The Who, What, and Why of Convergent Billing

By Lisa Phifer
Core Competence, Inc.

Carriers know that billing is where the rubber meets the road.  Service turn-up and delivery mean
nothing if customer payment cannot take place.  Billing sounds so simple: send an invoice,
collect payment.  In reality, considerable network infrastructure and systems integration is
required to deploy an effective billing operations support system.

Take a quick look at billing systems today, and one word keeps popping up: convergence.  What
is convergent billing?  Why do competitive local exchange carriers (CLECs) need it?  And who
can CLECs turn to for convergent billing solutions?

What Is Convergent Billing and Why Should CLECs Care?

At its core, convergent billing is the integration of all service charges onto a single customer
invoice.  Convergent billing means creating a unified view of the customer ― and all services
provided to that customer ― for single-point customer care.

CLECs understand the value proposition behind convergent services: becoming a one-stop shop
for multiple services, delivering voice, data, video, and Internet access over wireline, wireless,
DSL, cable, and dial-up.  But why convergent billing?

Studies like one by Price Waterhouse conducted in 1997 indicate that customers want to
purchase many communications services from single provider.  And, when doing so, customers
want all services invoiced on a single consolidated bill.  Receiving a single bill simplifies
processing and payment for the customer.  And a unified bill enables cross-service discounts, so
that customers who order multiple services can receive preferential pricing.

Even those customers who are ambivalent about a unified bill most certainly appreciate single-
point customer care ― difficult, if not impossible, without convergent billing.  Customers want
to call a single number to resolve billing problems.  They don't want to call different numbers for
local and long distance service, much less for data or video services purchased from the same
provider.  They expect customer service representatives to have access to their entire account
record, not just that portion of their account associated with a single service. 

Who among us hasn't experienced the frustration of being shunted from one department to
another and back again when trying to resolve a problem, ask a question, or add, modify, or
delete a telecommunications service?  Multi-service providers who successfully create a unified
view of each customer gain a competitive edge that helps them hold onto existing customers and
attract new ones.

What's Good For The Goose Is Good For The Gander

Multi-service CLECs also stand to benefit internally from convergent billing through improved
operational efficiency, flexibility, and economy of scale.

Convergent billing enables multi-service packaging and pricing, whereby existing customers are
enticed to add new services and new customers are attracted by innovative service bundles.  In a
highly competitive market, providers must seek new service differentiators to stand out from the
crowd.  Convergent billing helps a CLEC leverage its position as a next generation service
provider by allowing distinctly different services to be priced and invoiced together, with new
combinations created quickly to reflect market changes.  Unified customer account records allow
a CLEC to easily view the big picture, spotting cross-service relationships and buying patterns
that spell out new opportunities.

Traditional billing systems are tied to individual technologies.  Call detail records (CDRs) are
generated by wireline voice switches.  IP flow records are generated by Cisco routers.  PVC
traffic history is gathered from ATM and Frame Relay devices.  RADIUS accounting records
monitor switched dial-up or ISDN Internet access. 

Traditional "stovepipe" billing systems gather one type of data, aggregate it, apply rates
appropriate for the type of service, and generate single-service invoices that may include both
one-time fees and recurring flat-rate, usage sensitive, distance-based, time-sensitive, and class-
of-service charges.  Billing systems are also responsible for applying promotions, discounts, tax
calculations, credits and adjustments, handling collections, account suspension/reactivation due
to non-payment, and reporting.  And billing systems are closely tied to customer care systems
that enable customer acquisition, service order entry, and contact management.

Investing in a new "stovepipe" billing system for each type of service is an expensive and
obviously suboptimal proposition.  But note how many "back office" billing system
responsibilities are common across service types.  The extent to which a CLEC can reuse the
same billing system components reduces systems cost, leverages prior investment, and simplifies
end-to-end processing.  Common systems increase operational efficiency and produce unified
customer views -- for example, by creating a common multi-services repository of billing data
that can be leveraged by single-point customer care systems.  And once a convergent billing
system is in place, it may help the CLEC deploy new services more rapidly.

Where Can I Look For Convergent Billing Solutions?

At the lowest level, convergent billing involves gathering data in various formats, originating
from diverse systems, and mediating it into a common format.  One industry effort that may
facilitate this is the standard IP detail record (IPDR) format being defined by IPDR.org. 

The IPDR is intended to be an extensible format that captures meaningful usage information and
cost components for any IP-based service.  A common IPDR would reduce the need for
mediation ― at least within the IP world ― by pushing consistent representation down to the
device level.  A common format for raw data is a step in the right direction, but it is only one
piece of a complex puzzle.
It may seem natural for a single-service CLEC to start with a single-service billing system.  As
the CLEC branches out into new services, it may be forced to adopt new "stovepipe" billing
systems.  By the time the CLEC becomes interested in convergent billing, there's already a
legacy to contend with.  And that legacy may influence who the CLEC looks to for convergent
billing solutions.

Entry-level turnkey IP billing packages like Boardtown Platypus or Rodopi Billing Software are
narrowly-focused on meeting the needs of ISPs who deliver IP services, not data CLECs. 
Carrier-grade IP billing systems are more robust and flexible, and may offer convergent billing
for IP over anything (wireless, cable, DSL, dial-up). 

A few examples include:

Aptiss TotalBill http://www.aptissoftware.com

Belle Systems IMS http://www.bellesystems.com
Portal Infranet http://www.portal.com
Solect IAF Horizon http://www.solect.com

For example, Portal markets Infranet to data CLECs and wireless and cable IP service providers. 
Solect sells IAF Horizon to broadband CLECs, mobile IP providers, and ISP/ASP markets.  But
carrier-class IP billing systems are just that: IP-centric.  In the near term, they are less likely to
meet the unique requirements associated with billing for voice ― unless you're talking Voice
over IP.  Convergence with the telecommunications world may come through partnership with a
traditional telco OSS supplier ― for example, Amdocs and Solect.

On the other side of the fence, wireline billing systems offer integration with legacy telco
operations systems and understand billing elements like CDRs, settlements, and tariffs.  A few
systems that have traditionally focused on this market include:

Amdocs Ensemble http://www.amdocs.com

AMS Tapestry http://www.amsinc.com/telecom/
Daleen BillPlex http://www.daleen.com
Kenan Arbor/BP (Lucent) http://www.kenan.com/
Saville Systems CBP http://www.savillesys.com/

Increasingly, these systems are being adapted for multi-services convergent billing.  For
example, Kenan describes three strategies for achieving convergence.  "Electronic stapling"
combines charges already calculated by two or more "stovepipe" billing systems onto one bill. 
"Consolidated billing" takes pre-rated data from legacy billing systems, then recalculates charges
by applying package pricing and discounts to produce a single bill.  Finally, "integrated billing"
takes raw usage data and performs all billing system functions in an aggregated fashion.  Kenan
Arbor/BP supports all three forms of aggregation, but only the latter enables both cross-product
pricing and single-point customer care.

The Current Situation

For now, convergent billing is best described as a good idea that can be realized in part, but
perhaps not yet in full.  CLECs may be wise to avoid "stovepipe" billing systems and seek out
solutions that offer some level of convergence for core services. 

Look for back-office components that enable consolidated billing and single-point customer care
for multiple service types, with interfaces that allow data aggregation and rate input from
disparate sources.  Even if today's convergent billing systems do not handle every forseeable
next generation service, they represent a step in that direction.  And ask your vendor about their
game plan for convergent billing ― if nothing else, the answer will tell you how far you're likely
to get with their existing system.

Can you bill for convergence? Real-time, convergent billing platforms

are required if carriers are to take full advantage of emerging industry
trends

Jackson Pollock, America's most famous abstract expressionist painter, became a household
name when his work of art 'Convergence' was issued as a jigsaw puzzle in 1964--almost a decade
after his death. Although it came with only 340 pieces, Convergence was declared the world's
most difficult jigsaw puzzle because there was no traditional subject matter to piece together.

Instead, Pollock's masterpiece reflected the familiar image of his abstract style: a scene of
multicolored drips and splashes of paint with no points of emphasis or identifiable parts within
the whole canvas.

The manufacturers of the jigsaw heralded Convergence's success by stating that anyone who
could put the puzzle together would unlock the meaning of Jackson Pollock's painting.

Despite its complexity--or perhaps because of it--the brainteaser exceeded all expectations and
quickly became a craze around the world. 100,000 jigsaws were sold within a year and a global
network of puzzle enthusiasts would gather frequently to exchange tips on how to put together
this impossible picture.

Forty years on and Convergence has been re-issued for a new age of game lovers. It has also
become a buzzword for the telecom billing industry as it tries to find ways to describe the
process of simplifying transactions for today's liberalised, competitive markets.

Defining convergence

Like Pollock's masterpiece, convergence in billing is a complex idea that is difficult to bring
together--at least without the help of the artist behind the innovation. In the telecom world, this
artist is the OSS vendor, the technology expert that can help unlock revenue for new services,
such as VoIP, MMS and 3G.

According to Pollock, Convergence is about "a unifying process that eliminates chaos". This
explanation can be applied to the modern trend in billing as well.

Convergent billing simplifies the way in which an operator settles invoices with its customers
and inter-carrier partners. It is about the ability to seamlessly support any type of network
traffic--whether it is voice, data or IP/next generation services--on a single platform. In an age of
content-based services, the traditional mediation and billing platforms are joined by another
crucial innovation: the real-time charging platform.

The ultimate goal of billing convergence is to streamline the settlement process with a unifying
technology, one that can make sense of all the data generated within an increasingly chaotic
network.

Interconnect still tops

In today's OSS market, mediation and charging platforms play supporting roles to interconnect
billing. This method of transaction, whereby an operator charges another for using its network, is
still one of the key generators of revenue for most carriers, often the first or second source of
income for major PTTs after subscriber revenue. For pure wholesale carriers (carriers' carriers)
interconnect is the only source of revenue, and management of routes is continuous, near real-
time. Interconnect also represents the largest operating cost.

With the launch of next-generation services, such as 3G, VoIP and MMS, there is even greater
opportunity to generate more cash through interconnect billing, with the rise of new partnerships
in the form of content and ISP providers. Conversely, interconnect mismanagement in this new
telecoms business model can also have an even greater negative impact on operators than ever
before, both financially and strategically.

Paying out

From a financial perspective, inadequate interconnect practices can add up to serious money loss.
Even established operators need to continually manage their interconnect partner agreements,
whether this be for voice, mobile roaming, data, value-added services or content. This explains
why major players such as BT are taking proactive approaches to protect their revenue streams
when launching new services. According to BT's annual report, for example, the company grew
its profitability from next-generation offerings by 85 per cent in 2003. This growth was
supported by the company's ongoing maintenance of its traditional interconnect business, from
which the majority of BT Wholesale's external revenues (over [pounds sterling]3 bn in 2003)
were derived.

Strategically, interconnect agreements are absolutely vital for new entrants that cannot deliver
services without other networks to complete their calls. It is also crucial for PTTs in emerging
markets that want to generate cash through international agreements. However, if they do not
have an adequate billing systems to cross check the bills that are supplied by their interconnect
partners they cannot determine whether they are overpaying for services. This can lead to serious
revenue leakage.

For example, according to a recent discussion at the ITU forum it was estimated that first world
telecom operators continue to underpay their African counterparts by up to a third of the annual
US$4 bn in interconnect fees owed them, as many African operators have no means of checking
the invoicing. This has led to an increasing trend in OSS spending on the continent with PTTs in
countries such as South Africa, Egypt and Nigeria investing millions in convergent billing
applications.

Africa is not the only region taking a proactive approach to interconnect settlement. Many of the
world's fastest growing economies are adopting strategies to minimise payouts and maximise
profits.

The biggest growth areas include the Middle East, Eastern Europe, Russia and the
Commonwealth of Independent States (CIS). Each region appears to be adopting its own
strategies, building on the experiences of the US and the UK and their subsequent liberalisation
efforts.

In many cases, liberalisation has come about more or less 'by accident', due to the emergence of
mobile operators, without any particular regulatory ground preparation. In these countries, which
include the Czech Republic, the incumbent has often been a major mobile player too. And in
some, the PTT is also the regulator. Other countries, such as Slovakia, have followed a much
more planned approach, with government announcements followed by a period of consultation
and new entrant development. Such countries have usually adopted a strategy based on the US or
the UK model.

Reasons for change

Within today's liberalised markets there are many factors that are forcing operators to rethink
their interconnect models, both in the West and in developing nations. Among the pressures
leading to reform include the emergence of VoIP, which is causing fissures to appear in the US
structure due to the fragmentation of supply and services offered. Local loop unbundling (LLU)
is another major problem as broadband starts to take off in Europe using DSL technology (this is
less of an issue in the US, where cable provides much of the market's broadband connectivity).

The refusal of the old ITU accounting rates system to lie down and die is another issue: the US
continues to carp about the huge subsidy it and other liberalised economies pay towards the
PTTs of developing nations.

Finally and probably most significantly, is the phenomenal growth of mobile market, which is
overtaking fixed-line subscribers in many countries in Africa and South East Asia. This is
causing strains for established PTTs whose revenues are declining but whose networks are still
required.
Finding ways to overcome these challenges have varied in each telecoms region, but what is
certain is that all operators have woken up to the financial importance of effective
interconnection management. Unfortunately, many of them still do not have board level visibility
of this important function. This could delay financial optimisation, especially in an age of next-
generation services.

Rise of VoIP and content

A look at the future trends in the telecoms market brings us back to the issue of convergence in
billing--and the importance of interconnect and its back-up support: mediation and real-time
charging. Perhaps the biggest telecoms change is the shift towards more content-based services.
According to US based analyst Juniper, content-based services such as MMS and video-on-
demand (VoD), could be worth in excess of US$60 bn by 2007, making next-generation
technologies (3G) the most lucrative business initiative in telecoms history. However, there are
also worries about the popularity of new services such as VoIP, whose growing importance is
seriously undermining revenues for many established PTTs and RBOCs. As a result, there are
severe rifts being created, particularly in the US model, which could eventually lead to an
overhaul of the system.

Juniper Research highlights that the VoIP market will become the biggest revenue generator for
broadband service providers by 2009, contributing to an overall value-added services market of
US$47 bn. This will be in addition to the US$43 bn spent on broadband access in the same
period.

The challenge to service providers will therefore be to provision these new services as cost-
effectively as possible as traditional revenue streams from existing fixed-line voice services
continue to decline. Flat-rate IP based voice tariffs will eventually replace time- and distance-
related tariffs. These declines may be offset by a reduction in operating costs for converged
networks.

The same issues for revenue generation apply to today's content providers. Interconnect billing
can help support the growing number of inter-carrier relationships that come with these services.
But mediation and real-time platforms are also crucial to the billing process as well.

Convergent mediation is the solution that gathers information about a customer event after the
service has been delivered to the customer. This is the information that operators need for their
network operations, network planning, fraud detection, marketing statistics and of course for
billing post-paid customers. In the content billing paradigm, however, it must operate along side
a real-time charging application for operators to unlock their revenue potential and guarantee
customer satisfaction.

Real-time charging platforms make sure that content services can be set up between partners,
brought into service, recognised on the network, and accurately and securely billed. The solution
can also accurately authenticate consumer details in real-time for payment, and how content or
transaction can be priced, delivered and charged using different business models, with each
partner receiving the correct revenue share.
Content-based services have the potential to produce unprecedented revenue growth, even in a
relatively stagnant or saturated market. To capture unlimited profits, however, providers of
value-added content must have the ability to develop brand value and to receive appropriate
compensation for the value their content brings to operators. The good news is that most
operators already have the necessary interconnect and mediation applications on their networks
to support the numerous challenges that content brings to the transaction process. Adding a real-
time charging platform to the transaction flow can help achieve the necessary levels of billing
flexibility, data quality and rapid service deployment to make content services truly profitable. In
other words, a completely convergent billing process for tomorrow's business challenges.

RELATED ARTICLE: Real-time convergent platforms in action

To illustrate the importance of convergent real-time platforms in the age of next generation
services--and how they work with mediation and interconnect systems--we can begin by looking
at the service package currently offered by Europe's first 3G operator, Hutchison Whampoa's
mobile group Three.

The company currently offers post-paid customers a wide range of next-generation services.
Additionally, the company is gaining more customers by offering these same services to pre-paid
customers using competitive pre-paid price plans for these new services. For instance, UK users
can now sign up for 100 minutes of Video Talk, which includes free content--such as video
downloads--for a month. This is in addition to 100 minutes of voice calls for a set rate of [pounds
sterling]15 pounds a month.

For Three to make this service work--as well as profit from it--the company has a number of
factors to consider. Firstly, it has to establish partner agreements for multimedia content and m-
commerce services, as well as allow consumer access to networks such as the internet and
corporate LANs. Once these services are in place and being delivered, there is a need to measure
a customers usage in real time to ensure they have not exceeded their usage limits--and if they
have, to change their charging paradigm for the next part of the transaction.

In respect to charging for advanced services, especially in this pre-paid environment, Three's
customers expect to be instantly and securely authenticated to receive, or be barred from, high-
value services (if they don't have credit to buy services) so the company needs to assure accurate
payment of all events. Real-time charging platforms provide instant, two-way communication
between network elements, pricing engines and customer balance management systems, together
with reliable post-event processing, to ensure payment and service quality. Convergent
mediation gathers the information after the transaction event occurs and feeds it into the
interconnect or retail billing system to produce an accurate invoice.

Convergence in Telecom billing

With changing consumer lifestyles, continuously evolving in providing new services has become
the mantra for Communication service providers (CSPs) to sustain stiff competition. Traditional
stovepipe billing systems support either voice, data, mobile or video services at a time. Investing
in individual billing systems for each service type is not an optimal proposition from an
operational as well as maintenance perspective. Also from a customer’s perspective, they are
keen to opt for bundled services which include triple play (voice, data and video) and quadruple
play (adding mobility to voice, data and video), instead of buying single individual services. 

Customers today prefer to purchase these services from a single CSP and require these services
to be invoiced in a single consolidated bill. Hence CSPs are forced to move towards convergence
to provide new varied services with one single point of contact and providing a single view of
the services opted by a customer.
Broadly speaking, convergent billing is an integration of all service charges onto a single
customer invoice, by creating a unified view of all the services provided to the customer and a
single-point customer care. Thus Convergence in the billing and Customer care platforms
provides two fold benefits to the customers as well as the CSPs as follows:

Customer Gain: 
• Eliminates the need of multiple providers for different services.
• Single bill for different services makes payment and other processing simpler and faster.
• Cross-service discounts i.e. eligibility for preferential pricing if multiple services are ordered.
• Single point of contact to resolve the billing problems/queries for any of the subscribed
services.

CSP Gain:
• Opportunity to become a one-stop shop for multiple services, by offering triple and quadruple
plays.
• Improve CSR’s operational efficiency and flexibility by making unified view of each customer
available on a single click.
• Convergent billing enables multi-service packaging and pricing, whereby existing customers
are lured to add new services and new customers are attracted by innovative bundled services. It
enables CSPs to easily view the big picture by spotting cross-service relationships and buying
patterns that spell out new opportunities helping them in adding new services to differentiate in
this competitive market.

 Thus with convergent services as part of CSP’s marketing strategy, the success of their business
model will depend to a great extent on the implementation of cutting edge billing and customer
care platforms.