Wholesale Billing: Build or Buy?

In October’s Billing World magazine, Becky Dancy of Intertech Management Group described the differences between retail and wholesale telecom billing systems (“Billing for Wholesale Services: Just Like Retail—Or Is It?” page 36). As a follow-up, we asked three large wholesale billing system providers—billing systems integrator EDS, Australian incumbent carrier Telstra and Williams Network—one simple question: Is it better to build a wholesale system from the ground up, or build out a retail system to handle wholesale billing? Well, maybe it’s not as simple a question as it sounds.

The U.S. wholesale billing market is expanding quickly as more CLECs and IXCs offer wholesale services. “What we’re seeing in the Tier 2 marketplace—not including AT&T, MCI WorldCom and Sprint—are organizations offering wholesale to a number of people who just want to get into the telecom business,” says Larry Floor, sales executive with EDS Communications Industry Group. “A few years ago, there were hardly any IXCs selling wholesale as well as retail. Now most of the larger players like BTI Telecommunications Services and Primus, $250 million to a billion dollar companies, are probably all offering wholesale to people on a switch-less basis.”

EDS: Rating key to good wholesale system

Floor outlined some of the challenges carriers face when building a competitive wholesale system. “The real difference lies in the nature of rating. You have to be able to fine tune components of the rating different than the traditional IXC used to do, because you have different termination and access charges in the same areas, in the same major cities,” Floor says. “There will be some pretty big differences from the terminating or originating LECs in those cities. So you have to be able to specify between LECs to compete at the wholesale message function.” And the system can’t tell if the message is a wholesale or retail message until well into the process, he says.

Another challenge in building a wholesale system: Writing code to align message formatting with customer preferences, which differs from reseller to reseller. “For instance,” Floor says, “you run into nuances in the PIC and CARE process. Some of the carriers want to be supplied with blocks of numbers that are already PIC’ed to them. In some cases, it’s the other way around. The carriers PIC individual numbers.” Resellers have different preferences when it comes to bill presentation. “Wholesale bills are very short. They may be summarized with originating and terminating information but a lot of it is simple flat-rate billing. And some resellers want the X-amount sum times the number of minutes, so you just put all the call detail on mag tape and let them do something else with it.”

Wrong hardware, weak system

Wholesalers also fail to build with the proper hardware. “It still takes a lot of horsepower and a lot of computer resources to be able to process large volumes of records,” Floor says. “Somebody could write the wholesale functionality and put it on a PC or a fairly inexpensive platform easier than you could for a retail billing system. But you’d run out of gas because you have to have something that’s capable of processing messages,” he says. “As an example, we process 300-400 million messages a month for one major carrier. You’re not going to be able to do it on your basic Pentium 360. We primarily use an AS/400 platform.”

Finally, Floor believes wholesalers might find it cheaper to outsource their call processing and billing functions. “Anybody that’s in the wholesale process knows that the margins are very thin. It’s a very competitive business for the price of that call.”

He gives an example: “Let’s just say that typically a retail message costs half a penny to process. If the wholesaler’s internal costs to process that message is two-tenths of a penny, that will give the wholesaler a 30 percent direct margin for processing that message. If a wholesaler does the same thing for a quarter of a penny, it will still cost the same amount of resources on that machine. What is the wholesaler going to do? A lot of companies spend a lot of money for a wholesale system and they’re going to have a hard time getting it back, because the cost of these calls gets cheaper and cheaper.”

Telstra builds out retail system to wholesale

Australian incumbent Telstra created a new wholesale billing system from its Flexcab retail billing system, says Mike Flattery, manager of sales marketing and service development for the Melbourne-based company. At the time of its launch in early September, the system was a year behind schedule; Telstra officials had pledged it would be ready for commercial use by the middle of 1998, but it was not to be. “We did have our challenges for meeting the schedule we laid out,” Flattery says. “It was a very big project. Our development teams and deployment teams worked hard to make the time frame.”

The carrier, which owns most of the network in Australia, had to build the system to make its network more available to competitors. Unlike the United States, where the FCC tightly regulates competition, Telstra faces looser regulatory oversight from the Australian government. The telco instead tries to comply with competition requirements by coordinating the construction of the wholesale system with telecommunications industry groups, including the Service Providers Action Network (SPAN) and the Australian Communication Information Forum (ACIF). “They’ve been involved in reviewing our design plans and our implementation plans. We had to demonstrate that we could move from the previous retail outlook to a fully dedicated wholesale service,” Flattery says.

First attempts hit snags

A member of one of those industry groups, RSLcom, piloted the system for Telstra. RSLcom provides international long distance voice, facsimile, data, calling cards, private lines and value-added services.

First attempts to build out the Flexcab system hit a few snags. Telstra billing developers tried to retail billing cycle for wholesale functionality. “We basically have 20 bill runs per month, so we tried blanking three of those out to run the wholesale,” he says. But it was difficult to keep track of the customers that moved from Telstra’s billing system to a competing telco’s account. Telstra needed to have the customer information, including call detail and other accounting data, before it could send a final bill to that customer.

Databases didn’t align

So Telstra created an agreed accounts list (AAL) database, which contains account data for customers to be switched from Telstra to a competitor. Using that list, Telstra would transfer the customer when the bill pull was done and create the invoice that went with the bill. The carrier found it difficult to coordinate the customer information in the AAL database and in the legacy retail database. “That didn’t work, because the minute you get into an area where you’ve got two sources of reference, in this case, the customer database behind the billing system and the AAL, they get out of synch. That was the fundamental problem,” Flattery says.

The answer? A different database architecture that lets the system split the retail customers from the wholesale side. “We are using an MVS platform and we’ve got 9 million customers up,” he says. “So we’ve got two different databases—a retail one and a wholesale one. We’ve got the one basic database that moves everything through call collection and through to mediation. And then we keep the tail end of it going for the retail [database] where you get down to invoice extraction, preparation, and then the production of the final bill.

“We also split the mediation system down into smaller steps to mediate the records to the wholesale customer. It’s different than the retail mediation because with retail mediation you have to wait to accumulate the full month’s records,” he says.

Telstra also changed billing cycles

Telstra also had to iron out billing cycles to reflect resellers’ business models. Some resellers want call records daily, so they can track minutes of use and other customer data for marketing purposes. “They wanted to get the phone calls detailed and price them themselves,” he says. “So we went back to first principles and said, ‘If you want to move back from the invoice ready stage of a retail billing system, what sort of [functionalities] do you want up front?’ It was all to do with message collection. Instead of going into the normal retail meter and accumulating them for monthly cycles, we wanted to each day effectively charge the call records and transfer them across to the service provider. And that’s where we modified the retail system predominantly.”

The system now lets Telstra send call data to other wholesalers via Internet, CD-ROM, cassette, or mag tape. “They get the call records, they can massage them, they can bill them, they can put them through any bill cycles they want.”

System is of strategic importance

“It was a very big project that is of strategic importance to our company,” Flattery says. “There’s quite a bit of infrastructure, you’ve got to provide the feeds across to these people and the larger wholesale customers want electronic information, they want it quickly, reliably, cheaply and securely.”

The nature of wholesale in Australia is unique in several ways. “The scope of wholesale in Australia is interesting because we have a population of about 18 million people, and we’re geographically not much smaller than the United States,” Flattery says. “You take the two major cities, Sydney and Melbourne, and you’ve got basically 80 percent of our business and private usage. The rest of it is scattered around the coastline. You’ve got a big concentration, particularly in the central business district. The licensing capability for the wholesaler or retailer is for the whole country.”

Williams Network creates ‘hybrid’ wholesale system

Unlike EDS, which builds wholesale systems from the ground up, or Telstra, which built out its in-house retail system, Williams Network built its system using a combination of outside vendors and software written by Williams developers.

“Intertech Management Group’s is the base system that we licensed and we primarily use it on the order entry and data services side. The rest of it is homegrown,” says David Parrack, director of network and accounting services and the man responsible for wholesale billing for Williams Network. “We’re using a combination of software that we have licensed, along with internal development that we’ve done. We try to buy as much functionality as we can, but we feel that in the wholesale space there are not a lot of systems that are 100 percent tailored to being wholesale. We’re basically trying to fill in the pieces ourselves.”

Many of the wholesale systems in the marketplace need work, Parrack says. “A lot of the systems weren’t designed from the ground up to be wholesale. Most of their initial applications were retail-oriented as opposed to wholesale. And that’s not entirely bad, but in wholesale, there are different issues and functionality, and that’s what’s driven us to do a hybrid solution.”

Williams contract could help wholesale opportunities

Williams Network, part of Williams Communications, was launched in 1998. Williams last year signed a 20-year contract with SBC Communications to provide the network for all of SBC’s domestic transport services, especially long-distance voice, once SBC wins Section 271 approval. In return, SBC will connect its international cables to Williams’ domestic network

Although some software developers believe wholesale systems are less complicated than retail systems, which have to add in taxes, Universal Service Fees and other charges and surcharges. But there are other complications, Parrack says. “In wholesale you are dealing with higher transaction volume per account, customers who potentially have millions upon millions of transactions with you per month,” Parrack says. “With retail customers, you might deal with hundreds of calls per customer. Although you may not be providing as much information on a wholesale invoice, you have to provide much more information electronically. So there’s a lot more design, development and system work that has to be done to let other customers interface with you electronically. Most of the supporting detail is on the electronic call record transactions.”

Tax functions affect wholesale

Nor are wholesale systems free of tax functionality. “You just can’t say entirely that wholesale is tax-exempt,” he says. “For instance, you might be selling into a market niche. Maybe the reseller is an Internet provider selling Internet access, but he is buying private line pipes from you his backbone. They’re not really doing direct resale, so they probably can’t qualify [for tax exempt status], can’t give you a resell certificate. Even in wholesale you can have taxes that can come up.”

Parrack echoes EDS’ Floor about the importance of having enough horsepower to process large batches of call records. “The strain on a wholesale processing throughput, and the bottlenecks that occur are in different places than the retail system,” he says, which hurts the reseller. “One of the real keys is the availability of data and getting the data back to the customer. That’s one of the most critical functions in wholesale billing. You’re not just billing a customer, you’re also providing the means by which they bill their customers. Although it’s a critical point, it is not the first point of design of a system that’s been retro-fitted from a retail system.”

Multiple services make mediation tough

And things get tricky at the mediation layer when wholesale systems developers try to track various types of services and rates across the platform, such as ATM, paging or data messaging. “Mediation is critical when getting all the data from different services, as well as the rating engine, and you are trying to turn rating around in nearly real-time,” he says. “What we’ve tried to do is to build it to be product-based. For example, we would consider ATM a product, consider IT services a product, and voice services as a product,” Parrack says. “We have a mediation layer that takes information from disparate systems and disparate types of services and puts them into a common format that can be interpreted correctly and properly billed by the billing system.”

That is particularly helpful when customers are buying several services from the same source. Some customers want a convergent bill, others want a single bill for each service, Parrack says. “We’ve tried to approach it to where our systems can handle multiple products, or product-by-product billing.”

And how does one fine tune a billing system for various rates, carrier agreements, etc.?

“It’s almost kind of a ridiculous answer. It’s easy if you designed your system to handle that, but it’s hard if you haven’t. I don’t know how to answer it better than that.”