Convergent Charging: An Opportunity that Reshuffles the Market Deck

How can you offer your entire service catalog to all users regardless of their payment method? This is currently becoming a critical but difficult question that operators must answer to remain competitive. The solution requires broad new service offerings that can be deployed quickly to a unified customer base in order to develop ARPU and increase customer loyalty. The key lies in restructuring existing networks and OSS/BSS systems into a single “online charging” solution. Brian Kassa, Nokia Senior Marketing Manager and Fergus O’Reilly, VP Product Strategy at Highdeal, discuss the benefits of this change for operators as well as for their customers, assess its effects on prepaid, rating and billing systems, and review the various players engaged in this new battle over convergence.

Transaction Reporter: What market opportunities will result from the converging of payment methods?

Fergus O’Reilly: For today’s operators, customer payment in pre and post-paid modes is the basic principle structuring their business. These two types of billing systems have an impact upstream on the type of services operators offer and the way they target their customer base. However, differentiating users by their payment method doesn’t really make much sense.

Brian Kassa: Today, many operators are facing constraints in their charging infrastructure that prevent them from offering their entire product portfolio to their entire customer base. It’s not a good idea to let processing constraints and technical requirements impact service offerings. Operators are frustrated at not being able to introduce new applications on a large scale due to the limits of existing charging and billing systems, notably pre-paid.

FOR: In particular, customer databases are now sufficiently detailed to permit a more fine-tuned segmentation: professionals, teenagers, working women, seniors, crossed with usage behaviours: early birds with a passion for innovation, or beginners seeking simplicity…

BK: It is essential to know who your customers are, what services they do or might use and utilize this information to offer services that best meet their needs and payment desires. Also, interacting with customers only at prepaid account top-up or on the monthly bill is not enough. Online bonus and loyalty schemes as well as new methods of interaction with the end user during service usage will build customer delight and in turn reduce churn.

TR: Could you give us some examples of these new offers and to whom they are geared?

FOR: Convergence enables operators to better reach mixed targets, users that switch between pre and post-paid subscriptions. That’s particularly the case with groups of related users. Operators can reason on a household basis, for example. Members of the same family on a fixed price plan, such as one with 1000 minutes a month, can hold a joint post-paid account on which all voice calls will be charged. On the other hand, operators can differentiate more easily between various types of data services (Internet connections, pay-per-view, downloads, ring-tones, etc.) and set different usage limits for each family member. As a result, numerous rating scenarios are possible. For instance, the parents’ usage could be charged to the post-paid account and that of the children debited in the prepaid mode, according to the pre-established budget.

BK: Similar methods could also be used to manage corporate accounts. For example, an employer could take charge of the employees’ voice calls during office hours, and bill all other calls to the employees concerned, either in pre or post-paid mode. Convergent charging would permit a far more effective cost control than current systems allow.

FOR: Operators see these global and modular offers as a unique opportunity to boost their market share, as well as their ARPU. It’s why they are urging suppliers such as Nokia and Highdeal to use the appropriate technology.

TR: So convergent charging will permit more effective cost-control?

FOR: It’s becoming increasingly necessary, given the evolution of the telecom industry. Neither customers nor operators want to be caught by surprise. Many customers want to keep their usage within a set limit and all operators want to limit litigation and the risk of unpaid bills. It’s a valid approach for data services and even more so for mobile connections from abroad: roaming can be very costly and users often are unaware of the bill they are running up. National regulatory authorities are growing more attentive to the question. In some countries, they ask operators to allow customers to specify their own budget limits, given the growing difficulty of assessing the cost of ever more complex offers.

It also should be possible to set credit limits on post-paid accounts with a monitoring system similar to the one that already exists for prepaid. The market will gradually evolve towards this new idea of “online charging” which is different from prepaid in that it also includes post-paid with credit limits.

BK: Operators and their network partners face the need to provide highly complex control for user accounts and balances. In today’s mobile world, prepaid customers can typically only consume one service at a time: they can place voice calls, send SMS, download data but never all three at the same time. Account balance calculations are carried out according to the type of transaction and sequentially, which is relatively simple. But what will happen when terminals are able to conduct several transactions simultaneously, for example when users can speak to someone on the phone and watch a video at the same time? In this case, both services will be charged to the same account, thereby increasing the risk of bad debt if prepaid balances go negative. Operators will no longer be able to wait until the end of a transaction to calculate the amount of credit still available.

FOR: The charging system will have to be more sophisticated and online. It is essential that the service about to be used is rated and an appropriate amount of balance is reserved before the service is delivered to the user. The same issue comes up in the case of multi-user accounts, when co-workers in a company or members of a family use different types of services on a joint account.

TR: Do operators have any particular technical reason for wanting to accelerate payment method convergence?

FOR: This is key to cutting operating costs. Right now, operators with a mixed customer base have to deploy and maintain two different platforms: one that functions in real-time for prepaid, and the other in batch mode for post-paid.

BK: The complexity and expense of: operation and maintenance; customer management and developing services offerings on very often dissimilar platforms had led many operators to begin looking for a better solution and a way of reducing the costs associated with these-

TR: Are these cost cuts significant enough to warrant developing a new system?

BK: Yes, particularly since existing systems often span several generations of technology and are even approaching the end of their useful life span and therefore must updated anyway. Consequently, migration towards a convergent system is often the best option.

TR: What markets are the most “mature” and ready to move towards convergent systems?

FOR: All the regions where operators have achieved a significant growth in prepaid: Africa, Latin America, Asia and Europe. Operators focused on post-paid, notably in the U.S., won’t feel the full impact of the change at first.

TR: Which current players are capable of implementing this new system of convergent charging?

FOR: Broadly speaking at present, post-paid systems are provided by billing companies and prepaid by network equipment providers. Obviously each side is going to try to push their unique advantages when it comes to offering the single system that will bring the two worlds together.

TR: Who do you think is the best position to do so?

FOR: Network equipment providers seem to be one step ahead because they already know how to do real-time transaction management; their competitors on the billing side operate with longer batch processing cycles, tuned to the rhythm of post-paid billing. Now operators will be asking online charging to meet the demands of five-nines, that is to say be available and functional 99.999% of the time. In short: this would mean a fault tolerance of only five minutes of unplanned downtime per year. Network equipment providers have already mastered the software architectures and redundant infrastructures that can achieve this.

BK: To meet the future demands, charging, rating and service control must go online. Online charging requires total fluidity between the networks and the rating and charging systems with latency of less than 200 milliseconds. This is feasible for network equipment providers but represents an enormous challenge for billing companies.

FOR: Network equipment providers, on the other hand, want not only to supply the necessary infrastructure, but also to handle pricing, rating and catalog management, as well as account balance management: all these elements could thus move out of the domain of the traditional billing players who, up to now, have been managing them for post-paid accounts.

BK: The billing function could end up being limited to just receiving priced tickets, formatting, producing and sending invoices. These functions could be easily delegated to players other than billing companies, in this case to firms such as SAP or Oracle as a complement to their CRM services. They are already doing this invoicing function for utilities companies.

FOR: These new potential players are waiting impatiently for an opportunity to enter the telecommunications market, which has been closed to them up to now.

TR: Where does Highdeal stand in all this?

BK: Highdeal is not in direct competition with the players mentioned above. The company is a strategic partner at the network, mediation and billing system levels. Its pricing, rating and account balance management solutions offer high performance and are easy to implement in all circumstances.