Billing For Broadband Cable: Big Dollars, Big Decisions

In some ways, cable companies have a leg up over telcos and ISPs, their communications industry brethren. Broadband coaxial cable allows for powerful service capabilities -- video, voice and data transported at high speeds via one wide channel, piped directly into homes. In addition to increased bandwidth, a hybrid fiber coax (HFC) network reduces operator maintenance costs and offers high quality through the use of optical fiber. With cable already installed in millions of U.S. homes, multiple service operators (MSOs) have the advantage of an established customer base. Last June, AT&T announced it was purchasing cable operator Tele-Communications (TCI); nine months later, the telco forged an alliance with Time Warner Cable. More recently, and AT&T acquired MediaOne Group and has given Comcast Corp. 2 million subscribers (as of May 6). By capitalizing on their combined resources, these new “super-carriers” have the potential to change the structure of the cable and telecom industries.

The Revenue Opportunity

Cable has so far proved to be a more profitable method of high-speed access than the telecom industry’s foray into DSL. According to the Yankee Group, by the end of 1998 there were 30,000 cable modem installations in U.S. households, with 4.3 million (two-way modems) forecast for 2002. Just 3,000 U.S. residences had DSL modems by then, with forecasts for 2.7 million installations by 2002. The Strategis Group views high-speed Internet access as the best new revenue opportunity for MSOs, predicting it will account for more than half of new revenues in aggressive markets over the next five years. However, the route to convergence is not without obstacles. Because much of the cable system infrastructure in the United States is still one-way, MSOs must deploy additional fiber and upgrade coaxial systems. Cable companies also must face the possibility of transitioning to IP-based platforms. Still other obstacles involve cable modems, including the evolution of standards as well as product deployment.

Billing: A Critical Factor

Billing is a critical part of any cable business, and brings its own set of challenges for operators who plan to market and offer additional advanced services. But the ability to print two or more services on a single bill does not mean that a customer care and billing application is convergent.

“In order for a system to be truly convergent, it must appear ‘productless’ to the telecommunications provider and its customers, in terms of not only the front-end functionality, but the data architecture,” said Paul Roemer, principal consultant for Spectralliance.

Although a few MSOs are currently offering one bill for multiple services, many are not sure whether consumers really want one bill. Said Mike Luftman, vice president of corporate communications for Time Warner Cable: “We’re finding differing viewpoints within the industry. Do customers want a single bill? There’s the possibility of sticker shock, but it does help sell bundled services.”

System scalability is another major obstacle, particularly in deploying the one-bill scenario. Cable companies are merging and forging alliances with other industry players to best leverage their resources for launching broadband services. Because companies use different systems and vendors for billing, a scaleable billing system is required to integrate different applications on a single platform.

AT&T is facing these issues. The company’s acquisition of TCI was finalized March 9; TCI is now called AT&T Broadband & Internet Services. In addition, AT&T and Time Warner plan to offer cable telephony service to residential and small business customers over Time Warner's cable television systems in 33 states by the year 2000. As noted by Don Tiedeman, senior management consultant DMR Consulting Group, between the merger with TCI and the contract with Time Warner, AT&T is working with two totally different billing systems.

“Clearly these kinds of partnerships will force a patching together of different platforms for customer care, provisioning and billing - a fair amount of systems integration needs to be done,” said Tiedeman. “In an ideal world, all customer care and billing records would be in one database. From a customer standpoint it must seem like one company.”

Will Current Contracts Hold Water

Although AT&T has declined to comment on which billing vendors they may work with, CSG Systems is one possible candidate; TCI signed a long-term contract with CSG in 1997 to handle billing for TCI’s cable customers. Time Warner’s cable division does not currently utilize a converged billing system, but CSG does provide billing services for 50 percent of the company’s cable customers. According to Luftman, Time Warner is currently working with several billing vendors, including CSG and CableData, and some billing is done internally. Time Warner Communications uses Saville’s Convergent Billing Platform (CBP) for its CLEC business, and the platform has the potential to provide a single bill. However, neither Saville nor Time Warner could say whether this would happen. Luftman stressed that convergence is more challenging and less finalized because of the joint venture. “Billing issues are under active discussion and will probably rest with AT&T,” he said. “The AT&T piece requires scale and complexity and will likely will be done through their existing infrastructure.”

Regardless of the difficulties, AT&T and many other providers are striving to offer the one-bill option. According to AT&T spokesperson Mark Siegel, the premise of the TCI acquisition is to provide consumers with all communications and home entertainment services from one company, on one bill -- a true alternative to the RBOCs. A bundled package could include three or four phone lines, each with a distinctive ring; a lower rate for long distance; high-speed Internet access through @Home; a full array of cable TV offerings, and wireless service. When asked if this would mean flat-rate billing, Siegel replied that it’s really too early to say. “If a customer wanted all services it would be a better deal than buying ala Carte,” he said. “The whole is greater than the sum of the parts.”

While consolidation within the cable industry poses difficulties for MSOs, it can provide opportunities for billing vendors. Convergys sees the possibility a Comcast-MediaOne merger as an opportunity to provide product and solutions, said Tom Smaldone, president of Cable and Broadband Solutions. Comcast is currently using Convergys’ CableMaster system, which supports video only. However, Convergys plans to migrate customers to its ICOMS system, a platform designed to integrate video, data and telephony services specifically for the cable industry. ICOMS can run in a video-only or an integrated mode.

MediaOne signed a cable telephony billing and subscriber management contract with Convergys in October of last year to license ICOMS, which will allow customers to receive a combined bill for all services. With the transition currently under way, Convergys plans to implement ICOMS with MediaOne’s systems over the next two years.

Le Groupe Vidéotron Ltée, Canada's second largest cable television company, is using Kenan Systems’ Arbor/Broadband integrated billing and customer management system to implement one bill for various services. Paging, Internet services (both telephony and cable modem services) and long distance (trial services) can appear on one bill. Cable service billing is still separate, but Videotron plans to integrate this service, as well as local telephony, onto a single bill.

Circuit Switch or IP?

Another hurdle facing the cable industry is whether to incorporate circuit-switched technology or make the jump to an IP-based platform. Circuit-switched is more expensive, because it requires MSOs to deploy separate telephony and high-speed data architectures, thus building another logical network over the existing cable infrastructure. However, many MSOs have experience with switched technology through established relationships with phone companies and prefer to leverage this knowledge. In addition, circuit has the advantages of reliability, quality and scalability.

Most cable providers offering integrated services use circuit-switched technology, but are prepared to evolve to an IP-based platform in the next few years. AT&T plans to roll out circuit-switched cable telephony this year and then transition to an IP data and telephony service platform in 2000, as standards are defined and two-way cable upgrades are completed. With a cable telephony trial currently underway in Fremont, Calif., and plans for trials of circuit-switched technology in 10 other U.S. cities this year, AT&T’s strategy is deliberately focused in a modest way, said Mark Siegel. Full-scale implementation won’t happen until all components are in place.

“Using reliable circuit-switched technology allows us to get to market fast…over time we will go to IP, but it will be largely transparent to the consumer,” he said. In listing advantages of IP, Siegel cited its efficiency, favorable cost and flexibility in how the network can be configured (it doesn’t have to be layered). In order to establish service, it’s easier to use a router than to buy and install a switch. However, Siegel admitted that there are still standards, quality and reliability issues with IP, and AT&T won’t deploy IP-based services until they are resolved.

With IP, high-speed data networks can be used to support packet services instead of deploying standalone HFC equipment, which is a cheaper alternative to circuit switched. Thus, IP’s lower entry cost could prove to be a more viable entry into cable telephony and other services for smaller companies and startups without a circuit background than the major carriers already firmly entrenched in the switched environment. For example, it’s clear that AT&T has the advantage for traditional voice, cable TV and wireless if these are services that they want to drive customers, says DMR’s Tiedeman. However, if IP starts to dominate the consumer world, AT&T doesn’t have the upper hand yet because they are not viewed as experienced in this area. The company’s success with IP-based services will depend on how well AT&T can market WorldNet or whether it is influential to customers.

Deploying both technologies in tandem will not be easy, noted Mark Wagner, General Manager of CSG Telephony. “The challenge is when we start recording data in IP packets and also in a switched environment,” said Wagner. There’s not yet standards associated with CDRs for IP - we’re working with national (standards) committees and companies to address this issue.” With CSG, software platforms are event driven so that the system can read CDRs or usage from Internet. Because the billing is based on events from any type of service (telephone, cable, data,) and all events are under one umbrella, customers can get a one-rate discount for all services.

Videotron Goes IP

Videotron is taking an IP platform approach for modem and voice rather than switched interface, working with Telcordia and Cisco to provide a packet-based cable infrastructure. Running on a distributed IP backbone, Telcordia’s call agent software manages calls from other vendor-supplied IP gateways, extracts billing information and connects the calls. According to Scott Davidson, executive director, Voice over IP Products for Telcordia, the call-agent product feeds data about the calls to accounting gateways and mediation devices to communicate with the billing system (supplied by Kenan Systems), allowing the billing system to do the rating. Videotron’s service is scheduled for household trials in mid-1999 and for commercial availability later this year throughout Quebec.

The transition to an IP-based environment raises the same billing issues for the cable industry as those currently being discussed in the Internet arena - the necessity of moving from the current flat-rate model to a transaction or usage-based system. Cable’s high bandwidth may dictate paying more for capacity and demand. Dial-up (Internet) access was first charged in terms of time logged on, so customers paid for having the circuit open. Now it doesn’t matter how long a customer is on, since traffic is sent via packets, split off the circuit.

Yankee Group analyst Paul Hughes predicts that once people realize the higher bandwidth capability of cable modems, this scenario will be more acceptable. “Several companies are now emerging within the IP space that have the ability to bill for network usage billing capability,” Hughes said. “If companies start billing for additional metered services, a complete billing system revamp will result.”

Xacct Technologies has been working with billing vendors, including CableData, Kenan and Saville, to make metered services possible for IP. “In order to offer enhanced services such as voice and video on an IP platform, extra equipment is required to provide mediation,” said Per Anil Uberoi, Xacct’s vice president of marketing. “Xacct serves as a mediator between the billing companies and those providing data services, which allows MSOs to offer data services from the get-go.”

Uberoi described Xacct’s relationship with CableData and Cisco as an example. Cisco provides the back end, CableData is the front end and Xacct functions as the mediator, creating a complete service. “The customer can access a menu tab to buy services on a per-use basis, allowing for real-time billing,” Uberoi said. By capturing the data in real time, the customer can see immediately what services they have used. Not all companies are banking on the usage-based model for billing. According to CSG’s Randall Cardinal, vice president of product strategy, the (IP) network should be treated similar to the PSTN, with billing rates based upon gaining back revenue. If operators charge based on usage, they will start limiting services based on the utility of the network. The trend is for customers to get a full telecom package with the flexibility of determining whether they receive one bill or multiple services.

Independent telecom consultant Cheryl Byrnes also foresees companies (AT&T is one example) offering bundled services using a flat rate approach. “Not only do consumers find this preferable, but MSOs understand that by bundling services under a flat rate option, competitors are less likely to make inroads,” she said.

Future/Trends

Single view of the customer
According to CSG’s Director of Sales Consulting Char Noland, the company recently completed a convergent project called Broadband Express, which can set up a single customer for multiple services but send the bill to different places. A customer who gets cable TV, telephone and high-speed Internet access services through her cable company may want her cable TV and telephone service on one bill sent to her home, but the bill for Internet access sent to her employer. This is possible through Broadband Express, and the system still recognizes this account as a single customer.

“This has traditionally been very hard for billing,” said Noland. “With the addition of high-speed data, we have to track differently, so we’ve added 50 different data fields specific to high-speed data usage.” The service is an optional feature that resides on CSG’s Advanced Customer Service Representative (ACSR) and Communications Control System (CCS) platforms, customers can choose not to use it. Currently offering cable (analog and digital), high-speed data and long distance telephony, Cox Communications is working towards converging all services to a back-end function, with services and billing viewed from single enterprise perspective, said Mike Riddle, director of applied technology. At the present time cable and data can be billed together, but telephony services are on a separate bill. Working with Convergys, Cox plans to have single-bill capability for all three services by the third or fourth quarter this year.

Riddle stressed that the convergent statement process will not be front-end stapling. “We’re trying to resolve the inherent issues with a stapled environment,” he said. “The billing engine rates and combines traffic statistics, then applies discounts, generating print spools to provide and distribute billing statements.” Billing cycles can be aligned to apply appropriate rates and adjust ARs for time within the cycle, and at the back end, statements can be spread out appropriately across ARs if customers develop sticker shock. Payment allocation can also be separated among different parties, which the system can view as single and/or multiple customer(s) in the database.

Although Cox does not have plans at this time to switch from its current circuit switched platform technology to an IP-based platform the company has explored a backup IP solution. According to Riddle, Cox has developed architecture around an IP-based environment where a mediation device sits between the router and the billing platform in order to rate and measure transactions, applying the same algorithms as the current billing engine.

To establish a convergent billing system, Roemer recommends incorporating its users into its design. “If an MSO is moving into the telco business, doesn't it make more sense to have someone with some telco expertise help to define the requirements?” he noted. “If a cable marketing manager is asked to define telco marketing requirements, nobody should be too surprised when the customer care and billing system that is selected looks like a cable customer care and billing system.”

Roemer has seen many service providers opt for what he calls a "flavor of the month" solution, where any customer care and billing application looks better than the current one. Although it is not clear how convergence will play out for billing systems and pricing plans within the cable industry, there is an obvious focus on customer needs. Both service providers and vendors are moving quickly to offer products and services that bridge a wide range of requirements, particularly the abilities to supply one bill for all services and allow customer account self-care.

In March, discussing data services and broadband telephony strategy, AT&T Broadband & Internet Services President Leo Hindery cited one-bill implementation and cable modem installation as challenges involving customer care. Because installing the needed cable modems requires unbelievable man-hours, the company is discussing self-installation solutions with technology developers.

So far used for high-speed Internet connections, cable modems also allow operators to bypass the LECs by offering cable telephony services directly. To deliver data services and telephony over a cable network, one television channel in the 50-750 MHz range is allocated for downstream traffic and another channel in the 5-42 MHz band is used to carry upstream signals. A cable modem headend system communicates through these channels with cable modems located in subscriber homes to create a virtual LAN connection. Most are external devices that connect to a PC through a standard 10Base-T Ethernet card and twisted pair wiring. Cable modems offer the benefits of access speeds from 500 KBPS to 1 MBPS or more, as well as constant connectivity - a customer’s PC is always connected to the network.

There are two types of cable modems. Two-way hybrid fiber-coaxial (HFC) modems can theoretically achieve download speeds in the 3-MBPS to 10-MBPS range, with upload speeds of 128 KBPS to 10 MBPS. One-way coaxial modems average a 2 MBPS download speed and require a dial-up modem for uploads. A few providers still use the one-way coaxial technology, but most have switched over to HFC. Until this year, a lack of standards locked both the service provider and end users into a single-vendor solution. A new industry standard called DOCSIS (Data Over Cable Service Internet Specification) was ratified last spring, and all of the major cable modem vendors intend to deliver DOCSIS-compliant modems by this summer.

Nortel Networks has expanded the DOCSIS standard to its Packet Cable product - a way to deliver end-to-end voice and data service over cable, including a billing system interface. Prior to DOCSIS, all devices were proprietary, and interoperability between cable modems was not ensured. Current Nortel DOCSIS cable modems have a 3300 chip for QoS software support and VoIP delivery, which won’t require a hard swap out to upgrade, said Wayne Mackey, general manager, Network Management and Provisioning. Nortel’s joint venture with ANTEC Corp. and Arris Interactive, is inended to allow broadband network operators to deliver converged voice, video and data services. Nortel is installing head-end devices and accounting mechanisms into subscriber cable modems to measure traffic statistics and interface with cable billing systems. This product, tentatively called “packet-port,” is an integrated broadband cable modem device that provides an interface between the HFC and MSO. It can track traffic by type and interface with traditional telephony and call-data gateways. Voice switches retain the CDRs so operators know when calls originated and their duration.

Nortel is working with a third-party vendor to develop a system to collect, aggregate and format billing statistics. In addition, the product has been selected by AT&T Broadband & Internet for its upcoming cable telephony trials.

The @Home network, which has affiliate partnerships with 16 cable companies in the United States and Canada, leverages the high bandwidth capabilities of cable TV lines to provide high-speed Internet access via cable modems hooked into consumer PCs. Because the service is providing only data access, convergence is not driven by multiple services for billing, noted Nick Hittolyte, Senior Director of Information Technology. Instead, like traditional ISP vendors, @Home needs to support a solution for both consumers and businesses, as well as accommodate billing for MSO partners.

As part of their billing strategy, @Home did not want a single source for provisioning their central billing solution, since they needed to integrate with service provider partners, and needed the platform to be deployed globally to support local currencies and cultures. The company also wanted a scaleable stand-alone solution that could be maintained by customers and be integrated on a small or large scale. “Two years ago we didn’t know what services we would bill for, so from the beginning we built in the flexibility to bill for e-commerce, telephony, etc. as well as Internet access,” said Hittolyte. @Home utilizes Kenan’s Arbor/BP software as well as a middleware application from Cigna Systems to integrate billing for its service brokers.

The system has been supported in an IP environment since June 1998, with a migration effort currently under way to a new system targeted for the second quarter of this year. Base requirements for the new system include the need to support a variety of billing metrics. Transaction-based billing will include the same basic set of services as the subscription rate, with additions for premium services handled on a per-use basis (for those with high bandwidth requirements) or specific usage-based requirements (for customers who access dial-up service while on the road). Transactions can be rated on a per-minute basis or via throughput tracking (the number of bytes sent up and downstream). @Home also supports an e-commerce usage-based model, where customers can purchase services on-demand.

“Our expectations are that customers (depending on their type of usage) may require a single or individual platform,” said Hittolyte. “Customer care needs to provide consistent service. We provide information back to our cable partners so they can integrate their cable bills or bill separately.” If an MSO does not have this integration capability, @Home will provide a service bureau function for them. @Home customers can check their bills and manage accounts online.

Like @Home, Roadrunner is a high-speed online service delivered via the cable television infrastructure. Road Runner is a strategic partnership provided by ServiceCo LLC, a joint venture between affiliates of Time Warner Inc., MediaOne Group, Inc., Microsoft Corp., Compaq Corp., and Advance/Newhouse. According to Sandy Colony, vice president of corporate communications, because billing is provided by each MSO affiliate, customers are billed separately for Roadrunner service. Currently, converged billing is not planned, said Colony.