Revenue A$$urance Its Not Just Billing Anymore ILEC Panelists See New Challenges Arriving with Interconnection, Increased Competition Second in a Two-Part Series

Revenue Assurance is a big issue for communications services providers, even if it hasn't always been front and center in the minds of top management. For Incumbent Local Exchange Companies (ILECs), it means ensuring effective marketing, efficient and error-free networks, and overall data integrity-an end-to-end view of the business from a customer-centric perspective.

What this means in plain English is that the carrier must have a robust understanding of all transactions and established processes affecting its revenue streams. This includes creating and maintaining solid business structures, hierarchies and processes, timely and high-quality service design, creation and implementation, accurate service activation, management and control of the network and its elements, error prevention and correction, effective marketing, and accurate billing and bill presentment, among other tasks. It's a big job, but in the coming competitive era, its importance to the health of a communications carrier will become even more magnified.

In April, Billing World and Arthur Andersen hosted several ILEC representatives for a roundtable discussion on this complex topic. The panelists' discussions opened the curtains on the day-to-day struggles these firms have with this issue, both on the grand scale and in the minutia. An account of the first half of this event, where a more defined definition of revenue assurance than the one offered above can be found, was published in the October 1997 issue of Billing World (see "Revenue Assurance-It's Not Just Billing Anymore, ILECs Defining a New Way of Thinking", page 34).

Like many real-life business issues, there is a long, difficult road between theory, design and implementation. Many ILECs lack the necessary systems to fully understand, correct and prevent revenue leakage from their existing operations. With the advent of competition, these carriers will soon be confronted with tighter margins while simultaneously creating new avenues for this leakage, riding shotgun along with the positive benefits of the revenue streams these new markets may someday bring.

In effect, the ILECs believe they need to tighten up their operations. It is safe to say their monitoring systems will not meet future expectations. These companies now are struggling to implement improved business processes and data and element monitoring systems, while simultaneously enlightening employees as to their importance in the carrier's overall revenue stream. All this is occurring in an era of belt tightening, expansion into new markets, and-with the complex interconnection requirements imposed by the Telecom Act of '96-all new opportunities for errors resulting in revenue loss.

How can this tightening up 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 were posed to the ILEC panelists.

Detective/Preventative Measures

The ILECS appear to have little trouble monitoring the flow of data from the switch at the front end of the billing process, but the panelists said an optimum revenue assurance process demands a more end-to-end view of the enterprise.

Switch data collectors typically send usage data into a rules-based system, which uses preset criteria to attempt to source any anomalies that may occur. (Anomalies are defined as marked traffic differences derived from comparing data from the current time period to a historically similar one, a process called "trending.") This is an effective tool for rooting out switch-based problems, but does not contribute to an overall view of the billing operation. This data is rarely tracked in a coherent fashion all the way to bill presentment, and even when it is, this is accomplished in a high-level, batch mode.

On the CABS (Carrier Access Billing) side of the business, for example, Pacific Bell collects call data off the switch at the front end, said Scott McMurry, manager, Revenue Assurance. The ILEC also has another process by which it checks data at the back end, before it reaches the customer bill. Still, "for switching analysis, it's in bulk by prefix, it's not down to the actual customer," McMurry said. "So at a prefix level, it does look at and compare message and minutes and [data of that nature]. This is because on the CABs side, if there is a problem, it is usually a problem with the switch, not the customer. By doing it by prefix rather than by switch, it's a cleaner analysis."

The ILEC also places test calls at least once every three months for almost every switch on its network. Others, such as BellSouth, have similar programs, which simulate calls by pulling existing call data rather than actually placing the call and creating an AMA record.

Another preventive measure currently used by some ILECs is the practice of reexamining switch translations annually. "We try to cycle through the offices, asking: 'This is what we have in the CRIS records. This is what we think we have programmed on the switch. How [similar] are they?' It does take a while to cycle through, be we do it," said Noreen Haffner, president, Communications Products and Services Group, SNET. For SNET, the actual comparison process is 100 percent automated.

On the preventive side, the ILECs focus on two tasks. The first is to correct the source of revenue leakage problems (be they network, process or people in nature) rather than simply putting out the fires these problems create. The second activity is to ensure that upgrades and new software, hardware or network element releases are adequately tested before they go live.

It's hard to argue with the logic behind those activities, but again, business management does not occur in a vacuum. There are several imbedded factors acting as impediments to these tasks.

Potholes Everywhere

One ILEC with three distinct CRIS systems and five processing centers is working to migrate operations from those systems to a new platform now being developed, said one panelist. "I have a high degree of confidence about [the new platform's development] and it's quite end-to-end, so we feel good about that," she said. "The ongoing releases for our legacy systems are in various stages. For some things they're very good, but with the speed of things happening, you have what amounts to modified releases being done." While the panelist appears pleased with the development group's efforts to date, they aren't as controlled as she'd like them to be. "We literally are doing some form of release about every four to five weeks," she said. "And those ones that are interim to a major release are not as well monitored and tested as they could be." That panelist was not alone in her fear that software and hardware that have not been adequately tested are finding their way onto the network or OSS/BSS (Operational Support System/Business Support System). However, the circumstances creating this loose control are easy to understand-if not necessarily to fix.

One ILEC, for example, tests "all the way through the system" every month or two for major releases, a panelist said. Yet, if there is "something we want to put in because it's going to fix a problem or if it has to go in because it's mandated, [the developers] may bypass a lot of those processes. [The designers] don't necessarily wait a month and then put it in as a program deviation, which gets run every day. If it's mandated, it sometimes just gets released without every 'T' getting crossed." Even if testing is then done while the new service or element is in production, that type of back-ended diligence is often worth much less than if testing had been done up front.

Why does this difficulty occur? The panelists mentioned two reasons: With IT, as McMurry said, "it's obvious that no matter how much testing is done, it's just never enough." Some bugs or errors are difficult to find until they decide to show themselves. Compounding this technology-centric obstacle is a joint personnel- and competition-inspired one-upper management may want a quality product, but they often want it yesterday. Testing takes time. The market won't wait.

Several panelists said this conflict between time-to-market and testing integrity won't go away, so they're trying to attack the problem from another angle. "From a preventive perspective, we've found that the developers don't really understand the impact that they have to the bottom line," said Janna Shelton, formerly team leader, Revenue for Ameritech (now the Resource Manager for Workforce Management at Alltel Information Systems). "So, we brought a group of designers and developers and what the business units would consider their experts together at the design table. [Now IT staffs better] understand the impacts of their code and the outcome of the implementation on the billing cycle. We've had some successes in that we've seen decreases in defects."

"it's really a customer focus issue," added McMurry, "and it is important for [IT staff]... to feel some of the heat that we feel trying to reconcile some of the numbers. It's just that by the time we take the heat [for billing or system errors] and then translate it to somebody else, who then translates it to somebody else, [the system or software designers] don't feel it. They need to go with us through the fire sometimes to understand the impact they have."

Nearly all of the ILECs have had major investments in error correction techniques and systems, while simultaneously reducing the staff that performs the manual tasks associated with this function.

Command and Control Center Not Ready for Prime Time

While there has been improvement, the panelists said today's monitoring systems are not end-to-end or robust enough to give investigators the tools they need to quickly correct errors. As McMurry said, "nobody will pay a hundred thousand dollars to fix a programming error if you can just make a journal entry for it once a month. However, if you have enough of those journal entries, your exposure becomes so great that upper management is starting to address these problems." ILEC revenue assurance managers dream of a computer command center stocked with PCs with large color monitors displaying real-time information on areas such as switch performance, order entry quality, error hot spots and data mining tools. "I think if we could save the data long enough to do some valuable trending and analysis of statistical fluctuations, it would be so powerful and so much more meaningful than retaining three months" worth of data," said Deborah Charkowicz, manager, Revenue Assurance for Pacific Bell. "[Especially since] we're very driven by volume constraints and storage costs." Unfortunately, such a system isn't around the corner.

It's not an issue of value; it's a matter of priorities. With new markets opening and new competitors showing up, infrastructure, personnel, advertising, lobbying and licensing costs are standing in the way of the ILECs fully investing in revenue assurance IT and processes. Spending money on a more efficient, error-free network is not as splashy as turning up a new wireless network, or providing long distance service for the first time.

Which is not to say that a more integrated, robust revenue assurance command center isn't a good idea. "There has to be a different measure there other than 'what's the immediate return on that item?'" McMurry said. "It should be, 'How does everything interrelate in terms of producing quality product?'" Today's realties resist that kind of logic, however.

MCI has spent millions trying to enter the local phone market, and while one can debate whether the CLEC spent that money efficiently, the fact remains that MCI is attempting to invest now to ensure future returns. Still, Wall Street and potential buyer BT were not impressed by MCI's good intentions. BT has said it will restructure its purchase price downward, and investors have devalued the MCI stock. To avoid a similar fate on the Street, ILEC upper management wants to appear financially strong in this uncertain time. Spending millions to fix or prevent billing errors that didn't break the bank in the past is not an activity top brass will soon put on the front burner, the panelists agreed. One increasingly important issue, however, could and probably will make today's revenue assurance problems eventually look like the good old days. That issue is interconnection.

Interconnection and the Wholesale/Retail Split

To enter the lucrative long distance market, the ILECs need to open their OSSs to CLECs for interconnection, implement a working number portability scheme and unbundle their local loops for resale, among other mandates. If revenue assurance managers were looking for another challenge to add to those already on their plate, then interconnection fits that bill. More control points, more carrier customers demanding error-free data exchanges, increased consumer confusion, collection hassles-as one panelist put it, "The complexity of it is going to be a nightmare."

"The CLECs will demand a controlled and assured processing environment," said Carl Geppert, partner with Arthur Andersen. "There are or should be some expectations from a CLEC perspective to receive input that is valid. These orders are going to come fast and furious."

The ILECs already confess to having difficulty with order entry when the end user is their own customer; how can they guarantee superior service to the often squeaky-wheeled CLECs? Many ILECs are looking to improve their own processes (increase the use of electronic data interchange for large customers, for example), and by doing so improve the service offered to their CLEC customers. Several initiatives and ideas are being worked on.

"One of the things that we've been driving toward is to try to get tools in the hand of the reps that just make their job easier- [such as using the] English language as opposed to USOC codes," said Pat Walker, executive director of Revenue Operations at U S West Communications. "A lot of these reps, they get busy, they usually use what they know will work. They've figured out ways that make things flow through the system and we all know it, because we see it when it falls in our hands. It's not because they're trying to do a bad job, it's actually because they're so frustrated sometimes, it's the only way they can make [the process] work."

While improved order entry tools and processes are important, they're not the only way to cut down the tremendous volume of order entry errors (the ILEC panelists listed this as the number one source of errors throughout the billing process). In addition, all manual events must be cut to a minimum, and errors must be flagged and fixed at the front end. This latter point, several panelists said, is imperative.

"One of our short-term solutions on that issue has been to move the edits that are in the batch system up front," said Dave Hollett, senior director of customer billing services for BellSouth Telecommunications. "We've been pretty successful with doing that. My perception is that when you enter the order and you get the error, you're much more likely to getting it fixed than you are further downstream."

One ILEC built an interface between its wholesale order processing system and the wholesale billing system, which sends errors back to the rep that entered the data rather than forwarding the error on to the billing system for handling. "Now, [the system] is blocking everything that doesn't have all the billing codes right," said one panelist. "I just got a nasty message from the [access order processing group] saying, 'You're killing us; we've got all these errors that we have to correct now.' And I said, 'it's about time.'"

Breaking Up is Hard to Do

Entering the long distance market and reselling local service has caused several ILECs to contemplate splitting their organization into wholesale and retail units. The retail unit would sell directly to the end user, and in theory be treated just like any other CLEC reselling services on the network. The wholesale unit would be in charge of the network-operations, resale interconnection, management and the like would fall under its domain. This creates large headaches for IT managers seeking to establish a coherent, integrated view of all ILEC operations, of course. Imagine trying to ensure revenue flows effectively and change employee behaviors across such a separation.

Securing funding for an umbrella system to monitor the new systems that are being built appears an arduous task.

"You know the 80/20 rule? This is the 99/1 rule, because such a small percentage of our business is resale and is involved with unbundling. It's so different that we're exerting a tremendous effort for what little [revenue] there is at this point," one panelist said. "From a resale standpoint, what's happening is the reseller is just buying our lines, our customer, our everything and calling it theirs. It's sort of like the can of Safeway peas; they're made by Green Giant, they're picked by Green Giant, they're put in the can by Green Giant, the label's put on by Green Giant, and it says Safeway."

ILECs such as SNET have already made the move to a wholesale/retail separation. The notion of parity between the service levels offered the CLECs and those offered the ILEC's retail arms could be difficult to institutionalize, but several panelists said it would be in the best interests of the incumbent to offer their CLEC competition the best services possible.

"I believe that it's the right thing to do, and in fact, I believe it's going to drive us to rethink and re-manage-particularly in our retail billing world-the way we do things," said BellSouth's Hollett. "Of course it's terribly complex and there's a lot of opportunity there to tweak the systems. In fact in my communications with the collection part of the local arena, I have often told them 'you have little concept of the significant collection issues in front of you.'"

Collections is just one area mentioned by the panelists as a possible hot spot for errors created by interconnection or the process of splitting the organization into two distinct entities. The ILECs have a good deal of expertise in correcting revenue leakage problems; whether that expertise is properly used by the new wholesale organization remains to be seen. As new management positions are created to deal with the changing relationship between the LECs and the CLECs (which will be both competitor and customer), there will be a tendency for those newly elevated managers to attempt to recreate the wheel. It's simply human nature for a manager in a new operation to want to place her own mark on the organization. And while it may be true that the ILECs still have very real and unattended-to revenue assurance issues remaining from the monopolistic days of the past, they have also created more than a few solutions. This experience, the panelists hope, should be used.

"Our ICS (Interconnection Services unit), they have a difficult challenge ahead of them. As they're restructuring to get set up to manage the competitive business, I think they've begun to think about bill verification and billing disputes and all that business," said one panelist. "I've talked to my counterpart (on the wholesale side), and I've said, you've got to understand the connection between disputes and inquiries and verifications. I'm trying to communicate to them that we need to sit down and partner, if you will. I verify access bills, I verify CRIS bills; my organization does lots of those things.

"When you look at access bills [today's precursor of sorts to the future of interconnection and resale], with certain carriers, they have some significant write-offs, and they have a tendency to think, 'it's the [ILEC] billing system." Well, there's a direct linkage between ordering and processing that data directly into the bill. I think there's a lot of things we can do to help them with their disputes, but they don't know how to ask the questions, because they don't know how to get to us. I'm trying to springboard off the local world to get [the wholesale side] to start really making that connection. But their organization's thinking is 'oh, you want to take all of what I've got [in terms of revenue assurance functions] and move it over to you.' It's real interesting."

The Road Ahead

"interesting" may be an understatement. ILECs are increasingly recognizing the importance of an end-to-end, customer-centric revenue assurance process, but the real-life challenges are daunting. Monitoring systems for detection of errors need to be improved, but funds are scarce. Preventive measures, such as more robust testing of new releases and hardware or software implementations, need to be addressed over the din of marketing executives calling for quick time to market for new products and services. Hundreds of employees spread out over often-vast geographic distances need to be on the same page as to their effect on the company's bottom line. All this, while competition and all that surrounds it will create dozens of new areas for potential revenue leakage. New separations between business units will need to be created while still affording top executives with a high level view of the carrier's overall revenue stream, while also affording quick responses to problem areas. This "interesting" issue, the panelists agreed, appears far from resolved.

Billing World and Arthur Andersen thank the panelists for their candor and participation.
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 McMurry
Manager, Revenue Assurance
Pacific Bell
Deborah Charkowicz
Manager, Revenue Assurance
Pacific Bell