Billing and wooing: operators need to offer subscribers a simpler, more flexible billing relationship

The parameters that determined the cost of a phone call were once relatively few and simple: duration, geographical location (ie, whether local, domestic long-distance, or international) and time of day (peak or off-peak).

GSM brought some new variables to the mix. For example, people began sending text messages to each other and it became possible to pay up front for usage by setting up a prepayment credit that eventually ran out as you made calls. These prepaid minutes are generally more expensive than postpaid and their use requires the operator to keep an account--in real time--of how the subscriber's credit has been depleted. This is not only to safeguard against unwarranted use, but also to ensure that the subscriber can be prompted when they need to recharge.

Europe leads the way

Both SMS messaging and prepaid subscriptions took off primarily in Europe rather than the US. The success of texting, which was thrown in by handset manufacturers as an afterthought, came as a surprise to everyone. It boomed because the youth market really took to it, creating its own cabalistic codes to abbreviate messages. SMS soon became a major source of revenue for the carriers, and a way of life for the users.

Next-generation services are also likely to take off first in Europe. The rollout of 2.5G services has given us some glimpses of where they market can go, though it can only follow a path beaten by billing capabilities. At the end of the day, services only make sense if operators can charge for them.

No great leaps forward

Like their human counterparts, software generations are not clear-cut. Vendors have been claiming to deliver next-generation systems since the latter part of the 1990s, yet we still have a way to go before we can consider ourselves in a Brave New World of telecom services. Indeed, since the services themselves are only starting to be dreamt up, the billing systems to support them are bound to be the result of an iterative, evolutionary process.

The first additional area of complexity in GSM came with GPRS. This introduced the challenge of having to bill for data as well as voice. Since the data layer of the service is over an IP connection, the billing system had to be able to calculate how much to charge for a given eventt over the packet-switched layer while continuing to bill for voice minutes on the circuit-switched layer. This was a halfway house to 3G, in which both voice and data go over IP.

Billing for events rather than just calls is the direction mobile telephony, and therefore also next-generation billing, is taking. Increasingly, it is not the duration of a transaction that needs to be billed for, but metrics such as the volume of data transmitted, or even the intrinsic value of that data to the user. This means that duration as a metric tends to fade out altogether, particularly when network connections are always on.

Not so simple division

Billing systems not only have to cope with placing a value on the data delivered, in new telecom services they also have to deal with revenue sharing. If Disney or ESPN are offering the content, they will want some of the revenue, and the network operator will not only have to negotiate its slice of the pie but also guarantee that its billing system can calculate the size of each partner's slice every time a transaction is made, no matter how diverse these are.

If the carrier is a virtual mobile network operator (MVNO), that is, piggybacking on another operator's infrastructure, it will also have to share the revenue with the network provider in accordance with their contractual arrangement. Most of the leading billing vendors now offer modules that can be attached to their platforms for divvying up the revenue amongst the various players.

How would you like to pay?

Differentiated billing is not just about deciding how much the subscriber owes for their particular services, it is also about offering a choice of modes of payment. A subscriber may be happy for his normal usage, including data transactions, be carried out at as a postpaid service. Buying five theatre tickets online, however, will probably involve a credit or debit card payment and thus may not appear on the monthly phone bill at all. Equally, they may decide that seeing the highlights of Saturday's soccer match is something they'd like to pay for in advance, ie, as a pre-paid service.

Such levels of flexibility will involve multiple balances being kept for a single, master account. Some of them, such as business usage, may not even be paid by the account holder. Some will be prepaid, some post-. The account may have multiple individual numbers, with different services activated for each.

As the use of mobile data services increases, so will the impact of segments not normally associated with telecommunications. E-commerce transactions are an interesting conundrum for telcos. Who is the bank? Are they just an e-commerce gateway, or a real commerce partner? Should the transaction appear for information only on the invoice? What about micro-payments versus larger valued transactions?

Services for which money changes hands will not be the only challenge for the billing operators. Another factor to take into consideration is the way players such as supermarkets and airlines will increasingly offer bonus minutes/transactions as rewards for using their affinity cards, and these too will be used to pay for different types of services. Discounts from the operators themselves and reward points from other retailers will have to be as generic as possible, so that if Mum has run up some credits by shopping in supermarket A, there is no reason why she cannot make them applicable to the children's numbers on the family account, instead of using them up herself.

This sort of 'lifestyle billing' is only now becoming possible, as the next generation of software comes into play. Indeed, many billing systems have often been guilty of imposing rigid, hierarchical billing structures onto the operators, so that there was no way of splitting out business from personal usage, opting to pay for a service in one way or another on an ad hoc basis, or transferring discounts accrued on one service across to another, or indeed to another person or number on the same account.

That is set to change--and radically.

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RELATED ARTICLE: To have and to hold

Given that the basics for 2.5G and 3G billing are in place, it seems sensible to consider what further demands operators could make of their billing provider.

The sector has shifted its priorities over the past few years. Where once the name of the game was to grow the subscriber base, profitability is now top of the priority list. This means that operators' primary focus today is on retaining their more valuable (ie, higher ARPU and AMPU) customers and, wherever possible, increasing revenue from them with new product and service offerings. Billing systems have a role to play in this.

People churn provider for a variety of reasons, with ease of use among the principal factors. Part of that ease of use is the billing relationship they have with the company, which should be both simple and flexible. Anyone who has ever used their own phone to make work-related calls, then had to sift through their bill, highlight the calls in question, photocopy the marked bill and submit it to be reimbursed will understand how desirable it is for the process to be automatic.

Billing services could include having calls from the same number handled differently, depending on whether they are private or business calls. Equally, parents with adolescent children could want to consolidate their offspring's phone bills onto their own, just as traditionally happens with the house fixed-line phone. The kids will nonetheless want their own numbers, and of course, many parents will want to impose some kind of limit on the children's monthly bills.

As most youngsters in Europe are on prepaid phones today, such consolidation will not only simplify their parents' lives, but should also work out cheaper, since postpaid telephony rates are lower than prepaid. And of course, though the parents may impose a limit on their teenagers' endless phone conversations, they will nonetheless want to guarantee that calls home, or to cab offices, are still possible, even when the monthly credit limit has been exceeded

written by Kurt Lillywhite

Kurt Lillywhite, VP, marketing (EMEA), Portal Software

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