BILL & CHARGE Why CSPs can keep control of the billing relationship and enable the order-to-cash process
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ANALYST REPORT
Introduction
T
he billing and charging market is set for significant changes and upheaval over the next few years. From the time the first modern telecoms billing systems went live in the 1960s, telecoms and technology have undergone massive changes. From a simple monthly billing system mostly developed inhouse for basic communication services, the billing and charging systems at use in communication service providers (CSPs) today have evolved to support a variety of sophisticated real-time use cases. CSPs are increasingly being driven to do more processing in real-time to provide differentiated services and a superior customer experience. This is having a profound impact on the underlying systems used by CSPs and in many cases it requires the transformation of currently installed software solutions and a change to established processes The advent of the internet era and the shift towards IP based traffic from circuit switched has had the most profound impact on billing systems. Furthermore, the increasing popularity of mobile broadband and the rising penetration of smartphones have posed significant challenges to the way CSPs run their business. The decline in CSPs’ revenue from traditional services has coincided with significant investments in the roll-out of IP networks to support an explosion of data usage. This has put pressure on CSPs to monetise their service offerings more effectively and reduce churn by improving the customer experience.
The author, John Abraham, is senior analyst for Telecoms Software Research at AnalysysMason
Cloud On demand charging Shared plans Postpaid real time charging Prepaid charging Monthly charging Figure 1: Overview of the major shifts within CSP charging environment [Source: Analysys Mason, 2014]
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ANALYST REPORT
Billing and charging market drivers The billing and charging market was worth around US$4.5 billion in 2013 and is expected to grow moderately over the next five years. But the technical and business requirements will undergo significant changes as CSPs prepare to support new digital economy use cases. 1. Real-time charging for data services Real-time charging systems have been around for nearly two decades, mostly for charging prepaid voice and messaging services. As mobile data consumption soared over the last decade, the application and opportunity for real-time charging services also increased dramatically. Some of the new applications such as on-demand charging, shared bundles, speed boosters and real-time customer notifications require sophisticated real-time charging systems and cannot be supported on traditional platforms. The real-time charging system therefore becomes a critical component in a CSP’s ability to monetise new potential revenue streams. Besides realtime notifications and allowing customers track and control their spending in real-time have become pivotal for improving customer satisfaction. 2. LTE roll-out The deployment of LTE and the increased data speeds that it offers have had significant impact on the billing and charging market. The worldwide mobile data traffic is expected to grow at 47% CAGR over 2014-2018. CSPs are expected to spend significantly on network and spectrum to ensure good customer experience on their network. However, this will also throw up new challenges of monetising the usage to ensure optimised used of network resources. LTE roll-out is expected to trigger investments in billing and charging platforms, especially around data charging use cases. 3. Subscriber personalisation Traditionally, CSPs have offered standardised services to all customers for a limited number of services. However, over past
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decade, changing customer perceptions have led CSPs to invest in better ways to offer personalised service. Subscriber personalisation goes beyond offering a range of services to requiring individualised bundles and pricing options. This puts a substantial burden on the capabilities of the complex rating system to provide support. The need for CSPs is to not only offer personalised services, but also support those offers after they are accepted. While real-time charging is a key element of personalisation, it also calls for integrated customer care and billing systems, to segment, track and support customers more effectively. 4. Consolidation of legacy platforms Many CSPs have a number of disparate billing systems, which may have come together through mergers and acquisitions or to support specific use cases. Managing such a complex billing setup can be expensive and this drives CSPs to invest in a simpler, convergent billing platform. A convergent billing and charging platform allows CSPs to support both prepaid and postpaid users from a single instance. Convergent platforms have gained in popularity over the last decade and today are a necessary part of all new billing system requirements. By breaking down the separate silos between prepaid and postpaid systems, convergent platforms reduce support cost and time to market for new products and promotions. It is also more flexible and can be scaled cost effectively. While most tier one and tier two CSPs already have deployed some form of convergent billing, several smaller CSPs are still using legacy billing platforms. As the cost and complexity of maintaining the legacy billing system increases, many of these CSPs will make the switch towards convergent platforms. 5. Demand for bundled offerings Bundled offerings have offered a glimmer of hope CSPs faced with declining revenues from traditional services. Offering service bundles has helped CSPs, especially in developed regions, to strengthen their average revenue per account (ARPA). Besides, customers subscribing to bundled offers exhibit lower propensity to churn and therefore offer greater
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lifetime value to the CSP. Several CSPs are investing in adjunct billing platforms to support multi-play service offerings.
5.0 4.5 4.0
6. Digital economy use cases The rise of the digital economy will have a significant impact on CSPs’ business models as they seek to adapt to the alwayson, digitally enhanced lifestyles of advanced consumers. CSPs are wary of becoming dumb pipes and are keen to use their network and customer reach to add value beyond providing just connectivity. Partnerships are the key factor in most digital economy use cases and CSPs are expected to invest in sophisticated charging systems that can support complex partner settlement requirements.
3.5 3.0 2.5 2.0 1.5 1.0 0.5
7. Enterprise billing CSPs are increasingly positioning themselves aggressively in the enterprise market using their assets and expertise in connectivity, customer base and data centre management. The main trends in enterprise revenue opportunities for CSPs revolve around the move to mobile, cloud services and increasing reliance on data communicated over the internet. Services such as M2M and unified communications will deliver strong growth and CSPs are expected to invest in back end support systems to ramp up their service offerings. All the above detailed factors are expected to drive a nominal increase in spending on billing and charging systems over the next few years. A significant portion of the spending will be derived from maintenance and support services, with CSPs expected to keep their legacy systems running for the foreseeable future. There will be a noteworthy increase in new billing and charging use cases, driven by the need to support digital economy services. While the CSP spending on systems to support such new services is expected to be limited until the business cases are proved, it will bring about an increase in the number of new billing and charging vendors offering new systems dedicated to these new services.
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0.0 2013
2014
2015
2016
2017
2018
Figure 2: Overall billing systems revenue forecast worldwide (excluding professional services), in US$ 2013–2018 [Source: Analysys Mason, 2014]
Key trends in billing and charging market 1. Service type trends Mobile services remain the dominant recipient of CSP billing and charging investments. This can be explained in that a significant portion of the new potential revenue opportunities for CSPs such as LTE data monetisation and OTT partnerships for content are predominantly in mobile. Demand for pure-play prepaid and postpaid platforms is on the wane, with most of the investments in this segment coming in from CSPs looking to maintain and support their legacy systems. The maintenance revenue can be a significant amount because of the large, well-entrenched legacy billing systems in
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ANALYST REPORT
use at several tier one CSPs globally. Convergent platforms have taken over almost all of the new sales for billing and charging systems, even though most CSPs do not utilise its convergence potential initially as it is used to support selected prepaid or postpaid use cases.
2. Regional trends Region
Outlook
Asia-Pacific
The anticipated wave of LTE network deployments has begun in some countries and will continue to drive spending on systems to support mobile broadband. The roll-out of broadband infrastructure across emerging economies is also expected to be a driver for spending on revenue management systems.
14% 7%
Latin America
10%
Subscriber numbers continue to increase and there will be increased activity in partner settlements in roaming and third-party content services.
69/% Europe, Middle East and Africa
Mobile PSTN Business Residential Broadband [Source: Analysys Mason, 2014]
Figure 3: Billing systems spending by service type in 2013, worldwide
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LTE deployments have continued to increase in this region and will drive spending on systems to support mobile broadband.
Strong competition and slow recovery from recession has delayed spending on billing systems in western Europe as CSPs are hindered by declining revenue. The Middle East and North Africa represent a growth region within EMEA, although from a relatively smaller base.
North America
Moderate growth has returned to the region, as LTE roll-outs drive spending from the major mobile CSPs. North America continues a modest move towards prepaid services, which helps to drive sales of new systems.
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3. Technology trends The software development effort for telecoms has evolved radically over the past two decades towards faster design cycles, less expensive hardware and lower support costs, as development moves from in-house to generic vendor supplied systems.
platforms started gaining traction. Lately, software as a service (SaaS) deployments are attracting CSP interest, driven by a number of factors discussed below. However it must be noted that the traditional billing platform vendors are strongly entrenched in most leading CSPs worldwide and these systems will not be replaced completely for the next several years. While the adoption and success of SaaS based billing services are some years away, there are several reasons why SaaS deployments hold promise for CSPs.
In-house billing systems
Vendor billing platforms
Network agnostic COTS platforms
SaaS based deployments
Source: Analysys Mason, 2014
Figure 4: Shifts in leading edge CSP approaches towards billing and charging platforms
It must be noted that there are overlaps between each of these phases in the diagram above and they are not mutually exclusive. The first iterations of telecoms billing systems were mostly developed in-house to support monthly billing for basic voice services over POTS. Over the next couple of decades CSPs tilted firmly towards vendor provided platforms as mobile communication took off. As prepaid usage increased, the billing function moved closer to the network as prepaid IN systems gained prominence. Further along, as billing and network complexities increased and the traffic shifted to IP from circuit switched, network agnostic software driven convergent billing
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1. For one, they are capex friendly. CSPs faced with declining voice revenues and high network expansions costs are looking at ways to improve their cash flow. SaaS based deployments incur minimal capex and are mostly based on a pay-as-you-grow business model. This is attractive for many CSPs looking to slash their costs. 2. Support for new business models is another key factor. The digital economy ecosystem calls for partnerships with a number of different players in a short period of time. CSPs’ traditional way of doing business is incapable of supporting such requirements. Having a cloud based deployment that is flexible, easily scalable and adherent to standard APIs can drastically cut down on time to market for new partner services. 3. Availability of technical expertise is another reason why CSPs especially in emerging markets are considering SaaS based use cases. Such deployments can be remotely monitored and managed without onsite support. For all the benefits, there are some significant obstacles that have slowed down any large-scale adoption of SaaS service models: 1. There are strict regulations regarding how and where customer data can be stored and transferred. While most CSPs are not considering SaaS deployments in public
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cloud, even private cloud hosted solutions need to be compliant with security and data protection regulations or the implications can be huge. 2. Network latency for cloud-based services remains a significant issue in most regions, especially emerging markets where there tend to be connectivity black holes. In case of cloud hosted billing deployments, network latency has to be less than 50 milliseconds for real-time charging use cases, which requires dedicated direct connections. However there is greater flexibility in case of postpaid charging use cases.
Change is in the air The telecoms industry is undergoing a massive shift today with strong competition, declining voice revenues, explosive growth of data and more stringent regulation. Effective data monetisation has become a key pillar of success for CSPs as they battle to stay relevant in the light of competing services from OTT players alongside the need to invest significantly in network upgrades and support systems. Prepaid and postpaid systems will continue to dominate the billing and charging market for the next several years, with growth almost entirely coming from convergent platforms. Billing systems have very long active service lives and are seldom completely decommissioned by CSPs. However the number of services supported by a legacy platform will decrease over time though they continue to remain in service. Mobile will continue to attract the lion’s share of CSP investments in billing and charging as the number of mobile data based digital economy use cases increase (such as sponsored data). Emerging markets will see stronger growth for billing and charging systems driven by new technology deployments such as LTE and fibre broadband roll out. SaaS based deployments have the potential to have a strong impact on billing and charging systems, mainly as it allows CSPs to take cost out of their operations. While large-scale deployments of SaaS based billing services are some years away, there will be increasing number of small use cases being supported by such services in the medium term. The next few years looks to be an exciting time in the billing and charging market with significant changes and upheaval on the anvil. For more information feel free to contact me at john.abraham@analysysmason.com
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About Analysys Mason Knowing what’s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research.
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Our focus is exclusively on TMT. We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy. We have developed rigorous methodologies that deliver tangible results for clients around the world.
For more information, please visit www.analysysmason.com/consulting.
Research •
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We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services. Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts. Our dedicated Custom Research team undertakes specialised and bespoke projects for clients.
For more information, please visit www.analysysmason.com/research.
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COMPANY PROFILES
Company summary Founded
1876
HQ
Kista, Stockholm, Sweden
Employees
115,000
Revenue
US$34.9 billion (2013)
Customer
Over 500 customers in more than 180 countries. Key customers include AT&T, Comcast, MTN, Rogers, Saudi Telecom (STC), Telefónica, T-Mobile, Turkcell, Vodafone, Verizon, BT, BskyB, Swisscom, Time Warner, Sprint, Orange and Telenor.
Partnerships
Accenture, HP, IBM ESRI
Financial Status
Publicly Traded
Revenue management products Converged Billing in One (CBiO)
Ericsson’s CBiO offers a flexible modular architecture and includes standard public interfaces and integration to external systems such as CRM, ERP and point-of-sale. The solution offers real-time, end-to-end functionality for accurate billing and charging. It enables CSPs to offer converged services with a single bill and single point of customer care. CBiO comes pre-integrated with Ericsson’s Telecom CRM product and integrates with Ericsson Catalog Manager as well, offering service agility. The solution also supports dynamic and personalised service bundles, tiered pricing and shared plans.
Ericsson Expert Analytics
Ericsson Expert Analytics is a horizontal data analytics solution that correlates metrics and events from network nodes, probes, OSS/BSS and other sources. It supports multi-vendor environments and includes an SDK and API that allows flexibility in adapting new data feeds. It also supports purpose-built applications such as Customer Experience Assurance (CEA) and Expert Analytics for Marketing (EAM).
Multi-Mediation
Multi-Mediation provides a single platform and interface for post-processing systems that can handle traditional off-line, CDR-based, billing mediation and bi-directional, real-time mediation and event-based mediation.
Yield Management
Yield Management is a tool that supports innovative tariffs to increase network revenues and optimise network utilisation. It controls the inventory and targets the right customer at the right time with the right tariff.
Key differentiation Ericsson offers a robust end-to-end BSS and OSS product portfolio, provided as pre-integrated suites or standalone modules. These products enable CSPs to develop automated processes, offer personalised services and dynamically build and manage contextually relevant services. The product offerings are backed by a strong global services group with deep understanding of network and system infrastructure and also a wide partner ecosystem. These solutions are further supported by a comprehensive analytics platform that drives real-time insights that help achieve higher levels of customer experience and loyalty. For CSPs seeking to transition towards digital service providers, the company offers a clear vision for building the programmable infrastructure of the future using NFV, SDN and cloud technologies. Ericsson’s customer base includes several tier one mobile network operators and cable companies worldwide.
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COMPANY PROFILES
Company summary Founded
2008
HQ
Mountain View, California, USA
Employees
95
Revenue
Undisclosed
Customer
Swisscom, Teleena, Telstra, tier one APAC mobile operator, European MVNO
Partnerships
Aria, Atos, CapGemini, F5, IBM, Sicap, Tech Mahindra, Unico, MDS, KPMG
Financial Status
Privately held
Revenue management products Converged Billing MATRIXX Unified Policy and Charing
MATRIXX Unified Policy & Charging combines the functions of an online charging system (OCS) and policy and charging rules function (PCRF) into one real-time product that has been engineered to deliver predictable performance under load in demanding LTE and LTE-Advanced deployments. It supports rating, balance management, online charging and makes network and customer policy decisions for all services, payment methods and line-of-business segments. The solution also includes MATRIXX Catalog Builder, which is a graphical user interface tool that combines product, pricing, discounting, policy and configurations and allows creation of sophisticated customer offers across multiple products and services. Administrators can reuse pricing and policy data across product catalogues through a unique ‘set up once, reuse anywhere’ approach, which allows new offerings to be quickly rolled out. Centralising pricing and policy configurations reduces likelihood of errors and allows easier support for new policy and charging use cases such as sponsored data and optimised OTT video packages.
Key differentiation The MATRIXX unified policy and charging solution offers inherent scalability and low latency. The solution was engineered from the ground up as a unified platform and MATRIXX claims unrivalled performance based on benchmarking and live customer implementations. The system uses patented technologies such as Contention-free In-Memory Database, Parallel-MATRIXX processing, Algebraic-Decision Engine and Parallel-MATRIXX Clustering. It allows CSPs to offer tailored price plans and allows customers more control in real time through accurate notifications. The solution can be quickly deployed and new products and promotions can be configured in-house without professional services, which reduces time to market. It also offers significant hardware cost savings as it can run on low-cost commoditised hardware without requiring third party database software.
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