As the industry starts making the long awaited strategic shift from simple survival to positive growth, new challenges continue to emerge. Unless service providers of all shapes and sizes confront these, they're going to be reduced to little more than mere bit-pipe players. However, knowing where you've got to get to is only part of the problem facing operators as they try to transform themselves through the addition of content and applications to their service portfolios. The real issue is in negotiating all the steps in between, especially as the dance becomes ever more complex, more partners join the floor and the pace picks to an ever faster rhythm.
When it comes to controlling the money flow and all the multi-faceted relationships that reach across the many dimensions that service providers now inhabit, it's fast becoming clear that we desperately need a new approach to how we manage revenues. Only by being able to keep a tight grip on the collection, aggregation and analysis of all the revenue touch points across the entire network and value matrix will operators stand a chance of retaining their current strategically dominant position in the industry. In turn, this requires an approach to billing that is centred around revenue management as its core discipline.
Seeking a role in a transformed landscape
While most of the focus in telecommunications over the years has been on improving the flow and control of the customer's speech and data traffic across our networks, the focus for the next few years has to be much more on controlling and managing the revenue flow. As the products, services and content that we offer become more complex, so too will the relationships between them and with all the other members of the value chain, including the customer. If we lose control of this ever expanding universe then we truly are condemned to become utility carriers for other, more innovative industry sectors, such as retail, entertainment and broadcasting. While we might have been good at programming networks – they specialise in programming the end-customers' needs, desires and creating a personalised experience.
The billing baggage of the past
For much of its history, telecommunications was stuck in a pretty anomalous situation compared to most other industry sectors. This was reflected in its approach to financial and revenue management issues, right up to the present day. Even at the heart of aggressively capitalist economies like the US , a broadly socialist model of service provision existed with forces like the Universal Service Obligation being a major factor in customer relationships .
Sure, some amazing technology might be deployed in the actual network, but the back office remained bogged down in legacy architectures and processes, with very little in the way of real market pressure to drive a reassessment of operational principles or encourage financial transparency. Even a decade ago, many European incumbents had no mechanisms for working out the profitability of their different services as they came under pressure from the EU to halt cross-subsidisation and open the wider market to true competition.
The network itself, while arguably the most complex machine that man had ever built, was essentially two dimensional. Only very limited sets of data needed to be collected from that network to calculate bills, even though the quantities of data involved were huge. Once collected, bill calculation was straightforward. With almost no competition, tariff calculations could almost be done on the back of an envelope, with most customers' bills dependent on distance called, length of call and time of day. While the numbers involved did eventually add up to huge sums – AT&T, for example, was the largest corporation in the world for many years – each individual transaction was relatively tiny.
Cash also generally flowed in one direction only, from customer to operator. In turn, because of the simplicity of the business model, government regulation was comparatively straightforward, especially in areas where the operator was owned by the state itself .
Changing networks, changing customers, changing loyalties
Fast forward fifteen years or so and this landscape couldn't be more altered – and the pace of that change is speeding up almost exponentially as new players –and changes to technologies, markets, regulatory conditions and consumer groups– enter the fray. The old model of traditional telecommunications is coming to the end of its working life. Unless service providers change the ways that they control and manage their revenues – and how they flow between themselves, their customers, and their partners – they'll find that they are exposed to some pretty cruel competitive forces.
Prime amongst these challenges is the operator's relationship with the customer – traditionally seen as its greatest advantage, especially as the concept of network ownership as the prime asset has been steadily eroded in recent years. If there's one defining characteristic of the Next Generation Network model, then it surely must be openness, allowing - if not always encouraging – new service, content and applications providers and aggregators to reach across the network and deal direct with the end customer.
The challenge for service providers is that content owners are very good at ‘programming' their own customers and the strength of consumer brands in an increasingly on-line world cannot be understated. In particular, the potential power of new intermediaries such as the Googles, Amazons and E-Bays – often already having their own billing systems and payment mechanisms in place – is set to pose a major threat to the service provider's traditional dominance of the entire value chain.
Complementing this change, the old ‘one size fits all' model of telecommunications services is now firmly dead in the water. While tariffs for even simple services like mobile voice and texting have exploded in complexity in recent years - thoroughly confusing many customers and not a few marketing and billing executives in the process - we've only seen the start so far. While new services or access options like Fixed-Mobile Convergence continue to be added to the total service portfolio, the complexity of the market has also increased substantially with ever greater levels of fragmentation. Each of these new niches in turn requires their own specific marketing activities - as well as accompanying changes to the supporting billing and tariffing processes.
Retaining the upper hand – from the ground up
Service providers have two possible responses to these changes. They can sit still and, as the competition heats up around them, get slowly cooked alive like the proverbial lobster. Alternatively, they can use their current semi-dominant position in the value chain to extract the maximum value from all the customer, billing and service data available to them and begin to compete more aggressively and proactively for a share of their customer's mindset, loyalty and revenues.
One crucial factor in making this move a commercial and operational success lies in a service providers' ability to react in real-time to changes amongst customers and partners, as well as the wider marketplace. Accurate revenue data needs to be readily available to business development and marketing departments if they're to properly fulfil their roles and move away from ‘flying blind'.
Unfortunately, many processes in this area have historically been built around batch-type processing. While the ability to track payments and credit balances in near real-time conditions have contributed to the success of prepaid services in mobile for example, the performance of these systems is already coming under increasing pressure. With transactions now often involving purchases of premium content such as ringtones or music downloads, delays in monitoring or authorising transactions can either leave the service provider open to fraud and revenue leakage or, at the other end of the value chain, leave the customer frustrated and with money spent out-of-pocket with no service received in return. The appearance of triple- and quadruple-play service providers offering IPTV only increases the urgency of this challenge, with these customers expecting the same near instant performance that they've come to expect from their ordinary TV services.
Transparency, trust and tactics
The issues of transparency, trust and tactics are also particularly acute when third parties are involved. As a result, complex cross-charging calculations may need to be applied as revenue flows in different directions simultaneously, as with advertising, sponsorship or even customer-contributed content playing a part.
This increasingly real time nature of revenue management and the accompanying vulnerabilities of many existing systems also raises its head in the area of CRM. When a customer calls up to complain, change her service bundle or upgrade her handset, what sort of information on that customer is available to the call agent? Are the supporting CRM systems able to monitor customer behaviours from the underlying billing system data and enable the call agent to offer new service and tariff packages designed to at least retain that customer or, more ideally encourage them to try new service options? Indeed, in some situations it may actually be financially advantageous for the service provider to encourage some unprofitable customers to churn away to its competitors….
Finally, there's the changing regulatory environment to consider as well. With accounting scandals having caused trillions of dollars in losses, the buck – as defined by legislation like Sarbanes-Oxley in the US - now firmly stops at the desks of senior executives. Without clear audit trails across the service provider, it is impossible for companies to be sure that they are fulfilling their legal requirements.
Building on Billing
Unfortunately for service providers, their partners, and their customers, many of the billing and revenue solutions currently available betray their origins in the far simpler days of what was effectively a two-dimensional and bi-lateral service model. Incrementally adding new functionalities to a legacy system, while expensive, was supportable when only a few services were being added each year. As telecommunications however moves towards an open-ended supermarket or department store model, it's fast becoming clear that systems are needed that were purposefully designed to fit this new environment.
Not only must a solution deliver on its ‘real' real time promises, but it must also be capable of supporting on a truly integrated basis a far wider range of revenue management and intelligence capabilities. These must stretch from service modelling and delivery right through standard billing processes to CRM plus all the carefully targeted innovative marketing and service bundling activities that service providers need to add to their competitive armoury. Within a wider holistic framework, a service provider must have the ability to both access modular add-ons as required, while simultaneously keeping necessary integration costs down through open APIs and easily extensible interfaces.
Without these system assets - and the conceptual framework that they exist in – billing will remain just billing and many telcos will start a ride down a slippery slope from being a service provider to become just a network operator, searching for the fractional profits that come from being merely a transport provider.