Eden Phillips, chief technology officer at Azure, the telecoms revenue assurance company, argues that the killer app for next-generation services will be revenue assurance.
Mobile operators have spent billions of pounds on licenses for next-generation services as they look to them as a major new source of revenue in an increasingly saturated market for traditional services. Yet many operators will not be able to reap the potential benefits and maximise these revenues unless they start to put a coherent revenue assurance strategy in place.
For the last decade, the main focus for mobile operators has been to attract subscribers to their services and meet the retail demands of the market. This has meant that operators have aggressively marketed their voice services offering a wide variety of deals and tariffs. Consequently mobile operators have, by and large, concentrated on retail billing and have been pro-actively implementing mediation and fraud systems on this side. However, until recently, little emphasis has been put on wholesale billing, which potentially is the largest source of revenue but, at the same time, the largest source of loss!
Current revenue losses are estimated at 13.7 per cent (Analysys, 2003) and there is concern that this figure will increase over the next 12 months with the roll out of next-generation services. Certainly, the move to IP based services will require many operators to have a mind-shift with regards to how they approach managing their networks, as revenue assurance and IP are potentially big trouble.
One of the first hurdles to consider is that the evolution of IP is at different stages, both at a company and country level. Italy, for instance, has taken a revolutionary approach to IP services and is much further down the road than many of its European counterparts who have taken a much more ‘conservative’ approach. With this being the case, it is currently difficult to have any uniformity and develop best practice.
In traditional voice networks it is possible to monitor events as the network contains ‘intelligence’ with call data being gained at the switch. This has led to much revenue assurance activity being undertaken by in-house departments under the supervision of individual systems designers as managing the end-to-end process is deemed to be quite ‘simple’. However, with IP, many in-house operations are going to struggle. Firstly, it is much harder to monitor activity as the network has much less ‘intelligence’; and secondly, the sheer size and complexity of the value chains means that in-house operations are being bombarded from all directions with data from a multitude of sources, and can’t manage the relationships effectively.
IP probes are certainly going a long way towards enabling operators to monitor IP events on their network. However, unless there is an actual understanding of the entire next-generation revenue assurance picture, operators are only identifying the cause but not solving the problem.
Areas of impact
Three operational areas where the impact of next-generation mobile services will be felt will be mediation, partner management and fraud management. In traditional voice networks most operators implement a mediation layer as part of their standard billing platform. However, most mediation systems require a lot of manual effort to add new record formats or processing rules, meaning that launching or being able to bill for new services can be significantly delayed. At a time when operators are looking to roll out next-generation services quickly and the lifecycle of many products and services will be short, such delays will be very damaging to potential revenues.
Many customers will want services that enable them to download content such as films, video clips, music tracks and ring tones as well as give them access to entertainment, news, games and information services, etc. Most of the products and services offered to Billing for next-generation services will simply not be about rating for kilobytes or pages: it will be about providing a safe, efficient and open trading environment for both customer and business-to-business transactions. A critical success factor for operators will be the ability to manage their partners and their wholesale business.
Current wholesale billing models so far have been very simplistic with the operators charging for access and the customer settling directly with the service provider. This model does not require the access provider to make any settlement with the content provider, but it also means that the access provider does not get a share in the value of the transaction. As next-generation services will carry a higher value it is likely that operators are going to want more of a cut of the action. How this is approached will depend on how individual mobile operators view themselves in the marketplace.
Some will see themselves as primary network operators, whose purpose will be to provide technical infrastructure and facilitate the movement of data across the network. Their goal will be to fill the network with as much data as possible and then operate it as efficiently as possible. Content services will be a primary driver in attracting more traffic across the network. Since the operator does not gain a share of the end transaction in this model, it is important to keep the settlement mechanism simple. In order to do this, operators will need to develop relationships with a small number of ‘content aggregators’ who will manage the complexity of multiple content partners or continue to allow the end customer to settle directly with the content provider. Although this settlement system may be simpler, the downside to this approach is that the operator does not get a share of the content value.
Alternatively, other operators will see themselves as service providers, not just network operators. Their aim will be to earn incremental revenues through differentiation and targeting services as specific customers. To do this they will be required to have very active partnership agreements with content providers in order to pull together packages of services, which they believe the customer will be prepared to pay for incrementally. If successful the operator will want to try and take a share of the value of the content services provided. Both Vodafone and NTT DoCoMo have already followed similar models with some success.
With all of this in mind, it is important that mobile operators make partner and content management an essential part of their revenue assurance strategy for next-generation services, particularly as fewer transactions will be executed by only one party. Therefore systems will need to be able to:
* Cope with much higher transaction volumes and number of services than currently.
* Manage multiple agreements or price lists. When settling with a content provider it may be necessary to have different pricing plans and charging mechanisms.
* Set up rating for new services and partners immediately. Any billing or rating engine will have to be rules based, configurable in data and in real time.
* Verify and reconcile wholesale charges from other partners as well as to bill.
* Detect fraud on the network.
On this last point, fraud is potentially a major problem with next-generation services. Certainly operators are more concerned about it than they were 12 months ago.
Attractive to fraudsters
Next-generation services will become particularly attractive to fraudsters as m-commerce positions itself as a more flexible alternative to the traditional bank or credit card. This means that the risk changes from price for calls costing a few eurocents per minute, to much higher values for content and commerce. The types of fraudulent activity can be quite varied ranging from basic subscription and identity fraud, both of which are already commonplace with credit cards, to the basic theft of next-generation devices due to their higher value and immediate access to highly personal information.
There will, of course, be many other new opportunities for fraud. Content, for example, could be resold without authorisation, as demonstrated in simple fashion by Napster, resulting in operators and content providers losing significant due revenue. Mobile operators have been repeatedly hit by weaknesses in manufacturing, supply and vendor chains with terminals and payment escaping into the black market for onward sale internationally. Next-generation terminals and payment mechanisms are likely to be the target of similar fraud, which will be even harder to manage and detect due to the increasingly complex interconnect agreements and value chains created by handset manufacturers, content and airtime providers etc.
The need to launch services quicker, potentially with reduced security, introduces further weaknesses that can be exploited through fraud, both internally and externally. This can range from risking recruiting a percentage of untrustworthy staff capable of breaching internal security, to sophisticated fraud involving internet and radio access.
Closely allied to QoS
Whereas, previously, mobile operators could argue that all these revenue assurance issues did not directly impact on customers, it is certainly not the case now. Revenue assurance will be closely allied to quality of service and how this relates to billing and customer satisfaction. Dropping an expensive multimedia transaction and not billing it correctly could potentially have a long-term impact. Firstly the customer will not be happy as they have lost an expensive multimedia call; and secondly, if it is an ongoing problem, this equates to significant lost revenue for both the operator and content providers, who could use this revenue to enhance and improve services for customers in the future.
As next-generation services further evolve, the ability to accurately deal with the large number of diverse transactions, services and partners all in real-time will be key. In this environment operators will be able to highlight potential issues very quickly and take appropriate action before they become a major problem. All of this will enable operators to more effectively manage their cash flow at a time when many are still concerned about their expenditure.
The mobile sector is entering a very exciting, if daunting, era. The next few years will be make or break for many mobile operators, with many of them implementing next-generation services to try and increase market share and grow revenue. Operators have already struggled to ensure that they are recouping revenue from existing services. So, unless revenue assurance is taken seriously, next-generation services could prove a source of great loss — rather than gain.