BILLING: Carriers recognize need for transaction-based billing model

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NEW YORK-The tail is wagging the dog when it comes to billing systems capable of meeting the needs of wireless network operators to enhance average revenue per subscriber by charging for the provision of enhanced data services.

“In our conversations with carriers during the past three months, we’ve seen an amazing recognition that they do have to move to a transactional model,” said Michael Ozburn, president and chief executive officer of Bridgewater Systems, which provides a framework for managing transaction-based telecommunications services.

“Billing systems are very complicated, but they are all about one service going from point A to point B … But the concept of the pipe goes away because of packet-based networks. Yes, the carrier provisions the customer, but does not set up a specific circuit. This also introduces a whole new group of different players offering applications or services.”

Transaction billing requires carriers to ascertain what kinds of services customers are willing to pay for since the wireline Internet has accustomed Americans to all-you-can-eat plans for one set price. Network operators and operations support systems must be able to handle and identify situations in which end-users are toggling back and forth between data and voice communications. Calling plans must be structured in a variety of ways, on a subscription basis, bundled with other services or individually priced, like pay-per-view cable television.

“Something has to create the data record, which doesn’t exist in the normal switching gear available today. It must capture this information in a way that it can be fed into billing or rating systems, and this also doesn’t exist today,” Ozburn said.

“That’s the exciting part. But it’s also very scary when you think about all the options, which are orders of magnitude more than what is available in the circuit-switched environment.”

Content and application providers need to receive reimbursement for the use of their services. Alternatively, some third-party providers, like financial institutions, may be willing to reimburse carriers who provide access to their services.

“With third-party providers of content, like sports, games, shopping and location-based services, the whole concept of settlement is not just about roaming anymore … There will be ways for third parties, like banks, to subsidize their customers,” said Jennifer Fellows, director of product marketing for ADC’s Software Systems Division.

It provides billing system adjuncts that track usage of different services and allow carriers to respond quickly with varied pricing models.

“There may also be loyalty points. Let’s say you download a certain number of games, you could get a game free or a discount for other services,” Fellows said.

Particularly as wireless operators move into next-generation technology, the importance of monitoring and responding to customer usage will become critical to finding the “secret sauce” required for success, she said.

“The reason the CLEC (competitive local exchange carrier) model hasn’t worked is they never used a revenue model that would let them know if they’re making money,” Fellows said.

Traditional billing systems can handle billing by duration or event, as in charging a set price for each short message, said Kenin Spivak, chairman and chief executive officer of Telemac Corp. Telemac embeds its system into the subscriber identity modules of GSM phones and into the software of CDMA handsets.

“The problem in the packet world is assessing usage based on destination, service and content. Each of these can be determined, but it’s necessary to have the intelligence in the end-user device,” he said.

Much of the newly discovered emphasis on billing for varied services is coming from the capital markets, said Scott Swartz, founder and chief executive officer of MetraTech, a Web services billing and revenue-sharing platform provider.

“The market has changed from a first mover market, where you couldn’t spend enough money, to a first `prover’ market. It’s no longer time to market because the capital markets no longer are that receptive to this. Instead, it’s time to revenue. Revenue and net margins are most important,” he said.

At the same time, carriers must be alert to network capacity and service quality issues.

“Other than providing lousy service or refusing to do something, neither of which is good for retaining customers, billing is the best way to shape behavior-by (criteria like) the time of day or at a premium for real-time information,” Swartz said.

As wireless communications moves into a packet-switched environment, the nature of customer usage also is undergoing a transition, he added.

“Wireless started as a way to increase business productivity, moved into a way to improve personal productivity, but now it’s about how consumers can waste time. The most compelling new services I’m seeing are entertainment, music and games,” Swartz said.

While telecommunications carriers are interested in switching from billing based on time to billing for data services, they do not yet seem ready to invest in the change, said Tom Healy, director of corporate communications for Princeton eCom, which provides outsourced and turnkey electronic billing services over the Internet.

“When you transition from time to bit, or flat rate, billing, customers will want to understand their bills better, to know if the silver or the gold plan makes better sense for them,” Healy said.

“The nirvana of this, although it’s probably several years away, is for an electronic billing platform to ask you, the customer, if you’re on the right plan. That would be a great retention tool.”

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