Surveying the Battleground of Payment Convergence

As the boundaries between media, telecoms, and the Internet dissolve, the market landscape for communication services is becoming highly dynamic and more complex. To remain competitive, multiservice providers are implementing convergent charging systems that can interact with the network elements and applications servers in real-time and provide the necessary flexibility needed to rapidly launch and package new multiservice offerings.

Larry Goldman, Founder and Senior Analyst at OSS Observer - Global OSS Market Analysis and Isabelle Roussin, EVP of Marketing at Highdeal discuss the need for real-time convergent charging and the battleground that is emerging due to the challenges of meeting these new service demands.

Larry Goldman, Founder and Senior Analyst at OSS Observer Global OSS Market Analysis

Isabelle Roussin, EVP Marketing, Highdeal

Transaction Reporter: From a billing perspective, how do you define convergence?

Isabelle Roussin: Convergence can be classified into two types, service convergence and payment convergence. Service convergence is the ability to package any number or type of services into a seamless customer experience across both fixed and mobile domains. Payment convergence is the ability to apply any type of payment method to any type of service or customer, such as prepaid, postpaid, and hybrid payment methods.

TR: What is convergent real-time charging?

Larry Goldman: It is a platform that enables both payment and service convergence, but I find it is easier to define convergent real-time charging by what it’s not. It’s not IN-based charging and it’s not strictly mediation. Convergent charging platforms incorporate the real-time support needed for prepaid environments with the flexibility to support a wide range of services. They combine some of the capabilities that are normally found in an IT-based flexible system with the real-time capabilities that are traditionally incorporated directly into the network.

TR: Can you elaborate more on how convergent charging is different from IN-based charging?

Isabelle: In the past, OSS/BSS systems have been stitched together around individual services such as simple voice and basic data services, designed according to their individual needs and requirements. These traditional, monolithic billing systems are ill-equipped to meet the challenges of the fast paced, multi-media rich multiservice world.

Larry: A convergent charging system has the flexibility to authorize charges and rate the full variety of services on a single charging platform. Traditional IN platforms don’t meet this requirement because essentially they only authorize and moderate simple measurement systems like voice minutes or the number of SMS messages.

TR: What market trends are driving the switch to real-time convergent charging?

Larry: Fundamentally, convergent charging is being driven by the demand for more prepaid services. Outside of the North American market, the customer base for prepaid services is enormous. Service providers must offer more and more sophisticated services to the prepaid world. Obviously, they must offer the same new services to their postpaid customers. Otherwise they risk losing this high ARPU business. Service providers require single platforms that can support these new services.

Isabelle: A significant factor in the convergent market is the prepaid/postpaid subscriber split. Operators with few prepaid subscribers will remain with a postpaid billing system and some small separate system for prepaid. Once the number of prepaid subscribers rises close to or above 10%, operators start considering the value of having a single converged system. The need to manage subscriber spend is another factor. With new services, customers want more control over their own or their family’s spending, such as capped postpaid accounts or allowances per service type.

Larry: The demand for convergent charging is also driven by the wide range of services offered by the mobile market. Residential broadband is starting to be a force as well, but the broadband market is not using convergent charging for prepaid services. Instead, pay-per-view services are the driving force. Broadband customers have postpaid accounts that require sophisticated payment mechanisms. Broadband providers give vouchers and coupons to entice customers to spend more money and these discounts function similarly to prepaid services.

Isabelle: In recent years, the traditional territories of communication providers have been encroached upon by a variety of new players from the entertainment & media space. As a result, Incumbent fixed-line providers and cable and broadband companies now all offer voice, video and data services. Some providers have extended their services to the quad-play arena either by acquiring or partnering with mobile providers.

Larry: Multiservice devices are another driver for real-time convergent charging. Service providers need convergent charging for customers who use more than one service on the same device at the same time, such as 3G mobile phones. Residential broadband is another example. VoIP and video-on-demand come into the house through one access point-in and can be used simultaneously. As these new services become more popular, charging platforms have to become more sophisticated.

TR: What is the growth potential for convergent charging systems?

Larry: The charging market is at about $200 million right now. Convergent charging software is a small part of this market at about $50-60 million, but it is growing very fast. Real-time convergent charging is the key element that is being added to the bigger platform environment. Most of the charging market’s future growth will be in this area. The rest of the charging market is essentially made-up of updated IN-systems. This part of the market will probably only grow by 10%. When we throw the high growth convergent software into it the equation, I expect the entire charging market to experience a 20% compound annual growth. Market demand is for systems that have the ability to mediate and rate a wide range of services.

Isabelle: Service providers have definitely recognized that introducing prepaid/postpaid convergence is an intelligent strategy towards customer ownership. Service providers can use payment mechanisms as tools to differentiate their service offerings. Rather than be constrained by them, they add value to new service bundles, differentiate offerings and further reducing the likelihood for churn.

TR: Will this growth happen equally world-wide?

Larry: Convergent charging is a global phenomenon. The Western European market is being driven by Tier-1 companies who are inventing their own stuff. Vodafone-live is the name brand doing the most; but really all Tier-1s are working on convergent charging. The Asian market is experiencing an extraordinary amount of growth, especially in rapidly maturing countries like India, Malaysia, and China. In many cases, service providers have little that works well and are creating new service platforms from scratch. The Asian market is interesting because there are more big deals happening. The voice driven North American market is lagging behind the most, but this might change with the arrival of more parental services. The really interesting thing in the North American market is residential broadband. This might be a bigger market for convergent charging than mobile because of the existing competition between carriers. Latin America, specifically in Brazil and Mexico, has many of the same characteristic as Asia.

TR: What are some of benefits of real-time convergent charging?

Larry: Convenience and flexibility are the key consumer advantages. With convergent charging, consumers have a wider range of services and payment mechanism.

Isabelle: For service providers, a flexible platform is the key advantage to real-time convergent charging. They have more ways entice new customers and reward customer loyalty with only a minimal amount of change to their system.

Larry: There is a lot of money to be made by vendors as all these companies invested in new charging systems. The new systems will use more IT-based software than the old IN-based systems. There will be more rating and mediation software in the charging platform. In the past, real-time services and support were the domain of equipment vendors. The new convergent platforms open up the opportunities for software vendors to participate in something that used to be the closed domain of the hardware vendors.

TR: What are some of the challenges involved with real-time convergent charging?

Isabelle: Gaining the flexibility and reactivity needed to meet market needs is the primary prerequisite for investing in any convergent charging system. The ability to rapidly price, rate and bundle any combination of services and introduce cross-product promotions will determine the ability to differentiate in the market place.

Larry: My main recommendation to service providers is that right now is the time to displace your traditional billing systems. Service providers need to first evaluate their overall charging requirements and find a balance for themselves between reliability, scalability, and price.

TR: Do you have any recommendations to vendors, such as Highdeal?

Larry: Traditional vendors have all the answers to the old billing problems, but with convergence, new answers are need and new vendors, such as Highdeal, are taking advantage of these opportunities. Most service providers aren’t going to buy separate components and assemble them themselves. There are a few large providers who are acting as their own integrators. Highdeal offers one of the key components in a real-time charging environment, the ability to do flexible rating. Highdeal needs to demonstrate that its solution can work with a range of solution providers and system integrators within a variety of environments.

Highdeal is working with a variety of OEM and integration partners and it’s exactly the right business model. Highdeal has this unique technology and capabilities and is well positioned to be a participant in this real-time convergence charging revolution.