VoIP poses billing challenge

The arrival of voice over IP in the service mainstream has meant a proliferation of flat-rate service plans, from VoIP-specific companies such as Vonage and Packet8, as well as from cable companies and even incumbent telephone companies.

The resulting competitive popularity of flat-rate pricing would seem to take the pressure off the complex billing systems operated by service providers, which must be able to process call detail records and factor in time-of-day, distance and length of calls, as well as add in advanced feature fees on a per-subscriber basis.

Billing industry experts say, however, that if anything, VoIP actually will create new billing complexity and challenges — especially for incumbents — that are substantially different from what service providers are accustomed to today.

“Billing is going to be very different, and, of course, different is difficult because you have established processes that will be disrupted,” said Martin Creaner, chief technical officer of the TeleManagement Forum. He believes many service providers are only now realizing the extent in which VoIP will challenge the way they handle many things today, including billing and service assurance.

Even flat-rate plans include rated elements, said Kent Steffen, CEO of Telution. “Information or 411 calls and most international calls still are usage based,” he said. “It's not truly flat fee. Also, many service providers may go to an all-you-can-eat service plan but then want to price it differently for specific markets, based on the specific set of services they are competing against in that market. Then, the billing piece of it starts to be less about billing than about ‘how do I compete?’”

Cable players are introducing VoIP as part of their service bundle, and that adds another level of complexity, said Scott Ortiz, director of voice services for CSG Systems Broadband Services product management.

“The customers of ours who have existing video or high-speed Internet customers, they do have some fairly sophisticated bundling schemes,” he said. “There are discounts — sliding scales based on how many services I actually subscribe to — that have to be factored in. And many of them have fairly sophisticated business rules, with qualifications in terms of campaigns and prerequisites to customers receiving the discount.”

The danger, said Curt Champion, senior director of marketing for Convergys, is that service providers will begin viewing VoIP as just another data application.

“Just providing voice service by itself still adds complexity because there are multiple steps involved,” he said. “One of the things that is underestimated sometimes is that voice does create a more complex ordering environment. A service provider must be able to capture the data needed to provision the service but also do other types of things — like assigning a telephone number and being able to define other types of optional features — if they are offering optional features on the voice.

“Many went in with the idea of treating VoIP as data service, which is a very simplistic approach. It may be enough to initially launch the service in a trial period, but as they launched it and supported it, the complexity became a little bit more obvious.”

What service providers need to remember is that it is still important to have visibility into what customers are doing, how they are using the network and what resources are being consumed.

That all factors into one of the items TMR's Creaner is worried about — revenue assurance. “Normally, you have a few guaranteed things that you do — like asset tests for whether you have revenue leakage,” he said.

Existing systems set up for billing can enable service providers to detect suspicious calling patterns and know to investigate further, he said. “All of the systems built up for revenue assurance are pretty useless in the VoIP world,” he said. “We have to develop a whole new set of processes for how you detect fraud.”

While solutions exist on the market to address the issue, service providers are only now waking up to the problem, Creaner said.

“You have to admit there's a problem before you can fix it,” he said. “Now that they are expanding out a VoIP business, some companies are starting to admit VoIP is actually a challenge.”

He believes there may be some high-profile disaster before there is general acceptance of the need for new types of systems to guarantee the same kind of revenue assurance in the VoIP world that exists today in the traditional voice world.

“There is going to be a few pretty dramatic examples of poor revenue leakage or fraud in VoIP, and people are going to wake up to it,” he said.

Even when voice is part of a service bundle, the service provider needs to know that the individual piece of the bundle is profitable, said Brian McCann, director of product marketing for Portal Systems.

“You can bill VoIP as flat rate,” he said. “But if you look at the whole back office in terms of revenue assurance, you still need to be capturing the usage of the network, making sure every item is accounted for and rated.”

Without doing that, he said, service providers run the danger of not knowing how network resources are being used or if they are adequate to meet customer needs.

“Do you know if these services are profitable or if they want to get into more sophisticated things, like find-me, follow-me? A number of things need to be prepared for,” he said.

The solution, said the experts, depends on the starting point. Every service provider has to start with the billing and customer care systems they have in place today before determining where they have to go in the future. But, in general, suppliers stress the need to maximize flexibility, look for strong mediation capabilities and recognize that VoIP is the tip of the iceberg where IP services and revenue-generating opportunities are concerned.

“There is a level of sophistication in the mediation space that is required going forward,” Steffen said. “Before, service providers had a central place called the switch to get call detail records. In an IP world, there are packets all over the place that make up a call. The mediation piece has to collect packets to determine which ones make up a call.”

Even in a flat-rate world, service providers must collect information about how their network is being used for competitive reasons, he added.

Billing systems should become competitive tools, McCann said, enabling service providers to more rapidly react to changing market and technology conditions in building new service bundles and getting them into the network quickly. That requires billing software that is customizable but doesn't require major reworking for every customer or change, he said.

At the end of the day, knowing that any kind of VoIP service is profitable will become a corporate imperative, Creaner said, at least in the U.S. Under the Sarbanes-Oxley rules for corporate accounting, chief financial officers will be required to sign off on statements assuring the profitability of service plans, lending a new level of urgency to the internal ability to prove that every new service is carrying its revenue weight.

“It's not rocket science to pull together packets that are going all over the place, instead of having one call detail record, and then determine how resources are being used and revenue collected,” Creaner said. “But it's also not an easy change.”