Revenue leakage: Are carriers raising white flag?

A survey conducted by Analysys Research and commissioned by revenue assurance provider Subex Azure revealed last week that fraud has contributed to a global increase in lost revenue for carriers. Surprisingly, they are reacting by raising their acceptable limits of loss.

The 2007 Global Operator Attitudes to Revenue Management Survey found that average revenue leakage among global telecom operators increased to 13.6%, up from 12.1% in 2006. External fraud, internal fraud and fraud by other operators are the primary factors in the rate of loss, which would have gone down slightly otherwise. Losses due to fraud grew from 2.9% last year to 4.5%, with mobile operators losing the most.

There is a huge gap between the losses carriers deem acceptable and what they are actually losing, yet 32% still don't use third-party revenue assurance programs. The average acceptable level of revenue loss is 1.8%; in 2003, it was less than 1%. So why the big difference between what is acceptable and what is actually flying out the window?

Generally, it is because people try to solve the problem themselves, said Danny Dicks, principal analyst for Analysys Research. The bigger problem, however, is organizational. “Fraud, interconnect and routing issues are generally not dealt with by the revenue assurance team. They have dedicated teams for fraud and interconnect, but they don't consider their issues to be part of the revenue assurance team's remit, and that has important implications,” he said.

This is the fifth year the study has been conducted. The bottom line is that only 50% of carriers have dedicated revenue assurance teams, and even those are focused more on network management than on billing integrity and external fraud, where most of the problems are. Operators within Europe and Central and Latin America reported higher percentages of dedicated teams than other regions. Europe has the lowest rate of loss.

In addition to fraud, the three primary sources of revenue leakage cited by respondents were poor processes and procedures, poor systems integration, and problems associated with applying new products and pricing schemes. The biggest problem for North American service providers continues to be incomplete or incorrect usage data, a category in which they rank in the bottom 10% globally.

The Middle East & Africa region lost the most revenue, more than 20%. Asia Pacific was just below 20%, and Central and Latin America lost more than 15%. These high levels could be linked to the higher percentage of wireless services in these areas, Dick said. Western Europe ranked lowest with 7% in losses. North America averaged 13%.