Are revenue management systems about to be driven over the top?

By necessity, CSPs need a far more complicated set of revenue streams and customer plans. Nick Booth assesses the options for managing them all as they go forward and over the top.

While digitisation means CSPs are much more responsive to customers and vice versa this increased sensitivity means both parties are a lot more volatile. With so many variables involved in the process, it’s only good engineering practice to minimise the number of moving parts in the machine, in order to improve the overall efficiency. However bundling, as we shall see, has limited effectiveness and re-engineering the old silos is dangerous.

David Heaps: It’s a mistake to assume bundling cuts the complexity or the need for accuracy at the charging level
David Heaps: “It’s a mistake to assume bundling cuts the complexity or the need for accuracy at the charging level”

Ideally the appetites of good consumers could be recognised and they can be enticed to buy more, while strategies could be applied to the less enthusiastic customers, with algorithms automatically calculating alternative offers. In practice, CSPs have coped with the added complexity by bundling offerings, but these don’t cope with most eventualities and have proved a crude instrument.

Now it’s obvious that flat rate, limitless consumption doesn’t work, it’s got very complicated. Never has so much been consumed by so many with so few management disciplines.

“In many mobile operators the data is all over the place,” says Ravi Palepu, the senior director of global telecoms solutions at Virtusa, “there is no cohesive view of billing, customer relationships and inventory.”

Andy Gent: CSPs are now being hit with double-digit reductions in their termination revenues
Andy Gent: “CSPs are now being hit with double-digit reductions in their termination revenues”

This has dual negative effects on revenue. There is a direct impact from underbilling, as people get services they aren’t charged for. On the other hand those who are overbilled will contribute to a temporary upswing in revenue, but they will eventually take their business elsewhere. This is a doubly expensive blow, when the cost of finding a new replacement customer is factored alongside the revenue loss.

The CSPs’ challenge of charging the subscribers fairly is difficult enough. Now, with digitisation offering so many service options, revenue management may have a new responsibility: to calculate whether a CSP is getting the best return on the investment it has made in each service. As if that was not complicated enough, there is the question of whether the various streams of over the top content are being managed efficiently. How do all the various parties involved know if they are all billing each other correctly?

It’s mostly about simplifying the data sets and establishing the events that the CSPs need to know about, says Palepu. To do this they have to custom create tools that interrogate all the various silos of data, such as CRM databases. “This is where we spot where the gaps are between the service and the billing areas,” he says. CSPs can’t do this for themselves because identifying particular attributes, such as circuit IDs and customer IDs, is a specialist skill.

Given that the work of a CSP covers so many disciplines of IT, billing, accounting and telecoms, they couldn’t afford to hire in house experts in every area.

This is why many CSPs are still attempting to simplify the challenge with bundles. This could be a mistake, according to David Heaps, the senior vice president of corporate strategy at CSG International.

“Bundles will simplify the billing experience for most users, but it’s a mistake to assume this cuts the complexity or the need for accuracy at the charging level,” says Heaps.

Few flat-rate bundles can cater for everything and the extras, such as premium rates, international calls and roaming charges, complicate things. Even a genuine all-you-can-eat bundle may be subject to throttling once its limit is exceeded. So the need to accurately account for every charging event is as strong as ever.

Supporting multi-devices and family plans, not to mention triple and quad-play bundles, multiplies the complexity. The charging and billing in most CSPs is still distinctly siloed for each service, so the task of revenue management unification is not to be underestimated.

Convergent online charging systems for voice and data services can capture all events – postpaid and prepaid – and act on them in real-time, claims Heaps. This is the most practical way to react to the constant changes that CSPs will face as they bid to go over the top on the supply side, while their customer management systems become ever more complex through discounting, loyalty schemes and new payment processes.

It saves the CSP from the agony of a full transformation operation of their legacy systems, which could be fatal for patients of a certain age

There is still a long way to go however. According to the CFCA (the Communications Fraud Control Association) US$38 billion was lost by CSPs in 2015, with the lack of controls over premium rate service and arbitrage a major contributor.

“Many CSPs are now being hit with double digit reductions in their termination revenues, partly thanks to aggressive selling of termination capabilities by over the top apps,” says Andy Gent, the chief executive of Revector.
So revenue management is only going to get harder.

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