Setting a New Table

Posted: 06/2001

a New Table
IP Billing Puts a Charge Into Revenue Assurance
By Chris Garifo

It’s no secret that resellers and carriers want to take
advantage of IP-based services to drive revenues and improve profitability. But to make money off those services, they’ll have to bill for them.

That’s easier said than done because IP billing is a different animal from traditional flat-rate billing on which the circuit-switched world has feasted for decades.

IP billing brings to the table not so much more complexity–telcos have been dealing with huge subscriber bases and complex rating schemes for years–but a new kind of complexity.

This new complexity results from the fact that most resellers and carriers obtain IP-based service offerings from third-party providers. In the case of wireless services, some industry insiders say a communications provider may have hundreds of such partners. Making matters more difficult, some partnerships will be wholesale/retail, some will be revenue-sharing and others could be sponsorships.

Moreover, the revenue trough is going to have many more mouths to feed, which will result in smaller portions for everybody. What that leads to is tighter margins, and, in many cases, margins that are extremely tight. As a result, revenue assurance

in an IP-billing environment is “absolutely critical,” says

Jason Briggs, a senior analyst with the Yankee Group

( “Clearly, the system that you’re going to have to have has got to be watertight,” Briggs says.

Plenty of Places for Leakage

The complexities of IP billing, coupled with a business model that includes several service-provider partners, will result in a number of new areas for revenue leakage.

“There’s a problem today, and it’s not getting any easier or better,” says Alan Gilbert, senior director of marketing for GuideComm Systems Inc. (, an OSS services company. “The problem is: ‘OK, you know you took in the order, but do you know what you’ve billed and have you taken the time to see if you’ve billed what you should have billed?’ If you don’t have an accurate revenue assurance program, you’re in trouble. If you’re not doing revenue assurance, you can expect 4 percent of revenue leakage.”

That 4 percent can spell disaster to a reseller or carrier trying to succeed in a marketplace with razor-thin margins.

Resellers and carriers that offer IP-based services need to ensure that they have a billing system designed specifically to handle next-generation transactions backed up by a reliable means of revenue assurance. Unfortunately, unlike many back-office functions, revenue assurance doesn’t have anything like a best-of-breed solution that you can pick up off the shelf, tear the shrink-wrap off and plug into your OSS and billing systems.

“There really isn’t a revenue-assurance tool so much as there’s revenue-assurance capabilities inherent in the architectures of the billing and mediation solutions that, when implemented correctly with the proper procedures, give you that end-to-end view of your usage and your ability to track usage and prevent it from falling through the cracks,” says Jack Storer, eastern region director of market development for ADC Telecommunications Inc. ( ADC’s Singularit.e OSS suite includes the Saville CBP convergent billing solution. IP-based, off-the-shelf billing solutions can help reach revenue assurance goals; but, to ensure that such a tool does what its buyers hope it will, an operational process audit must be performed and administrative-level controls introduced, ADC advises.

Until recently, IP was relegated mostly to the sidelines, with communications providers simply providing the means of transport while not paying much attention to what was in the packets flowing through their networks. Some next-generation telcos made forays into providing VoIP, but that still was rated and billed based on minutes used.

The move toward providing premium content and sophisticated, enterprise-style applications services that are provided by multiple partners has increased the complexities exponentially. If a circuit-switched environment can be described as plumbing with water flowing through it, the packet-switched world is plumbing with supercharged steam blasting through, says A.J. Germek, GuideComm’s Systems Inc. (, co-founder and COO.

“The opportunity for leakage is greater [because] the throughput can be 10- to 100-fold more,” Germek says, adding that margins could be one-tenth to one-twentieth of what they were. Compounding that is the fact that IP is still new to many in telecom.

“We’re not measuring packets vs. a voice circuit,” Germek says. “We’re selling bandwidth, we’re selling throughput or speed or accuracy [or] time of day, volume discounts, standby capacity. All of these elements or bits we’re selling are different [from] the issue of ‘Do I have a circuit or not? Do I have the pipes or not?’ In addition, we’re selling content. So, it’s not just plain bits, it’s valuable bits.”

Building Revenue

Assurance Inside Billing

That kind of pressure requires the ability to ensure that billing data can be delivered in a format that a reseller’s billing system can bill, says Andrew Burroughs, chief marketing officer of the IP-billing solutions developer Apogee Networks Inc. (, whose NetCountant Billing provides an IP billing solution for content, application and network service providers.

Image: Typical Revenue Assurance Points

For revenue assurance to take place, a reseller has to have the ability that, once usage occurs, the usage information is captured, posted against the correct account, rated and invoiced correctly in a timely fashion; and that the invoice gets sent to the right person.

“Revenue assurance is the training of the people; it’s the right credits that are given; … [it’s] the bill actually going out and that it’s printed correctly,” Burroughs says. “So, there are many components that are involved …. It’s a process of integrity.”

Too bring value to those using IP-billing solutions, the products must have levels of flexibility, scalability and robustness that eclipse anything seen previously in the market. Such systems will need to have revenue assurance capabilities built into them.

Billing systems have to handle rating and billing, and have real-time and strong batch-operation capabilities to accommodate per-use and flat-rate pricing models. The mediation platform will have to be robust from a revenue-assurance perspective and have full auditing capabilities. A process audit should identify all the potential leak points. Appropriate operational controls should be put in place to cover those leak points. Internal groups have to be monitored to ensure they are using the operational controls; and sample billing runs are done with a given amount of test usage to ensure the bills are created for the bits that passed through the network.

The billing system also needs “the ability to generate an unlimited number of charges from a single event passing through the rating engine just once, to allow you to generate any number of charges from a retail and wholesale perspective, tracking your underlying costs,” adds ADC’s Storer.

Dealing with Complexities

Notwithstanding all the nuances attending IP billing and revenue assurance, there’s no reason to believe that people used to delivering telecom services can’t handle the complexities surrounding enhanced IP services, says Lynne Levy, product manager for AP Engines Inc. (

“Will it be more complex? Potentially, yes,” she adds. “It’s nothing that they haven’t already dealt with, it’s just different: different fields, different pricing structures, different discounting structures. You’re still going to have your account management hierarchies. You’re still going to have your 10 different OSS systems you have to deal with. You’re still going to have complex tariffs, pricing and discounting.”

Director of strategic market development for Amdocs Ltd. ( Mike Couture adds, “It’s not a matter of voice being simple and IP being complex.”

But the dynamic nature of IP services is going to provide real challenges for the market, Couture says.

Amdocs’ Ensemble customer-care, billing and order-management platform recently established benchmarks for being able to support more than 2 billion IP service data records (IP-SDRs) and more than 350 million call data records (CDRs) per hour.

“As IP services become more and more important in terms of how much revenue they account for, as they become mission critical, then all the aspects of revenue assurance become important to the IP service as well, and become important to the operator in ensuring that they’re getting maximum revenue,” Couture says.

Add to the mix the fact that many IP services are going to be here-today-gone-tomorrow, which means providers offer them to take advantage of a short-term trend, or discard them quickly because of lack of customer demand. This means IP billing has to be much more flexible than earlier generations’ billing solutions.

So the industry is “looking at the concept of putting out a lot of different applications and knowing full well that many of those will fail,” Couture says. “We expect a good number of our applications, particularly as we go to 3G, will fail and we want a model where we can bring out many, many different applications, and obviously, while looking at a cost structure where the ones that succeed are going to far outweigh the revenue margins of those that fail. That’s very, very different [from] voice.”

If resellers and carriers find that taking advantage of IP billing fully is too complicated, they may simply decide the situation calls for the KISS (keep it simple, stupid) principle.

“People will do cost benefits,” says Apogee Networks’ Burroughs. “If I could rate every transaction, if I could identify every transaction and really ideally match my costs, that would be ideal for me. However, that causes extra inquiry to my customer service unit and that causes confusion. Customers may resent it if every transaction were listed. So, I’ll go to a simpler billing system that’s easier to control and manage, even though in a complex environment I probably would squeeze out more revenue.”

Resellers and carriers in those circumstances will be making a trade-off where they give up some of the extra revenue that IP billing can provide them in order to have fewer headaches and a lower risk of revenue left on the table.

“It’s a complex cost-benefit pluses-and-minuses decision that you have to make,” Burroughs says. “And that impacts the revenue assurance process.”

Nothing is Ever Perfect

Moreover, service providers must realize that even with leading-edge IP-billing systems and strong revenue-assurance efforts, error records are going to exist.

“Even if your network is reliably generating data, it may miss-attribute or not be

capable of attributing certain records to the usage or the subscriber accounts that they belong to,” says Andrew Bonner, ADC’s western region director of market development. “So, you have to expect that those problems are going to creep up from time to time and you have to have efficient ways of detecting and correcting them.”

Making matters more difficult for the industry is the lack of standardization in IP-billing.

“Companies are taking their own unique approach [to IP billing], and that’s complicating the situation for both the service providers, as well as the OSS/BSS vendors, to come up with good future-proof solutions,” says Andre Kopostynski, marketing manager for EHPT U.S.A. Inc. (, a revenue-enhancement software developer whose products include rating and mediation solutions for IP-based content.

Despite that lack of standardization, resellers are going to have to find a way of muddling through, and that will mean an attitudinal approach as much as anything purely technological. “Revenue assurance is almost a philosophy, more than it is a series of tasks,” says Yankee Group’s Briggs, adding, “You’re going to have to build the revenue-assurance discipline into the billing and customer-care system.”

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