Calling Party Pays: Fact or Fiction?

Cut the cord on the wireline phone and go fully wireless. Many wireless carriers hope for this future, especially as they struggle in the wake of chasing one another down the competitive price curve. According to Duane Ackerman, chairman and CEO of BellSouth, 17 percent of new PCS customers in Louisiana recently signed up for "untethered" service as a replacement for wireline.

Today's clamor is that wireless may do more to usher in local competition than will the Telecom Act, especially as the IXCs and CLECs arguably seek to cherry-pick, the ILECs arguably choose to stonewall, and the CATVs unquestionably raise rates. It is a unique opportunity for wireless carriers, and those who are optimistic cast a covetous eye toward industrialized countries such as Finland. According to Stefan Zehle, director of Prodata Partners in the United Kingdom, "Finland has the greatest wireless penetration of all markets at nearly 42 percent at year end 1997." Wireless minutes threaten to eclipse wireline minutes in markets such as this. Carriers such as Helsinki Telecom in Finland have set wireless tariffs near wireline tariffs, inducing a fixed-mobile convergence. The same price convergence is evidenced in other markets, such as Mexico.

"Why must I pay for a call I didn't place?" asks Jeffrey Buck, manager of technology and planning for INgage at AG Communication Systems, rhetorically reflecting the sentiment of the everyday consumer. Carriers must face the evidence that the consumer market does not want to pay for inbound calls, although some business niches prefer the current model. To make greater wireless penetration and increased billable minutes a reality, carriers must embrace "calling party pays" (CPP) as the prevalent billing model, rather than "wireless party pays" (WPP). Most countries in the world that have CPP--and an increasing number do, from Colombia, to Israel, to the United Kingdom--point to statistics that clamor to increases in CPP network minutes and revenues.

Some industry pundits and media members still consider this to be an economic assumption. However, as competition in the United States ushers gradually lower prices, increasing billable minutes, becoming operationally more efficient and adding new subscribers are the only ways to offset lower prices per minute.

According to Noah Asher, vice president of Latin America for Bell Atlantic International Wireless, "Wireless services are price elastic, and in Mexico minor changes in price result in large increases in usage and subscription. CPP, plainly stated, has a positive impact on usage."

Zehle at Prodata Partners concurs: "Wireless is price elastic both with regard to the cost of adoption and the monthly cost of ownership. Of particular note is that studies in Europe found that demand for calls from wireline subscribers to wireless phones is relatively price inelastic."

"Consider when CPP was implemented in Argentina," points out Juan Fernandez, research analyst for Latin America at Frost & Sullivan. "The impact was market growth that can be described as ranging from spirited to phenomenal as it rose from 700,000 subscribers to 2.1 million in 11 months."

No Easy Street

While the lure is great, no one said getting to CPP would be easy. To the contrary, it is fraught with challenge at every twist and turn. But the biggest challenges are not necessarily functional.

"Business drivers set the tone," says Luther Rudisill, senior manager of brand management for Service Builder at Nortel. "CPP was perceived by PCS carriers as, way too much effort, and maybe sociologically difficult. Instead of CPP, offering the first incoming minute free has been an interim means to get subscribers to give out their numbers, and carriers reap subsequent billable minutes. But it still pushes the cost of service on to the wireless subscriber."

For every point made in favor of CPP in the United States, there is a counterpoint. More questions than answers prevail. Limit CPP to a local calling scope, a national calling scope, and including or excluding an international calling scope? It is moot whether the FCC decides to mandate CPP at some date, or whether market mechanisms gradually grind away to such an end. Information technology business and operational systems upgrades will be required, as will new billing and collections (B&C) agreements and interconnect agreements.

Bell Atlantic's Asher confirms that the same key issues the U.S. market must grapple with are being addressed and resolved today in Mexico's market. The issues all have costly billing and OSS implications, as with any development process, while the extensive negotiations for interconnect and B&C agreements promise to be excruciating.

It is not just a question of whether the wireless carriers can be ready on a local, national or international scope in the near future. But it is a question, rather, of whether the LECs (ILEC and CLEC alike) are ready (currently the LEC-based approach is limited), and whether the clearinghouses (both for wireless roaming and B&C treatment), the IXCs and resellers are ready. Some clearinghouses such as Illuminet are preparing for end-to-end eventualities. For every carrier within a given wireless carrier's serving area and beyond, some type of coordination will have to occur because of carrier-to-carrier interconnect costs, as well as on-net and off-net origination and termination cost considerations.

Imagine for a moment that a caller attempts to connect with a wireless subscriber, but since an interconnect agreement does not exist between the two carriers, the call either fails, the wireless party pays, or revenue leakage occurs in that the call has no clear destination for billing. Is this bad news for consumers or bad news for carriers? Worse yet, what if the network hasn't been engineered for increased call capacity ushered in by CPP? Revenue will drop to the floor.

CPP Today in the United States

"Limited" is the best way to describe the current LEC-based approach, even with AIN capabilities present, which is restrictively local/regional based on the specific LEC's geography, its billing capability, and the ubiquity of its billing footprint. CPP only works if a person has service through the given LEC, and the LEC has an agreement with the given wireless carrier. Outside the LEC network, forget it.

The wireless subscriber pays a monthly fee for CCP, which will not perpetuate as a viable pricing component, and the LEC caller to the wireless subscriber is informed that they will incur a charge. This per-minute charge will appear on the caller's local bill. Should a call originate to the wireless subscriber from off the LEC network, it will revert to WPP. There is no widely deployed bill-and-keep type approach.

Given the diverse number of carriers in the United States, in differing vertical segments, CPP stands little chance of becoming ubiquitous on a national level using the LEC-based approach. "In Mexico," according to Bell Atlantic's Asher, "we're still hopeful that CPP will be in place by year-end 1998. On-going interconnection negotiations must be resolved before CPP begins." CPP will be nationwide in Mexico, but functionally operational only at the local level. This indicates the sane struggle toward ubiquity beyond the local service provider's areas as anticipated in the United States.

CPP Tomorrow?

The CPP of tomorrow most likely will be controlled by the wireless carrier with wireless intelligent network (WIN) deployed. Products such as AG Communication Systems' INgage CPP, or Nortel's Service Builder, are designed to offer carriers network-based alternatives to the LEC approach.

According to Ajit Sadarangani, senior product planning manager for INgage at AG Communication Systems, "One main difference between the LEC-based CPP and AG's INgage is that the LEC catches the call at the front of the network. INgage grabs the call at the home MSC (wireless switch), thus allowing control by the CPP application. This tools the application for the wireless carrier, rather than expecting the LEC or other carrier to assume application costs for CPP functionality."

INgage CPP resides on a service control point (SCP) and utilizes SS7 to provide call control and monitoring at the terminating switch before the call is completed to the CPP subscriber. It screens incoming calls and verifies that airtime charges can be billed back to the call originator. The caller is cued to accept the charges, the call is completed to the CPP wireless subscriber, and the application tracks the elapsed time. Nortel's Service Builder operates similarly.

Inner Workings

The wireless subscriber is ordered and provisioned so that the applicable SCP captures pertinent data for use. (Effect-to-switch load software must be considered by switch type, but most vendor applications are being engineered with a one-to-many capability.) Once active, a calling party may dial the wireless subscriber. The call is routed over the PSTN, or possibly to an interconnect point if originated from another wireless network. The call is recognized as destined for a CPP subscriber and terminates to a designated ISUP trunk group, then the associated SS7 signaling to the SCP gives control of the call to the CPP application.

The CPP application determines whether the call is billable to the caller based on data in the SS7 message. If needed, a LIDB dip associated to the caller is made. If the call is allowable, it is routed to a VRU/IVR on another ISUP trunk. Callers to CPP wireless subscribers are notified that they will be billed call charges. This may be done through an audible tone, and a recorded message. Other billing options may be presented to the caller if the originating station is non-CPP compliant, such as a payphone. "Service Builder," says Adam Crane, product manager, GSM IN Services at Nortel, "allows the use of PINs, or private numbers, which can be used as another billing option."

Assuming two-way communication begins, information about the call is recorded, and the CPP application releases a CDR. After being downloaded to an adjunct processor for formatting into standard wireline and wireless formats, the CDR is shipped off to the appropriate carrier or clearinghouse. AG's Buck points out that, "With INgage, a CDR is created and made available for data mining whether or not the call completes."

Since the CDR is industry standard EMI or CIBER format, the receiving carrier can introduce the record into the normal billing milieu for processing. Generally, the milieu is not greatly impacted. This includes calculation, discounting, and presentation. CPP "calls" can be introduced into 3rd party billing mechanisms, such as the LECs use for IXC message-ready billing. The CPP subscriber is liable for roaming charges, and the call originator should not be charged for other than the standard elapsed time.

"The controversy over split charging can be treated as the carriers' agreement specifies," according to John Hoadley, director, PCS 1900 Systems at Nortel, "because the application generates events from the SCP, which billing can use for local, long distance and roaming charges between calling party and wireless party."

It Gets Tougher

Since answer supervision is provided to the originating switch, the generation of any access charges must be resolved. Whether a call completes or not, utilization of network resources must be accounted for. This and other nuances need to be considered during interconnect negotiations.

When a CPP call cannot be fully billed, leakage occurs. Such a revenue drain must be recognized and handled, with the long-term goal of total elimination. The greatest potential for this kind of leakage is when the originating carrier does not have a billing agreement in place with the CPP wireless carrier, and when roamer access number calls are made that bypass the CPP wireless carrier. Originating carriers, whether other wireless, CLEC, or international carriers, must agree to make information available in standardized formats.

In the meantime, non-compliant calls may be blocked, billed to the CPP wireless subscriber, or alternate billed (using an IVR to credit card, third party, etc.). These, too, are sometimes defined as leakage. According to Bell Atlantic's Asher, offering CPP nationwide for local calls only, as is being done in Mexico, does much to plug leakage.

"CPP to prepaid is yet another issue to untangle," says Nortel's Rudisill. "It provides the carrier with greater flexibility in the treatment of these transactional nuances to have prepaid and CPP applications share a common database and common processing logic."

Although the recording of calls lies with the wireless carrier's MSC under the non-LEC scenario, originating networks may consider basic recording for true-ups and reconciliation against the CDRs received for accuracy, especially if the interconnect agreement is strictly cost-based. Also, this data can be matched against received CDRs for B&C control and compliance. The call data exists in the network systems, it just needs to be retained for further disposition.

Not to be understated, perhaps the greatest challenge facing the industry is for all carriers to share information so as to achieve identification and accurate billing for CPP. Signaling protocols and CDR formats may have to be modified. These potential modifications--along with other IT modifications, interconnect and B&C costs all must be factored into negotiations between carriers. Market and business inducements for coming to agreement will reduce these impediments. Business that increases billable minutes across-the-board stands to benefit all participants. The originating carrier adds a new revenue stream, and the CPP wireless carrier increases minutes. (A further examination of end-to-end economics can be referenced in studies prepared by Stefan Zehle of Prodata Partners at www.prodata-partners.com.)

AG's Sadarangani also notes that, "Our business model indicates the greatest expenditure with CPP is what wireless carriers must pay the LEC per bill message placement." B&C agreements generally run from $0.10 to $0.30 per message.

As always, taxation will be an issue, but maybe not as thorny as usual. With CPP, the originating call should be taxed based on physical jurisdiction, which can be applied during routine bill processing. As long as they are already correct, charges applicable to the wireless subscriber, such as roaming, should be taxed as is.

Another issue will rear its head during credit threshold checking. CDRs introduced into the billing stream from another carrier or clearinghouse may not increment against allowable usage thresholds determined during credit vetting and scoring at account set-up. Preemptive management of this issue should result in fewer occurrence of non-payment.

The Slow March to Standards?

The need for standards is apparent if the U.S. telecommunications industry expects to implement CPP on a national basis - not to mention handling the international aspects. Some of the chief issues will be CDR exchange, originating blocking, exchange of call set-up information, such as carrier identification and calling party information, and billing agreements on how to handle call types, such as roaming long distance - who gets what revenues.

Maybe the recent comment by FCC commissioner Harold Furchtgott-Roth that "the industry can make it (CPP) happen without government getting involved" rings true. But don't expect ubiquity, at least not anytime soon. Instead, expect at best a loose confederation of warring tribes.

Frank Slavick is a telecommunications consultant based in Denver, Colorado, specializing in product development, new business development, and billing and customer care. He can be reached at 303/554-0958, or at fslavick@earthlink.net.