of the architecture is made

judiciously then there will be no reason for repenting at a later stage. The

question is what should be done for scalability. This decision is mainly at the

discretion of the designer of how he perceives a problem. But he should be able

to communicate well enough to the people taking over from him of how he proposes

to cater to scale the system as required by the operator.

Affordability

By affordability what one means is that the rating system

should be capable of introducing services with minimum amount of time and

effort. Ease of introduction of new rate plans is again an important feature.

Rather than treating rate plans as rating object if we treat it as customer care

object we would realize its importance in billing.

If we give heed to the above mentioned points we realize that

one of the best ways of realizing these features would be through independent

modules. From a business perspective it is far better to deploy parts of a new

system that will reduce cost or improve company performance than to wait for the

all-encompassing. Now we also realize that collection of the call detail records

is more or less independent with respect to billing in most of the billing

systems existing in this world.



The solution could well be found if we were to separate the rating, invoicing,
and the customer care part. Here it becomes important to understand the

difference between rating, invoicing, and customer care. Rating is that part of

billing where validations of customers, analysis of call patterns, calculation

of charge using different rating methods are done. The invoicing and customer

care part basically builds on the results obtained from the rating part. The

invoicing module as the name suggests is an interface with the customer and so

is the customer care part. These modules are responsible for producing invoices,

calculation of taxes, and credit control actions. It is far more economical and

efficient to separate the rating part from the customer care and invoicing part.

Future in the Indian Scenario

Though the present telecom scenario is not quite encouraging

for convergence to flourish, it is important to realize that convergence is

inevitable in the long-run and so the need for convergent billing systems. In

fact, one of the key strengths of India is its software industry. There are many

Indian software firms, which develop billing software for a number of large

telcos that operate abroad. Once the telecom infrastructure in the country

improves, it would be relatively easy for Indian telecom service providers to

adopt convergent billing systems.

This strategy of being the first-mover in providing

value-added services to ‘lock-in’ customers cannot only be adopted by the

basic service operators, but also by the ISPs and cellular service providers.

And a very important part of differentiation based on

provisioning of value-added services is the convergent billing system, the

importance of which in the marketing context has been discussed in detail above.

Market Significance

Given the complexities of convergent billing, why bother? In

its simplest terms, the goal of bill convergence is a matter of convenience for

customers and a matter of survival for vendors in a highly competitive

environment. Requirements vary according to market category. For residential

customers, the need for convenience is paramount. Service providers in the

residential market therefore must offer a single bill to addresses this need,

while also providing a medium for promotional offers and marketing tie-ins that

further reduce customer churn.

At first blush, convergence would seem to offer the same

benefits for business customers as for residential customers. After all,

discounting and the convenience of one bill are naturals for smaller businesses,

which differ from residential subscribers merely by shades of gray.

However, business telecom needs are more complex, and the

costs–and thus the potential savings–are far higher. Value propositions for

the customer look different in case of business, and therefore, the service

provider's perspective on convergence for business customers should differ too.

The bottom-line? As complicated as it is, billing in the

context of convergence is one more crucial piece of the strategic puzzle telecom

service providers need as they evolve into strong marketing organizations.

The article is written under the guidance of Professor V. Sridhar, by D

Raghuram, Pushpam C, J Krishnan, Syed Hussain, and Girish M, all second year MBA

students at IIM Lucknow

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