Realizing Roaming Revenues

Roaming traffic is growing at a significant rate as carriers lure high-end customers with low, single-rate nationwide plans. But roaming revenues as a percentage of overall revenue actually are declining for many carriers, especially for carriers that do not have a national footprint. The days of easy profits are long gone. Today, most carriers are learning to think of roaming as a service their customers demand rather than an unrestricted revenue stream.

Although it may seem roaming managers are stuck between the stereotypical rock and a hard place, the opposite is true. Just as long-distance revenues increased by billions of dollars when competition forced costs down, roaming revenues could increase as consumer per-minute prices decline.

The key to success will be negotiating beneficial roaming agreements, carefully monitoring activity from a home-and-serve perspective to ensure that every dollar is captured, and renegotiating roaming agreements when necessary.

Typically, roaming agreements are evergreen, but usually they can be renegotiated at either party's request. If you send a lot of traffic to serving markets, you are in a good position to ask for renegotiated airtime charges. Even if you don't make major changes in the relationship, the transformation of roaming from a profit center to a customer service means you must monitor agreements with future negotiations in mind.

CHOOSING ROAMING PARTNERSTypically, one of the first issues you must consider is the value of a contract with a national carrier vs. a series of agreements covering potential roaming areas. Both alternatives have advantages and disadvantages, and no one solution meets every carrier's needs.

A single agreement with a national carrier is much easier to negotiate and manage, but having all your eggs in one basket puts smaller carriers in a weaker negotiating position. Over time, as the national carrier grows, its partners may be in direct competition for local subscribers.

Still, if you need to provide national and international roaming, you could end up with more than 200 separate contracts if you decide to sign agreements in individual markets. Hybrid options such as the North American GSM Alliance are evolving to enhance your purchasing and marketing power in these situations.

Also consider that as the industry continues expanding, you should not necessarily form roaming agreements with as many carriers as possible. Rather, you should consider strategic relationships that are most beneficial from a technology and business perspective.

NEGOTIATING THE CONTRACTMost roaming contracts begin with standard agreement formats from CTIA, the CDMA Development Group or the GSM MoU. Although standard agreements are a good place to begin negotiating, they're seldom signed as final drafts. You should weigh every phrase and make adjustments to serve your best interests. Every detail in the standard agreement is up for negotiation. There are some key questions that will help you determine the final contract:

* Are you in a receivable or payable position in this market?

* Can you negotiate a lower rate in your payable markets, a higher receivable rate or a rate in the middle?

* Did you build in a time frame for renegotiations?

* Is this an exclusive agreement, or can either party sign similar agreements with competitors?

* What kind of long-distance rate can you negotiate?

* Is the fraud provision favorable?

The contract also should include procedure details for notifying the partner about new markets and a specific time frame in which new numbers will be loaded into switches.

You also should consider a separate amendment on dispute resolution. Typically, disputes arise over clerical errors, which are most easily resolved through the industry's net settlement-dispute program.

Also consider an amendment that addresses standards inter-operability issues. For example, GSM markets operate on a calendar month, and cellular carriers typically run from the 16th to the 15th of successive months.

MONITORING ACTIVITIESOnce contracts are signed, you should monitor activities from both a home and serve perspective on a daily and monthly basis. Daily monitoring helps ensure that roaming partners are meeting their contractual agreements. New technologies also will help you keep a close watch on micro and macro trends ranging from roaming charges incurred by a single subscriber to overall changes in roaming activities.

By monitoring individual calls, you can review high-usage reports and note anomalies to help prevent fraud immediately. On a macro level, daily monitoring helps ensure that current roaming agreements are incurring charges in home service areas. Although these mistakes are most often simple errors rather than intentional fraud, they're much easier to remedy if you identify them before you incur significant charges.

The multitude of clearinghouse data provided is vital to analyzing roaming trends and forecasting roaming revenue. You may want to feed clearinghouse data downstream to other applications in accounting, billing and revenue-assurance departments for further auditing activities.

You also can monitor daily activities to determine if your partners are loading subscriber identification information into their switches promptly. Less activity than anticipated -- or no activity at all -- may represent a problem with the timely input of subscriber information. Identifying the problem early will increase revenues for both partners and eliminate calls from angry subscribers. Low activity levels also may indicate problems with negative file bypasses, another issue that you can resolve easily once it is identified.

The opposite also is true, pointed out Betsy Jeffries, ALLTEL roaming manager.

"You need to be sure that the numbers you requested to be pulled really are pulled," she said. "We review activity regularly to make sure we're not being charged after the number should have been pulled."

Also remember to monitor clearinghouse reject reports carefully to ensure that charges are billed in correct CIBER format and to determine why clearinghouse edit reports rejected other records.

TRACKING CHANGESThe key issue for most roaming managers is reviewing rates as you update roaming agreements. Rates change constantly, and those changes may not always show up in clearinghouse reports immediately. Reviewing rates on a daily basis helps ensure that contractual changes have gone into effect as quickly as possible.

A daily review of rates also helps you pinpoint how you will need to adjust the financial net settlement account prior to month-end.

You also can request clearinghouse reports with greater detail in daily and monthly reports. Instead of just airtime and daily surcharges, you should receive reports on long-distance charges and other data. In most cases, the clearinghouse data also is formatted so that you can import it into your software applications such as Microsoft Excel or Lotus and use it as part of a comprehensive internal business report.

ALLTEL imports that data and runs it through a proprietary rate audit that includes settlement data as well as internal tables reflecting up-to-date contractual rates.

"Contracts are more complicated and change so often that everything has to be reviewed very carefully," Jeffries said.

NEW TECHNOLOGIESOn-line database-management tools can coordinate hundreds of administrative details including technical data, roamer agreements, negative file bypass information and brown-out conditions. Enhanced services even protect roaming revenues with a rate-audit feature that allows roaming rate comparison against roaming revenue accrued for financial net settlement and provides a variance report based on your specific query cri teria.

"We download carrier changes and use this information to update our billing system and switches," said Jon Lightle, Sprint PCS general manager of inter-carrier services. "Plus, we can keep track of exchanges pulled out of home and serving markets for fraud."

Other new services provide carriers with web-browser-enabled tools to track and troubleshoot for comprehensive real-time roaming data.

"It's a true timesaver," said Don Sehulster, Citizens Mohave Cellular vice president of network operations. "It minimizes the need to contact another carrier and find the appropriate party to clear a VLR entry, during which time our customer is denied service."

THE BOTTOM LINEDetermining roaming activity profitability can be as simple as checking your net position on clearinghouse reports or as complex as considering the role roaming services play in attracting and keeping high-revenue subscribers. Even a negative net position may not mean that roaming is unprofitable if those costs are passed along and billing subscribers achieve profits.

Many carriers have developed in-house programs that audit clearinghouse reports on a monthly basis. However, the process requires a significant amount of time to input and maintain tables that compare clearinghouse data to internal tables or other criteria.

Major clearinghouses are moving toward developing seamless software solutions that audit every call automatically and provide carriers with the data they need in a consolidated report. Programs allow carriers to post rate information with their clearinghouses electronically. Once all carriers have posted that information, the clearinghouses automatically provide audits on every record, confirming that every call is billed at the contractual rate and alerting carriers to any parameter discrepancies.

The long-term goal is to develop clearinghouse software that provides an integrated mechanism to audit roaming reports automatically and built-in modules to allow easy electronic reports on variances, forecasting and trending. The software also would allow you to create reports that predict what might happen if rates are changed.

Once you have the necessary software tools, monitoring functions and negotiating tactics in place, you will be on your way to realizing true roaming revenues for years to come.

Moore is GTE Telecommunication Services director of clearing and settlement solutions.

When you review your roaming agreements at the end of the year, you may notice that you send some carriers more traffic than they send you. Chris Brockbank, Mobility Canada director of marketing, said renegotiating a contract in such a situation could be tricky. The more you use another provider's service, the less likely that provider is to renegotiate the agreement for lower rates. It is a revenue stream for that carrier, he explained, and the repercussions on that company will be much more severe than on yours.

One reason a carrier may hesitate to renegotiate a contract is because it has a committed amount of revenue in its budget that it counts on you to provide. For example, if a partner expects $100,000 in traffic from you, and you want to reduce roaming rates by 50%, it will worry that its revenue will decline to $50,000.

Brockbank said one way to work through this situation is to commit to sustaining the $100,000 in revenue but double the amount of airtime you send to the company, which makes up the difference and has a net zero effect on your partner. You also can time reductions in a stepped approach to make it easier on the other company. You might agree to reduce rates every six months so the jolt is not overnight. Another way to build a partnership is to look for other opportunities to cooperate so that your relationship is not based on revenue alone. For instance, you can work on products together so that roaming rates tie in with an overall strategic discussion.

"If you get caught up in just haggling over numbers, you will ignore the fact that you really do need service from each other," Brockbank said.

Most importantly, you should think about the long-term ramifications of your relationship. Brockbank suggested that you treat all requests from roaming partners as customer pleas. If you treat a partner as a commodity, that carrier soon will find alternatives to roaming agreements through technology.

"A lot of carriers don't think about year two; they just think about year one," he said. "They will hit a brick wall at some point, and in year three they won't have the revenue anymore."

Is your next step coordinating international roaming service? Satellite providers are finalizing seamless systems that allow subscribers global access. Massive marketing campaigns to support the billions they've spent on infrastructure are expected to increase consumer demand dramatically for international roaming services.

Although many of the contract considerations for domestic roaming are similar, international roaming increases the complexity of almost every aspect, from interoperability issues and fraud to contract negotiation and currency exchange. Still, carriers who have assembled seamless roaming systems successfully in the United States can build on that expertise to take advantage of a market that potentially could provide a significant revenue stream.