Revenue A$$urance Its Not Just Billing Anymore ILECs Defining a New Way of Thinking

The phrase "revenue assurance" is getting a lot of play within the upper management layers of communications carriers nowadays. It's one of those new-agey sounding management phrases that can often breed mistrust among the rank and file. Most people may think they know what it means-roughly, in a way, sort of-but there seems a certain ambiguity to it. This unsteady definition leads some to embrace it and make it an integral part of their vocabulary, while others run screaming.

Eventually, phrases such as this fall out of favor after being repeated umpteen million times in industry conferences, and the original idea behind them-often valid and important-becomes obscured. Anyone remember the last time they used "paradigm shift" without getting an exasperated look in return?

Those with a tendency toward plain talk may have to get used to this one. Revenue assurance may sound like fluffy management-speak, but the concepts behind it are real and substantial. In an effort to find the foundation of this buzz phrase, Arthur Andersen and Billing World Magazine hosted several representatives from major ILECs for an informal, roundtable discussion on this topic in April. What developed was a clearer image of a growing challenge to the industry that is managerial, technological and process-oriented in nature, and will undoubtedly require innovative thinking to overcome. At stake is the lifeblood of any company-its revenue stream-and in question are the underlying forces that drive the money pump. Those include business processes, managerial competence and cooperation, communications/ computer technology and a clear, high-level understanding of both the company itself and the industry as a whole.

So What Is It?

According to the panelists, (see box on left) revenue assurance isn't defined as billing correctly for services rendered, although that's a part of it. It's not ensuring that the network is functioning properly and each event is billed for (although that's a part of it, too). It's not putting into place effective business processes to deal with exceptions, or thinking of back-office issues before launching new campaigns, or the cooperative interaction of management to provide a solid understanding of the importance of each business silo in the overall success of the company. It's not network monitoring or collections or advertising. In effect, it's the combination of all these things.

"it's almost everything we do," said Dave Hollett, senior director of Customer Billing Services (left). "People talk about quality, but it's essentially ensuring that the processes work right and the controls are there. That way, we can keep up with the business in a timely and accurate way."

In addition, carriers need to examine the "whole end-to-end process," said Janna Shelton, former team leader, Process Solutions/ Revenue Organization at Ameritech (right). "That includes the system side, the people side, the operations side, all the way through to collections. It's making sure the bill quality is there" by examining all aspects of the business that touch the final invoice.

End-To-End, Across Business Silos

While traditionalists may see revenue assurance as simply revenue and accounting, Arthur Andersen's Carl Geppert, partner in charge of Wireline Revenue Assurance Services (left), sees the process as much broader. This is primarily because the revenue stream though a communications company is itself quite expansive. The revenue process includes "marketing, regulatory compliance, the network organization, retile, wholesale, finance-all types of organizations within the company are involved in a true end-to-end view of revenue," he said. This breadth makes it difficult for companies to name a single revenue process owner, even at the CFO level. "Often the CEO ends up by default being the owner of the revenue process," Geppert added.

"Oftentimes, the billing operation has got to lead or sometimes even push and drag the operation side of the marketing organizations into understanding that we've got to focus from the very beginning point where the customer contact occurs and the process begins. [That way we can] marry-up everything that are in those system to what many in the company still consider back-room operations," Hollett said.

Nearly all the panelists mentioned leading disparate organizational silos toward a common understanding of their role in the grand scheme of servicing the customer as perhaps the number one obstacle to assuring revenue streams are operating effectively. Unfortunately, these silos often have cultures and responsibilities far removed from other areas of the carrier.

"Many of us have probably had the same experience," said Pat Walker, executive director for Revenue Operations at U S West Communications (left). "You talk to a person in network operations, and he may say, "that's a billing problem." They may not see themselves as the front door to billing. I think we may need to see a cultural shift here; that's absolutely paramount." Walker's organization identifies revenue assurance as the "early identification, containment and correction of billing errors before they are customer effecting. It ensures accuracy validity, and completeness of revenue transaction processes, and ensure all revenues are identified, reported and understood real time."

The RBOCs grew up with a lot of the same systems, generally the mainframe-based CRIS system, left over from the Bell System days, so "the tricky part is getting that real-time part," said Walker. Still, communication between business units is of at least equal importance, and often not done very well. "Just getting feedback both forwards and backwards in the process helps a lot, but I've seen that sometimes the feedback falls forward and it doesn't go backwards," she said.

Accurate Billing

Providing the customer with an accurate, trustworthy bill for desirable communication services is a key way to ensure future revenue flows. This "customer-centric" view of the overall business was put forward by several panelists, with the understanding that even the term "customer" is changing. Competition in local telephony will bring about the splitting of many carriers' businesses into wholesale (carriers as customers) and retail (businesses or residential consumers as customers), thereby adding further complexity to this definition. In carriers such as SNET, this change has already taken place.

Of course, it is difficult to argue with a "service the customer" answer to revenue assurance issues. This answer begs the pragmatic question: What does that really mean? The answer, according to several ILECs representatives, is millions of tiny headaches, each interconnected. To some, the answer isn't even that tidy.

Isn't This a For-Profit Enterprise?

"The concept of customer service hasn't been one that I've really closely linked with revenue assurance," said Andy Coulter, vice president, Business Processes Alltel Communications Inc. (right). "I understand, certainly, the importance of the accurate billing, but I think there is potentially some conflict between customer service and revenue assurance at times. Our customer service folks, I know, would err on the side of giving away service if they could. So, I think there is a built-in conflict at times."

If, for example, some billable traffic on the network is falling through the cracks due to a faulty switch or some other network problem, this is a revenue assurance issue. However, from a customer standpoint, a case could be made that many consumers would not be terribly upset with their carrier if their bills were less than anticipated. Underbilling is rarely mentioned in industry circles as a primary cause of customer churn. If a carrier takes a strictly customer-centric view of this issue, is it really missing the boat? Isn't the goal of a happy customer desirable because it leads to a longer-term goal, one a bit higher on the corporate food chain, of ensuring stockholder value? That's one way to look at it, but not the only way.

"I think customer service requires that you render to your customers an accurate bill," said Beth Moe, manager of Revenue Assurance for TDS Telecommunications (left). "We do have customers who call and say, 'This doesn't look right. I signed up for this service and I'm not seeing the usage.' We have very sophisticated customers. And, I'm not saying that there may be some laughing up their sleeves at us, but not most of them. They're worried it's going to come home to roost later in the year."

Consider another scenario: A carrier finds a hole in the process, where billing was not carried out for a particular service. Now it has in its possession several months worth or retro billing. Does it go back and bill customers? It's clearly a difficult call for revenue assurance managers, who in reality have two customers: the consumer and the corporation. This is but one example of the shades of gray coloring this issue. The individual business unit is accountable for the lost revenue and finance managers demand the revenue for their budgets. Conversely, a marketing and sales manager could ask whether in the long run it's in the best interest of the carrier to plant seeds of doubt in the end user's mind about the network's reliability. This is a classic revenue assurance issue, and one with no easy answer. Coping with such an eventuality is as much as part of this issue as designing the systems so such leakage doesn't happen in the first place. This basic conflict, easily traced to the origins of such a technologically driven business, is that of a system-centric view verse one where the high-level business process are given preeminence.

System vs. Process

With the complexities of communications systems increasing as new products and services are added, many of the panelists pointed to a process view of business needing to take precedence over a systems view.

"As a networking business for all of those (pre-competition) years, we focused on getting the customer up and running as 'good business,' " said Noreen Haffner, president of Communications Product and Marketing Services group for SNET (above). "We need to expand that definition of good service, to include not just the provisioning of service but correct and accurate billing as well. "

Still, old habits are hard to shake. "When launching a new service, right away we jump to system capability and interoperability," said U S West's Walker. "We were having a discussion about (a new service) just a few days ago, and we decided we could go three of four different ways from a systems design standpoint. Eventually, you need to make up your mind as to which way to go, but if you do it from a systems standpoint, something always ends up being broken. You must approach it from the overall process, and focus on the marrying of people's activities in relation to the system. Those must be coordinated...the system is a piece of the process; it isn't the whole ball game."

Revenue Assurance as a Business Unit

Arthur Andersen's Geppert sees revenue assurance functions as crossing people, process and technology boundaries throughout the company. As such, the days of revenue assurance-type activities being confined to the finance department may be numbered, for the scope of this organization is actually much broader. Geppert cited responsibilities as including the evaluation of business risk, the development of business, technological as well as internal accounting controls, and facilitating communication between the various business silos.

"In my mind it is all very circular-identify the business risk, effectively address those risks, [establish] a process of controls, metrics to monitor, reporting and communication of the results," Geppert said. "This leads you back to the business risk step as you assess the impacts of new products and services, the product development process, of changes in the environment, of changes in the accounting in effect, an up-front, ongoing, continuous involvement."

With responsibilities such as these, the revenue assurance organization must be staffed with high-level employees possessing a thorough understanding of the carrier's business, as well as the communication and persuasion skills necessary to resolve inevitable conflict. It must also have the absolute backing of senior management, and be given the power necessary to accomplish its tasks. If this is the model of an effective revenue assurance enterprise that was illuminated by the panelist, it is apparently not one that has come to light in most ILECs.

Many, such as Alltel, are still in the process of defining the organization's role. Coulter said he sees revenue assurance growing as a separate organization from two separate groups today tasked with many of the defined revenue assurance duties: the quality group, responsible for the verification of bills and billing data, and another that focuses on "trending" bills by call type or exchange, for example. " It makes a lot of sense so you have checks and balances. That way when a translations engineer goes in and does something to the switch, all of a sudden our records don't go away [without Alltel being aware of it], he said.

Some carriers have already broken revenue assurance off from finance or accounting arms, which should allow for a more comprehensive, company-wide approach to solving these problems. Still, revenue assurance management often lack absolute authority for implementing the changes it may identify as important.

"What we do is present our position," said Moe of TDS, one of the carriers with a stand-alone revenue assurance department. "I guess if it ever got to the case where we thought a really bad decision was being made, we'd have to work it out with my boss, the vice president of finance, and the rest of the upper-level management." This authority hierarchy, several other panelists said, it unlikely to change. The revenue assurance unit will provide its expert opinion, but not make the decision itself.

Convergence

Compounding the difficulties with setting up such a far-reaching organization-particularly within ILECs-is the fact that many of these companies have long-term goals surrounding the confluence of different service offerings, which the present reality is one of regulator-imposed separations between the units that offer these services. It's clear that there isn't a major ILEC today that does not think a bundled service offering of local, long distance and wireless telephony is in its future (not to mention video, Internet access and other data services). Today, however, there are FCC and congressionally mandated lines between telephony offerings, or even the outright prohibition of certain services, as currently with long distance. How does a company create a revenue assurance organization with end-to-end knowledge of the company's business offerings, when such barriers exist today? Several approaches are being explored.

Shelton's organization within Ameritech is within the corporate IS organization, with the group's CIO reporting directly to the CFO. In this arrangement, unless Ameritech is billing on the behalf of its subsidiary, it does not control its subsidiary's revenue assurance functions. BellSouth's Hollett's organization is under the BellSouth Telecommunications umbrella. "As far as revenue assurance goes, there is not a single revenue assurance owner or organization," he said. Some traditional revenue assurance functions, he believes, stayed in the finance group.

Hollett, for one, believes it's a bad idea to have revenue assurance functions confined to one group. "Because there will be a tendency for people to think, 'Oh, that's revenue assurance, I don't need to think about that, that's not important to me," when in reality, it should be end-to-end," he said. "it's not only ordering and usage, it's product development and the initiation of new services and products.

"In our company we've got what's called a product commercialization unit, and their primary role is to project manage new product development. I think if they don't have revenue assurance on their plate, then we're in trouble. And to me, in that group, revenue assurance means understanding your product, understanding what your objectives are and forecasting correctly. Of course, when a project gets into its own lifecycle, it's turned over to the marketing unit. But the product manager plays a role and their role is concerned with the financials, and they are concerned with what their product is going to look like in the end. So, I think it's very integrated. Now, has anybody actually gone in and said to them, 'By the way, revenue assurance is one of your primary roles?' I don't think it's that overt, I think it's more intuitive than that."

Opportunities for Outside Help

Hollett does agree, however, that the oversight role of a centralized revenue assurance group may provide future benefits. Consider this possibility: In the future, carriers may employ systems whose sole purpose is to monitor certain control points in the billing process, to compare real-time data against expected matrixes. Problems with the network, poorly performing marketing efforts and the like could be monitored by a group of analysts using terminals that monitor the control points. To create such a system, and implement those new products and services that need monitoring would require some group with the expertise and the power to manage the ongoing project. As monitoring and control is an important component of revenue assurance, this task would fall under that domain.

The scope of such a project would be huge, crossing many existing boundaries and effecting dozens of IT, marketing and finance process owners. For example, the system could pull data from such disparate sources such as the central office switches, the Carrier Access Billing System, cellular roaming clearinghouses, the CRIS system, the SS7 network, customer care databases, the billing system itself, and so on.

Such a system would be massive, the panelists said, and probably not doable in the near future. The issue is not whether such an end-to-end system would be desirable, but whether it would necessitate the reallocation of resources away from current efforts such as increasing marketing activities, implementing billing system upgrades, providing for OSS interconnection, instituting local number portability efforts-or other more pressing matters. The answer today appears to be no. For although revenue assurance can have a huge impact on a carrier's bottom line, it is not a revenue-generating center in the traditional sense. In many cases, obtaining funding for such efforts is difficult.

U S West's Walker mentioned an employee who was "beating her head against the wall trying to get funding for a tool that would validate what the translations were on a switch, and just really was going nowhere with it. [The opposition centered] around being able to verify that there's a loss that's significant enough to go ahead and realize the cost for [the project]." Walker said her group eventually verified that the lost was large enough to warrant signing a contract with a vendor to verify those switch translations. The point is that without some hard data to determine worth, the project floundered before the revenue assurance unit came to its aid. The Catch-22 becomes obvious when discussing funding for a project specifically designed to produce just that kind of usable data. Here is an area where a broad, empowered revenue assurance organization could prove its worth, several panelists agreed. This revenue assurance group would start by defining the business processes necessary to implement the systems needed to conduct the proper monitoring and accounting activities. Compare that statement to the previous descriptions of revenue assurance functions given by the ILEC representatives, and a common thread begins to emerge.

Show Me the Money

While the emerging revenue assurance organizations within the ILECs are more often than not striving to be an effective partner with marketing, billing, IT and other groups, aiding them rather than pushing them to achieve overall corporate objectives, they will need to rely heavily on persuasion. The best way to do this? Show them the money.

If a revenue assurance organization can effectively show the different service departments how their portion of the business relates to the carrier's business as a whole (and, more important, how technology or process problems affect each business silo's bottom line) it will be more effective in carrying out its mandate, the panelists said.

How can this be effectively done? What mechanized controls are currently implemented, and which will need to be implemented for the telco of the future? How is revenue assurance affected by a wholesale/retail split? What issues are raised by interconnection and auditing requirements? These and other questions will be answered in the second of this two-part series.

INTERCONNECTION AND REVENUE ASSURANCE

The Telecommunications Act of 1996 requires incumbent local exchange carriers (ILECs) to open their local markets to competition and provide interconnection and resale services to competitive local exchange carriers (CLECs). Providing these new services introduces significantly new and different revenue streams within the ILECs that must be monitored and managed effectively. This moves revenue assurance beyond a "nice to know" luxury to a "need to know" part of doing business. An effective revenue assurance function will be essential for ILECs (and CLECs) for at least three reasons: compliance, partnership and revenue enhancement.

Compliance

Implementing the act will require ILECs to allow OSS interconnection for preordering, ordering, provisioning, maintenance and repair, and billing for CLECs. Assurance that these functions are being done with parity of quality and timeliness will involve establishing mutually agreeable performance measures. In the agreement recently worked out between Bell Atlantic/Nynex and the FCC, for example, the two RBOCs propose 22 separate performance measures that they will regularly monitor and communicate with CLECs to demonstrate compliance with interconnection provisions.

Much of this assurance involves sharing revenue-related information. A CLEC will need access to the ILEC's billing and operating information (if not the actual systems) to obtain or confirm essential customer data.

Customer base. Who are their customers? How many are there? Do CLEC order, provisioning and service records match with the ILEC's?

Network usage. How many minutes of use have customers accumulated? What features and vertical services are they using?

Service quality and timeliness. The act requires that the ILEC provide identical service to its CLEC partners and its own end user customers.

Facilities. CLECs will need to know that the specific facilities are in place as ordered to serve their customers.

Billing data. CLECs will need sufficient data so they can bill their end users accurately.

Partnership

In a wholesale/retail environment, the wholesale network organization will be providing its services to its own retail organization (which some have labeled the RLEC) and to CLECs. Although this represents a change in philosophy for communications providers, ILECs should think of CLECs as valuable, high-volume wholesale customers they partner with to provide all the information needed and develop mutually satisfactory revenue assurance functions and controls. By building high-quality revenue assurance processes with early warning signals to identify and resolve issues up front, ILECs and CLECs can avoid costly post-billing disputes.

Revenue Enhancement

All communications providers will feel pressure on their prices and margins as competition becomes more robust. Both ILECs and CLECs have an opportunity for competitive advantages by mining the rich customer information their systems are capable of producing. For a wholesale network organization, this might include "return on investment" measures that help management understand the revenue generation capacity of network assets. A retail company, RLEC or CLEC, can track and manage customer profitability, product profitability, and bundled services revenue and profitability to focus its marketing efforts on the customer segments and product offerings that are most effective.

This kind of competitive advantage is achieved when revenue assurance activities are applied to the entire revenue stream, from product development and marketing through to the customer care and billing processes. It's true in any highly competitive industry the company that best understands, manages and leverages its revenue stream improves its margins, its bottom line, and, ultimately, the value it provides to its stakeholders.

-Carl Geppert, Partner in charge of Wireline Revenue Assurance Services, Arthur Anderson
ILEC PANELISTS
Andy Coulter
Vice President, Business Processes
Altell Communications Inc.
Beth Moe
Manager of Revenue Assurance
TDS Telecommunications Corp.
Pat Walker
Executive Director, Revenue Operations
U S West Communications
Dave Hollett
Senior Director, Customer Billing Services
BellSouth Telecommunications
Noreen Haffner
President, Communications Products and Services Group
Southern New England Telephone
Janna Shelton
Team Leader, Revenue Ameritech [She is now the Resource Manager, Workforce Management Alltel Information Systems]
Scott McMurray
Manager, Revenue Assurance
Pacific Bell
Deborah Charkowicz
Manager, Revenue Assurance
Pacific Bell