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.
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.
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
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
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".
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.
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.
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