India Telecom

February 18, 2005
Convergent billing has multi-dimensional perspective

Raghav Sahgal

SINGAPORE -- Markets today are becoming more competitive, and new subscriber customers are lower ARPU ones. In this milieu, customer retention becomes key. Billing vendors like CSG are in a unique position to tap the customer intelligence that resides in the billing and ordering system to support more intense customer profile management. CSG introduces new solutions to help operators enhance the customer service delivery experience surrounding electronic bill presentation and payment, as well as electronic customer self care via any wireless device or the Internet. When we talk of convergence in the billing scenario, it relates to a multi-dimensional perspective and could be at various levels. CSG sees convergence in many dimensions - in the network level, the service level and the balance level.

• Network level: This is truly CSG's strength! Only network-agnostic billing solutions support trends for massive convergence and a single bill, single view of a customer across multiple lines of services.
• Balance level: Independence of payment mode: "no matter how they pay, get them to stay."
• Service level: This really positions billing as a transaction enabler, not just as a bill generation vehicle. Service-level convergence is what marketing folks are looking for to enable freedom and creativity in quickly bringing to market the marketing campaigns with the ability to bundle products flexibly. IT means supporting all kinds of services - voice (usage billing), data (volume or transaction-based billing) or content (physical or digital content, example, music downloads, ring tones, pictures, movie tickets, etc.) enabling micro or even macro-level payment.
• Content: Global operators are looking to raise ARPU. The obvious new revenue pool comes from selling valued-added services. Today's lifestyle evolves a lot around the mobile phone. The ability to capitalize on this trend is the key. Having a system (billing solution) that helps content monetization is absolutely essential! CSG supplements the core billing and rating engine with complete partner care and revenue settlement solutions to effectively position operators in the center of the new value chain, thereby ensuring that operators have a good handle and share of content revenue.

From a billing perspective, by network level convergence, we mean having a billing platform that is network agnostic. That means, the billing systems can support all kinds of network access technologies, be it fixed, mobile (2G/2.5G/3G), cable or satellite. Service-level convergence simply means having the ability to bill for all kinds of services, voice (usage billing), data (volume or transaction-based billing) or content (physical content or digital content, example, music downloads, ring tones, pictures, movie tickets, etc.), enabling micro or even macro-level payment.

The concept of balance level convergence is very interesting. It evolves from the trend that many mobile operators in several countries are attempting to enable 'independence of payment modes' for their customers, thus breaking the divide between prepaid and postpaid customer segments and services. Even as convergent prepaid/postpaid platforms adapt to support this trend, it is important to ensure that customer loyalties are not weakened by the paradigm shift. Hence, CSG believes that one way of ensuring that customer's benefit from the convergence of payment options is to look beyond the payment modes and investigate how operators can provide a financial service to their customers by dynamically managing the various balances for them.

This is illustrated with an example. If an operator has a convergent billing system, this is a simple illustration of a probable scenario. Picture each subscriber maintaining a mobile wallet with the operators and with this m-wallet, John (subscriber) could, while traveling on business in Beijing, access his account online (powered by CSG Total Care Solutions) to check his bill for the month.

In a single statement, he could view his spending for that month on his fixed-line phone at home, mobile bill for his business phone, cable bill for his cable TV subscription, and broadband bill for his ADSL subscription at home. He could also log on and receive a message from the operator informing him of the festive promotion, conduct two prepaid top-up transactions that month and get two movie tickets to Bridget Jones Diary free. Simultaneously, he receives a text message from his son Jim to say that his prepaid is running low. This is the last text message he can send his father.

John immediately logs on to his operator X's account via his PDA and activates a prepaid top-up for his son. The account is automatically transferred from his postpaid account to Jim's prepaid account, and his postpaid statement is updated with the charges for the prepaid top-up. He then sends a text message to his son informing him of the prepaid top-up. While traveling, he also booked two movie tickets and a candle-light dinner for his wedding anniversary via his mobile phone and arrange for it to be billed through his month-end postpaid account bill. All of this is powered by the touch of a button, although John is overseas on a business assignment.

Key challenges in convergence
If an operator's billing solution is not positioned for convergence or is not network agnostic (in simple terms, an X billing system supporting wireless business; a Y billing system supporting content and data business; a Z business system supporting wire line business), then the system will have a hard time supporting an integrated convergent offer, or for the operator to more effectively position its customers with a single view. CSG's solution is well positioned to support massive convergence from a mutli-dimensional perspective.

CSG anticipated a route to convergence more than three years ago, and has since worked on developing a billing and customer care business framework, the Kenan FX. It is a single, easily-integrated, billing and customer care software platform that combines CSG's strongest existing and acquired applications with new products and features, to support an operator's current needs, while preserving its freedom to add integrated or third-party applications that fit future business requirements.

Operators are currently asking for billing and customer care systems that have the ability to handle a wide range of tasks - from providing customer support to billing the customer to generating new revenues. CSG has responded by weaving together its world-class assets under a common architectural framework that is easily integrated as well. With Kenan FX, CSG leverages its expertise in working with over 260 service providers globally across all access technologies, basically a wide range of operators to tackle other business needs beyond billing, including customer care, and generating incremental revenues from new products and services.

Drivers leading multi-dimensional convergence wave
Asian operators are currently undergoing extreme pressures due to lower capex. There is a need to reduce the operational expense, reduce churn and increase customer retention, increase customer service quality and expand services portfolios to launch next-generation services, while simultaneously integrating and simplifying their system architectures (to capture opportunities in mobile data, prepaid-postpaid convergence, next-generation convergent, fixed, broadband and mobile services).

There is a wealth of knowledge about operator's customer bases inherent in the way consumers use services. However, this data is often trapped in silos of information, solely based on how customers pay (prepaid or postpaid) or what services they subscribe to (cable, mobile or fixed-line), rather than the more critical customer demographics and service preferences. Many operators today do not have the ability for a single view of the customer (information being trapped in silos created by having multiple legacy billing systems for different lines of business).

A single view of the customer is essential and critical to effective customer profile management, leading to better customer service quality and more effective targeted marketing campaigns. Most prepaid systems have little provision for complexities of customer profile management, and operators are unlikely to use it to maximize revenue per user. This becomes increasing critical as more than half of the Asian countries have higher prepaid penetration than postpaid penetration according to a recent report from Pyramid. The fact that some customers are prepaid, some postpaid, and still others are both, simultaneously becomes irrelevant to the provision of excellent customer service. Based on CSG's experience in working with global mobile operators, the operators will face three pressing issues that would ultimately drive the need for platforms where convergence is defined by products and services, not on how customers choose to pay:

Driver #1: Overcapacity and limitations of legacy systems
Several legacy prepaid and postpaid systems, designed solely for voice calls, lack the ability to support new services in emerging markets. These shortcomings will only become more prevalent as Asian operators increasingly launch GPRS and other m-commerce services. Further compounding the problem is that the rapid rate of prepaid and postpaid adoption has outstripped the capabilities of the legacy system deployments. Simply put, with millions of subscribers, these systems are dangerously close to reaching their limits. When they reach capacity, even the current limited level of customer service would be harder to deliver and innovative plans would take much longer to bring to market.

As operators look to replace legacy systems that cannot support capacity growth, they are taking advantage of the opportunity to ensure that the replaced system is a convergent system that is not only network independent, but is built upon open standards and inherently includes the rating flexibility and superior customer management that first-generation solutions, adopted throughout the world, could not provide.

Driver #2: Need for a transaction-based focus on customers
Fundamentally, billing is transaction processing. By thinking of prepaid and postpaid activity in this transaction-based model, the only difference being the payment mode, operators can boost revenue and potentially reduce customer churn. When consumers use prepaid services, there is only an additional transaction: authorization against a balance, followed by the same post-event transactions, like rating, shared by both postpaid and prepaid customers.

When focused on all parts of the transaction as opposed to just authorization, operators concentrate on providing consumers with the flexibility to select the optimal services that match the way they want to pay.

The consumer ability to select prepaid and postpaid balances based on the kind of transaction - be it a phone call or Internet download - gives operators valuable insight into which services have stickiness and which are just draining the marketing budget.

When a provider elects to support its customers with a convergent system - any service combined with any payment method, that can handle every type of transaction, it allows the provider to convert valuable data gained from the way every consumer selects services into campaigns targeted at the entire customer base.

For Asian operators, this is the next logical step in the evolution in markets where penetrations are high and up selling, and cross selling is the lucrative growth window, or in markets where prepaid is the single biggest segment. As the operator builds a tighter financial relationship with the majority of its customers, they will become more loyal, churn will be less and the operator will approach the profitability of its postpaid customers.

Driver #3: Ability to serve customer in a convergent manner (single view of customer) becomes a competitive weapon
Operators must continue to build loyalty from a fickle customer base by packaging innovative bundled offerings that not only deliver a myriad of services tailored to the customer's needs, but also do so efficiently and cost-effectively. Why go so far to please the customer? Recent surveys suggest that despite fewer disposable dollars to spend, bundled offerings delivered with a single bill are the most compelling reason cited by consumers looking to select a carrier. Studies have also shown that a subscriber to a packaged bundled offer is less likely to churn, compared to a subscriber to a single line of service.

As operators expand their portfolios of bundled services, each customer relationship will become more complex. Service providers that can quickly roll out new service plans to further customer retention efforts and entice new customers will survive. Integration must produce a unified and total view of the customer, from how they pay their bills to the type of services to which they subscribe, to what new service offers might entice them to buy. The trend toward truly convergent packages is accelerating across all developing markets and even to some developed markets. For example, some operators have bridged the prepaid and postpaid divide by offering business customers the option of having a single account with multiple services, both prepaid and postpaid, or linked accounts each with their own services and payment mechanisms.

With this type of flexible package, a business customer can maintain a fleet of phones for its employees with a predictable monthly payment, and has the flexibility to top up the fleet phones to a specific amount each month. In the current economy, where consumers are less willing to spend money, having the knowledge of what is the right bundled offering at the right time that will entice the customer is key.

The importance of delivering a cohesive customer service experience and a single bill for all of the services ordered by the customer cannot be understated. Often, what stands in the way of quick, bundled services rollout is not lack of knowledge about what consumers want generally. On the contrary, it is the ability to adapt the mesh of front office and back office systems to work cohesively to achieve an organizational goal. Studies have also shown that prepaid churn rate is significantly higher than postpaid churn rate. As postpaid reaches saturation and prepaid subscriber penetration flattens in Asia, operators will need to find ways to encourage customers to convert to contracted, or postpaid, subscribers. Only in doing so will ARPU and loyalty increase.

An operator in Eastern Europe launched an innovative marketing scheme to its prepaid customers in which subscribers paid for six-months of airtime upfront. At the end of that period, they were immediately granted the ability to become a postpaid customer with the privilege of significantly reduced rates for services. The offer achieved excellent results for this operator: Its goal to convert 50,000 prepaid subscribers into postpaid customers instead lured 400,000 subscribers. In a short period of time, this mobile operator not only captured market share, but also turned its new customers into loyal, more profitable subscribers.

Prepaid/postpaid convergence: leveraging your platform into a marketing weapon
At its heart, a true convergent system makes the distinction between prepaid and postpaid or wire line, cable, broadband or mobile services fundamentally irrelevant. At the center of the convergent system are a subscriber's balances. Each balance is affiliated with a selection of services a customer wants to consume. Each balance is further affiliated with how the customer wants to pay, either prepaid or postpaid. When a subscriber uses a service, the transaction is directed to that desired balance.

Technologically, a convergent system must support all necessary pre-authorization of transactions against balances, as well as mid-event processing and post-event processing and accounting. True convergence brings significant advances to the operator's market offerings. In a prepaid/postpaid convergent environment, the operator has the ability to leverage the best pieces of postpaid rating and billing with the low latency of a prepaid system. In a convergent services environment, operators can easily rollout bundled offers across multiple types of services. In addition, an operator can create hybrid accounts and multi-balance accounts to lock in subscribers and reduce churn. The operator can also affiliate balances across an account or multiple accounts, enabling complex packages aimed at the lucrative business market.

Finally, and probably most importantly, in a truly convergent environment, operators will evaluate the importance of a customer based on the size of the financial relationship, rather than the means of payment or the service they subscribe to. Operators will have a single-view of the customer and hence, the true value of the subscriber, instead of a silo view of the subscriber across different services.