The Benefits of Real-time Billing

Dr Steve Menear has worked in the enhanced telephony services industry for over 20 years and with Comverse for nearly 14 years. During that time, he has managed many intelligent network and enhanced services programs. In recent years, Menear has focused his attention on prepaid service, real-time billing and converged billing and is recognized today as a leading expert in this field. He is a frequent speaker at industry events and has published a number of journal articles.

BM. In what ways are today’s billing systems limiting operators and preventing them from maximizing on potential revenue?

SM. Where do we start? Today’s billing systems are limiting operators in just about every way possible. They are fragile, inflexible, slow, leaky, unduly complex and horrendously expensive. With the rapid emergence of new data services, operators cannot continue to spend a fortune and wait forever to bill for these services. The days of traditional billing systems are numbered.

Let’s consider other industries for a moment. A few years ago, if I wanted to buy stock in a company, I had to approach a broker who placed an order on my behalf. The process was slow, expensive, paper-based and required an intermediary. Today, I can place a trade online in a matter of seconds. I have access to huge amounts of data and analysis, and I can track price movements instantly. The entire paradigm has changed. Technology has empowered the end-user and reduced costs. Everybody wins.

There is no question that the billing industry will face the same quantum change. The technology is there to empower the end-user and to reduce costs. Some operators have proved already that real-time billing can fundamentally change the ground-rules. Again, the days of traditional billing systems are numbered.

BM. How can a real-time billing strategy address some of these issues and enable operators to maximize on the opportunities created by emerging technologies? How is it giving companies that crucial competitive edge?

SM. Real-time billing means that service authorization, rating, charging and balance and account management are immediate, responsive, interactive and flexible. This is very different from today’s batch-oriented, paper-based, cyclical billing mentality.

Since rating and charging are performed as part of the service delivery process, revenue leakage is significantly reduced. Operators can impose a credit limit on every account in order to minimize credit risk. Tariff plans can be created and updated in real-time, quite a departure from the situation faced by most operators today. Since account information is always accurate and up-to-date, operators can utilize web self-care technology to empower the end-user.

The pattern begins to look familiar. The old way of billing was slow, expensive, paper-based and required an intermediary. Real-time billing is immediate, offers significant cost savings, allows greater automation and empowers the end-user. We have seen this transition take place in other industries; now it’s our turn!

BM. And how are you active in this regard?

SM. Comverse’s approach to billing is based on two fundamental attributes: real-time and personalized. We believe that these attributes should underlie any billing system, in the same way that they underlie the latest technologies in other industries. It’s not easy, and it takes years of international experience to establish credibility, but it’s the only long-term viable solution.

Comverse has been one of the world’s leading prepaid vendors for some time. Late last year, we purchased the Kenan billing system to become the world’s first converged billing company. We now have all the pieces in place to deliver real-time, personalized billing to all communities, whether prepaid or postpaid. In our approach, transactions can be authorized and credit limits can be imposed on all end-users.

BM. What are the benefits of having a seamless system capable of handling all kinds of data throughout the customer lifecycle? What currently are the limitations and how might these be addressed in the future?

SM. Existing billing systems were designed for voice services and a traditional customer lifecycle; it’s proving difficult to adapt them to the needs of data services. They tend to perform functions sequentially with one system authorizing a service request, another generating a record, another converting the format of the record, and so on. These various steps in the billing process take time and require complex interactions between the various elements. This means that changes to the process, and to the billing system, are costly and time-consuming.

Real-time billing is a whole new way of thinking, and it’s going to take us a while to appreciate its full potential. Since many billing functions can now be performed at the time a service is delivered, there’s much less need for after-the-fact data conversion and record processing, reducing the overall complexity of the process. The latest open interfaces allow operators to define new service types and new billing attributes without requiring software changes. Real-time billing systems can take advantage of these interfaces to support the rapid introduction of new data services.

Right now, the biggest limitation is the magnitude of the migration process. Operators are beginning to realize that real-time billing is the only option going forward – but how can they introduce real-time billing elements into the hugely complex web of traditional billing elements? A number of operators have deployed real-time billing technology already, which will spur others to act, but no one is pretending that the process will be easy.

BM. Beyond better customer interaction, how can the data generated by these tools be used to develop other key areas of business – what are the wider benefits for sales and marketing, inventory, etc?

SM. More accurate information provides more efficient inventory control, more relevant marketing campaigns, and more effective risk management procedures. Since every service must be billed, a real-time billing system becomes a huge source of market intelligence of which much advantage can be taken.

How do credit card companies take advantage of real-time purchase information? They use it to impose a credit limit on every customer, to spot various types of fraud, to identify patterns of use that allow them to frame more attractive offers, and much more.

Real-time billing information can be used in just as many different ways, and there exists a real-time communication channel back to the customer – the handset. Creative operators will notify customers of special deals by sending text messages or by posting internet banners. Real-time billing opens the door to dynamic, interactive marketing.

BM. What about the hard facts: how easy is your technology to implement, is it flexible enough to last the distance and, above all, where’s the ROI going to come from?

SM. Our experience with converged billing (for which Comverse is fortunate to be a pioneer) has taught us that considerable savings are possible when operators bridge the divide between prepaid and post-paid billing systems. It’s a case of simple math: there’s now one billing process, one billing department, one customer care team, one approach to marketing, one numbering plan, and a reduced need for IT resources. One of our customers has reduced billing costs to a fraction of its competitors’.

In addition to the benefits of unified billing, real-time billing can reduce bad debt by imposing a credit limit on every account. This is particularly important when we consider content and roaming services. Partners expect to be paid even if an operator cannot collect debt from its customer base. Some operators are losing tens of millions of dollars every year due to roaming-related fraud, which is just one component of bad debt. This is the second factor in the business case underlying real-time billing.

Real-time billing can reduce revenue leakage by reducing the number of steps in the billing process. Estimates vary, but conservatives put this number at about one percent of total revenue (others quote double-digit percentages). This is the third important factor in the overall business case.

Another important factor is time to market. When a content provider offers an exciting new service, operators with a real-time billing system can deploy that service within weeks. This is unheard of in many networks today where even the slightest change to existing billing processes requires long lead times and huge software development costs. While it’s difficult to quantify the financial benefit, this is the fourth factor in the business case.

Finally, there are other non-quantifiable benefits: improved market segmentation, the possibilities for interactive marketing, and sophisticated promotions and loyalty programs. Satisfied customers tend to churn less, and this factors into the total equation.

BM. Telecommunications is one of the fastest growing and rapidly changing industry sectors. How do you plan on ensuring your solutions remain at the cutting edge?

SM. First, we track standards activities and ensure that our system supports open interfaces. Second, we listen to the large number of operators that use our prepaid, postpaid and converged billing solutions today. Third, we monitor technology developments to ensure our system is as reliable, available, and efficient as possible. Fourth, Comverse has a record of making strategic acquisitions of technology and resources, such as our recent purchase of the Kenan billing group. We have a clear strategy to remain a leader in this market.

It’s important to remember, however, that real-time billing is a critical system. We will never introduce a new component to our system without first conducting extensive testing. In some of our larger systems, for example, we write to a database millions of times every hour. Nothing must be allowed to impact the availability of our systems.

BM. What will be your key business concerns as you look to move forward into 2006/07? And what trends/developments are you getting excited about?

SM. IMS will change the face of billing and make it even more important for operators to have a real-time billing solution – an essential element of the IMS architecture. The IMS approach will allow the rapid deployment of a range of new services, all of which must be capable of being billed. No longer can operators wait months for expensive changes to be made to complex and highly customized billing systems. Real-time and personalized billing becomes an absolute imperative.

With the emergence of some services, such as wireless gambling, end users can become highly indebted to the operator in a matter of minutes. This in turn increases the risk associated with offering new services. It’s unfortunate that operators seek to increase ARPU but don’t have the necessary real-time controls in place to mitigate the associated risk of bad debt. Billing technology must be an enabler of new services and not a constraining force.

Many prepaid companies have arranged marriages of convenience with post-paid billing vendors. These arranged marriages are likely to founder as companies face conflicting business interests and wrestle with the technological implications of high availability, high transaction rates, and fully real-time systems. Comverse is the first company to demonstrate a real commitment to the growing converged billing market. By combining our prepaid technology with the Kenan billing system, we can offer a comprehensive and fully integrated solution. We have anticipated the future of billing and are excited to lead the industry into a new era of real-time billing for all services to all subscribers.