The Business of Convergence

Although on the surface, offering subscribers a single bill seems like a simple act, in reality, the convergence issue is complex. Aside from the technical hurdles, several business issues go along with offering your customers a single bill, and what may work well for one carrier may be less effective for another.

According to Steve Lyons, Alltel staff manager of business processes - system planning, the first issue to consider is convergence complexity, which he describes as a double-edge sword.

"At the macro level, it's easier than you think," Lyons said. "Analysis paralysis can kill you. At the micro level, it's harder than you think. The legacy of standards, expectations and processes that each product set brings it is truly amazing."

The second misconception is that convergent billing is the same as convergent invoicing. Convergence covers a lot more ground than just printing a single bill, Lyons said. Convergence is about simplification and adding value to the customer, as well as about relationship management, 1-stop shopping and customer service.

"If a carrier builds an enterprise around creating a single bill, they will find themselves behind the curve very quickly," Lyons said.

Corporate structure also affects how carriers handle convergent billing. Lyons said carriers that provide all of the products and services can jump straight into a convergent model more easily. Those carriers already have the in-house expertise and support infrastructure. It's simply a matter of pulling it all together.

However, if you are reselling or working through a strategic alliance, Lyons said you probably would have some significant accounting and reporting issues to deal with, and you may have to rely on outside sources for much of your billing-system functionality. In cases where your company has different subsidiaries offering various pieces, management leadership becomes crucial.

"It can be harder to deal with a peer subsidiary than it is to deal with an outside company," he said.

PARTIAL PAYMENTOne example of the subsidiary structure is Horizon Communications. Its structure includes a holding company with separate subsidiaries for the LEC vs. wireless.

Bill McKell, Horizon Communications president, said if Horizon had operated its non-regulated businesses, such as PCS, with the LEC part of its business, which is regulated by the Ohio state regulatory body, the non-regulated businesses would be subject to more regulation. McKell said carriers need to be aware of partial-payment issues when they go into convergent billing. If a subscriber pays only part of the bill, the wireless business could be left holding the collection plate because the payment has to be applied to the LEC first. The situation creates a billing Catch-22.

It's ironic that non-regulated start-up businesses like PCS, which generally have more cash-flow problems, are the ones that get paid last, McKell said. One way around the dilemma is to wholesale the service to the LEC. The LEC bundles the wireless service with its own services and bills them. That way, McKell said, the non-regulatory company can meet its cash-flow needs because the LEC is obligated to pay the wholesale bill as it comes due. Then, it must take the cash-flow risk if the customer does a partial payment.

According to Lyons, partial payment is a 3-level issue. First is the regulatory level if LEC services are part of the converged offering. You may have to maintain separate account balances by product type (regulated vs. non-regulated). He said the second level covers carriers operating in a multicompany environment, either internally or externally. For example, you may provide a converged bill for a corporate customer across multiple regions or divisions. You'll want to track aging and write-off separately by region, so you have to divide that partial payment between two or more internal groups by some business rule (probably percentage of revenue contribution). You may have the same concerns in dealing with an outside company for resale or joint-marketing efforts. Product management comprises the third level. Most carriers want to track cash flow, aging and write-offs by product line for reporting and analysis.

Rich Aroian, Saville Systems vice president of marketing and strategic alliances, considers partial payments a carrier business issue rather than a billing-system issue -- as long as the carrier has a flexible system. He said partial payments could become more of an issue, depending on the convergent business model you put in place. If you resell services as part of a converged bundle, then you have an issue in terms of your business process. An example is the e-commerce market, where carriers are serving as a delivery mechanism, and subscribers can put charges for purchases from the Web on their phone bills. Although right now this is more of a trend in Europe than in the United States because of banking laws, regulatory issues and cultural views, chances are the trend will make its way to the United States. The questions that carriers must answer include: How do you relate to your suppliers? Do you turn off somebody's phone service if they don't pay a credit-card bill for something they purchase over the Web?

E-COMMERCEThe answers may come down to customer service.

"Every carrier is trying to be as customer-centric as possible, and that means they want their customer-service reps to be empowered to deal with their customers on a whole host of issues, regardless of the services they are providing them," Aroian said.

Although Lyons said e-commerce is part of Alltel's plan, he's referring, at least in the short-term, to bill presentment, payment processing and customer self-care.

"I'm not sure that paying for items on the Internet and having the payment show on the bill is really something we hear customers asking for," Lyons said. He added, however, that carriers will need to offer the ability to purchase a product on the Web and be billed for it on a converged bill.

Lyons added that e-commerce brings expectations of a real-time world, but the telecommunications industry has been built on a batch process. When a subscriber adds call forwarding from your Web site or makes his payment via the Web, he expects the account balance on the interactive voice response (IVR) to be updated within a few minutes. However, if you have to send a batch payment process to your billing system from the Web at the end of the day and another batch process from your billing system to the IVR to update the account balance, you're not going to meet customers' expectations, he said.

"Making all the pieces work together in a near-real-time fashion is a big undertaking, especially if you're not used to thinking that way," Lyons said.

According to Aroian, if you have a truly convergent system, you're not constrained from going after business opportunities such as e-commerce as they come along -- you can bill for anything.

Confusion about the definition of convergent billing adds to the issue's complexity. Terms such as convergent billing, consolidated billing and electronic stapling often are used interchangeably, sometimes making it difficult to ensure that all parties are on the same page.

According to Natalie Eichhorst, ITDS marketing specialist, bringing information from various services together on one piece of paper sometimes is called convergent billing when it really is electronic stapling. She said convergent billing allows you to apply different rates to various services based on usage.

"We consider consolidated (billing) a convergent service," Eichhorst said. ITDS is not rewriting its code to do convergence but is using a third-party solution to provide convergence to carriers, she said.

Steve Lyons, Alltel staff manager of business processes - system planning, said Alltel groups convergent billing into three models: aggregator, consolidator and convergent.

* In the aggregator model each product/account is provisioned and maintained, and the bill is calculated out of the product's host billing system. Instead of sending the bill file to the printer, the carrier sends it to the aggregator, which may be a separate system, one of the product host systems or the print vendor itself. This is done for each product and billing system. The bill formats are normalized, rendered sequentially, and a converged cover page is added showing product subtotals and an invoice total. This process often is referred to as electronic stapling. The financial side of this approach is a challenge, Lyons said. Additionally, keeping account information, billing cycles and control data in sync can be a lot of work.

* In the consolidator model, the legacy host system provisions, maintains, and calculates bills for individual products/accounts as in the aggregator model. However, instead of sending a formatted bill to an aggregation system, the legacy host system sends the billing results to a consolidator (which may be either a standalone system or one of the host legacy systems) in a data format. The consolidator system reads the data prior to its bill cycle and incorporates the charges into its billing. Because the consolidator system is dealing with data instead of just a print image file, it potentially can provide a basic level of cross-product discounting and bundled rating.

* In the convergent model, a single fully-convergent system can provide all basic provisioning, rating, billing and account-management functions for all products/services.

The trend in revenue management lately has been for niche solutions providers to team up, offering enhanced products and services.

* American Management Systems (AMS) and MetaSolv Software announced a strategic alliance to offer AMS system-integration services and MetaSolv's Telecom Business Solution software and services. The agreement combines MetaSolv's order-management, provisioning and service-assurance software and AMS' vendor selection, consulting, engagement-management, system implementation and integration, outsourcing and other best-in-class products to deliver a comprehensive operational support system, customer-care and billing portfolio.

* Ardent Software acquired Prism Solutions. Ardent develops and markets embedded databases and software tools for enterprise-scale applications and data warehouses.

* Danet and Network Engineering Consultants (NECI) will market and provide information-technology, engineering and management-consulting services to carriers. Danet provides billing and customer-care systems, system integration, business-support services, custom software development and other consulting services. NECI provides mission-critical consulting services.

* Heartland Payment Systems and CyberSource partnered to provide wireless carriers with an e-commerce solution. The solution offers merchant account setup combined with secure real-time credit-card payment processing and other e-commerce transactions.

* Kenan Systems and Mobile Data Solutions (MDSI) signed a cooperative marketing agreement to offer best-in-class customer service. The agreement combines MDSI's mobile-workforce-management solution and Kenan's suite of billing, customer-care, order-management and decision-support software.

* Lucent Technologies and Boston Communications Group (BCGI) announced an agreement to offer an end-to-end customer-care portfolio. The agreement combines consultative service offerings from Lucent's NetCare with BCGI's service-bureau capabilities for billing service inquiries, roaming and prepaid services.