Our recent discussions about revenue assurance, business assurance (or whatever we call it these days), confirm the one constant in the telecom industry: that it is in a state of constant change. An article in the Wall Street Journal addresses the SMS-related revenue stream and its decline, which has/had generous profit margins of 80% compared to the 35% typical for voice.

The most interesting comment was made by KPN’s Chief Exec:

“It’s not cool anymore to SMS”.

KPN also reported that its youth-oriented brand, Hi, saw an 8% decline in outgoing SMS or text messages per customer in the first three months of this year compared with the first quarter of 2010.

You have heard me say this before, but I will say it again: in my opinion the way for RA practitioners to remain relevant and justify their relevance is to offer a way to address these kinds of challenge, and not to just continue doing what has worked for RA over the last 15+ years. RA is no longer the new kid on the block. We can tell that from the debate about its name. The TCFKARAV (The Companies Formerly Known As Revenue Assurance Vendors) have grown out of their schoolboy shorts and want to put on long trousers. As it matures, RA needs more than a change of name. RA needs to take on more serious responsibilities.

Recently I had the opportunity to conduct an RA assignment for/with a British carrier that had invested heavily in a proper set of RA solutions about 3 years ago. The amount of leakage spotted was rather impressive. As a result I had decided to list below some myths regarding RA and to challenge them.

1. “Empirical RA efforts, prior to TMF maturity model were less effective”

Empirical RA efforts have numerous weaknesses as they rely solely on the common sense of the RA team and the support they receive from the upper management. However even the most sophisticated and well defined RA initiatives would not thrive without these elementary activities, which IMHO are entirely non-trivial.

2. “Advanced dedicated software solutions are fundamental for proper RA execution”

Software solutions are important as they allow us to focus on the “what” rather than forcing the RA team to struggle with the “how”. Yet, dedicated software requires a tendering process, internal lobbying with IT, procurement, implementation, integration, training and operating the software. Somehow it seems that 90% of the effort is still allotted for the means rather than just focusing on the job itself.

3. “RA conferences are an import platform for ideas sharing and empirical know-how exchange”

Few would argue that RA conferences have little merit. However these few would be primarily: vendors; consultants; and RA managers that hope someone will spot them whilst they give their speech on the podium, and offer them a promotion with a rival carrier.

4. “In the early days of RA there was much more fun”

Yeah, sure.

Any further suggestions for additional myths?

On 1 April 2010, UK regulator Ofcom announced significant cuts to future mobile termination rates (MTRs). The result is that MTRs will fall by a whopping 88% on average, from their current average of 4.3 pence per minute (ppm) to just 0.5ppm by 2015.

This is interesting because of the scale of the change. BT must be whooping it up, though they should realise that F-M substitution gets a boost as price levels get closer still. I expect to see a relative closing of on-net off-net prices; more complete bundles; increased dominance of Any Time Any Network price models. MNO margins will suffer but I also think this will dampen future demand for voice over mobile broadband applications which were surely coming as mobile data starts to deliver.

One can challenge by asking whether mobile operators one day gang together and try to ‘punish’ fixed-line users, by increasing the rates of calls made to fixed lines?

Even though this sounds like a joke, until a couple of years ago C&W used to punish pre-paid customers, by charging call terminating fees to pre-paid customers at higher rate than post-paid. While it was impossible to tell the call originator who is who. So, my reply to the joke would be: “never say never”.

IMHO RA is so hopelessly reactive, they find out about things after they happen and then react.

It would be a real shift for RA to work with Regulatory people to anticipate changes in inter-carrier charging in order to come up with effective models to maximize returns.

At some point of time I had noticed that I don’t find too many contributors to talkRA from North America. Even though the readership is there, yet we lack the contribution. American society has contributed greatly to the world economies and culture, with myriad inventions addressing every aspect of our lives and culture, not forgetting the infamous French fries or Spaghetti Bolognese (any attempt to mention this latter dish at a common Bologna restaurant would risk the guest being thrown out by the chef).

So, back to NA and RA.

The North American numbering plan, where all phone numbers, both mobile and fixed, use the same numbering system imposes a unique definition on how business is conducted.

The fact that CSPs in the Rest of the World (a fine American-invented phrase) use unique non-geo prefixes for mobile phones makes life rather different when one tries to compare the industry challenges with the North American numbering plan and the implications for revenue assurance.

In North America, the called party (MPP) has to pay for the call. The fact that in the US and Canada it is impossible to tell whether the called party is a landline or mobile imposes an MPP regime, the opposite to the CPP convention where the caller pays. In some cases the providers do offer a special ring tone when calling mobiles. In my eyes, this is a limited remedy.

As a consequence of MPP, the chargeable rate is determined by a myriad of tables and call jurisdictions. These charges are based on NPA-NXX tables and zones to determine whether the call has attributes (x,y) where x = {inter-LATA, intra-LATA} , y = {inter-State, intra-State}. On top there are “corridors” that override the above jurisdiction and also metro areas and more. For simplicity, I will not go into “1-800″, and related numbers.

Needless to say, this complexity also affects interconnect and other settlements between carriers that also must follow this uniquely North American approach.

In my view, if the RA sector outside of North America focuses on whether the OSS systems are correctly performing in view of recording, conveyance, charging, and provisioning, the North Americans instead focus greatly on “guiding” rules that are complex and where one wrong or out-of-date attribute in a table could cause a lot of harm. Let me illustrate how complex the situation can be. An average reference table system for a US telco would be comprised of say tens of tables: NPA-NXX and small NPA-NXX, CLLI codes tables and more. Vendors like CCMI and Valuecom make a living from providing such tables on a monthly subscription basis to various TEM vendors and telecom consultants.

The rates might look simple, however the guiding logic, which involves guiding to a customer and guiding to a service is rather complex. This is the driver of the business models of TEOCO and ATS, amongst others. As an anecdote, how things can be interesting, some rates involve distance calculation. There are at least 2 formulas for distance calculation. The “accurate” one is based on NPA-NXX V&H coordinates and calculates using the square root. The alternative formula by AT&T is based upon AT&T V&H figures and an iterative approximation. This alternative exists because, back in 1948, computers could not calculate square root along with correction logic.

The North American market is large enough to keep an admirable vendor like TEOCO doing well. After all, for a mid size company, there is so much business in the US, that sometimes it is not worth showing your cards just to play outside the US.

Since the domains of rating and billing verification, for retail, wholesale and interconnect fall within the pillars of the RA practice, it is little wonder that a generic solution would fit both the North American and RoW markets. If one would say that in the US you can get “all you can eat” price plans for a fixed amount so why worry about the issues above, my reply would be: (a) read the fine print and ask what does the “all” stand for, and; (b) interconnect is the major revenue stream and rating is still required anyhow.

To summarize my points, revenue assurance in North America has rather different aspects and challenges to RA in the RoW. TMF GB941 is generic enough not to be concerned with such differences. As for me, I’m curious. On the other hand, quite a few American vendors view CSPs in the RoW with a perspective more suitable to the North American market.

I recall an immortal comment by the American CEO of a large solution vendor. He said to me once at some telco conference: “..these Europeans are not all the same…” I replied “…well UK is not even part of the continent anyhow”.

I would appreciate your comments.

I recently found myself occupied with new endeavors (smart grid related topics etc). Seeking complete closure, I’m somewhat troubled why RA attracts only limited interest from the “typical” telco CXO.

TalkRA is discussing various RA techniques and standards; It had been read by a small and quality community of RA professionals. Yet it would be safe to assume its coverage is limited to a small number of RA practitioners.

I will try to offer a suggestion why…

The highest art of any trade is being able to answer the “what if not” challenge. I presume no one would dare to ask “what is the cost of not have a billing system?” or “what is the cost of not having a customer service department?”

Yet, I’m not so sure what would be the reply if we challenge the RA function and the related costs it involves. Sure, there are rather useful RA dashboards, and there is documentation about the right way of doing business by the TMF, Papa Rob and plenty of consulting firms. We’re also well familiar with fancy ROI figures which support the cost-benefit argument to implement an effective RA policy. However my challenge is being able to reply to a simple question: “what is the cost of not having an RA?”.

For sure one can craft a reply and mention SOX as a supporting argument. Others would mention proper financial controls. In some cases we can offer an uphill reasoning that we need RA to demonstrate that the telco is taking all the proper measures to shield itself from class action law suits when billing is not right.

To my ears, these are somewhat whining arguments. I’m looking for a clear and decisive answer, similar to one where no one dares to ask the cost of not having a billing system. At least in the case of billing, the reply lays within the question. Can somebody offer a similar answer for RA?

talkRA might consider offering an exciting prize for the best reply!

Recently I stumbled upon this story about Kenyans making a cheap mobile phone charger for their bicycles. What strikes me is the fact one would expect it is in the best interest of a telco to give such a device to consumers. The logic is self explanatory:

no power = no calls
no calls = no revenues
no revenues = no telco & no RA as well….!

No one could dispute that to have revenue assurance we must first have revenues.

The cost of the charger is $4.50. Yet no one gives it away for free to the consumers. Amazing.

By contrast, in Kenya the life insurance companies are providing free drugs to AIDS patients. Drugs which claim to extend life expectancy of their customer bases and so improves their financials… The math seems pretty simple: as long as the person is alive he/she is paying the monthly premiums or at least not claiming on their life assurance policy, which improves the financials. It looks like the telco CXOs and the RA never thought about a parallel analogy in their domain.

One comment though, a CFO of one telco in Africa mentioned once that they provide free AIDS drugs to extend the life expectancy of their customers. Seems as they didn’t think beyond that to also providing manual phone rechargers.

Of course there are hand operated phone rechargers, Nokia has one. There are also solar rechargers. I even recall one top-notch finger-revolving recharger, but none of these come close to $4.50 recharger to use with bicycles.

On a personal note I thought that telcos already altered their engineering DNA by adopting the same techniques as mass consumer companies or copying how retailers conduct business. Seems as, at least for some, there is still a way to go.