IP Mediation Enters Real World

As IP-based services become part of a provider’s revenue, they need to be billed for accurately. Usage-based mediation platforms can play an important role in capturing and processing data for these new service offerings.

Rather than sticking with the traditional flat-rate pricing model currently in place for most services, providers are starting to give the consumer more options and are looking into delivering value-added services such as voice or fax over IP, videoconferencing and broadband. Traditional telephony vendors are diving into broadband services such as cable modem and DSL, as well as IP services. Traditional ISPs are looking beyond the flat-rate monthly fee by heading toward streaming video and unified messaging.

But in order to offer variable-rate or usage-based services, they have to be able to collect usage information from a number of network elements, aggregate the data, and send it to billing and other back- and front-end systems—functions usually given to a mediation platform.

Offering usage-based services is fairly new, and most providers lack the experience to know how to change the way data is collected. There’s also concern about possible incompatibility between IP mediation systems and legacy billing systems.

Who’s Buying?

“There is a universal recognition that the undifferentiated, access-based business model isn’t going to get people where they want to go,” says Rick Kagan, vice president of marketing at Narus. “They have to provide additional value and have the ability to bill for it.”

IXCs, ILECs, CLECs and ISPs are all rethinking their business model and looking at what next-generation services they can offer.

Narus says it has about a dozen customers, of which two-thirds are domestic and one-third international. Its customer base breaks out to one-third RBOCs, telcos and PTTs, one-third broadband providers, and the rest a mix of traditional long-distance carriers, traditional ISPs and new types of providers, such as application service providers and IT services outsourcers.

“Most of our customers are in the trial stage, but several are moving into production,” Kagan says. The types of applications being used in conjunction with usage-based mediation are about as varied as the companies using these systems. An obvious example is voice over IP, which is being offered by traditional telcos, next-generation IP services providers and even traditional ISPs.

Although voice over IP is perhaps the most widely known of the new services, billing for it is still fairly simplistic, according to Timo Lehes, business unit manager for IP billing products at EHPT, a joint venture of Ericsson and Hewlett-Packard. “The most common model so far is the anonymous prepaid environment, which allows providers to get up and running with voice over IP very quickly,” Lehes says. He adds that he knows of a customer doing subscription-based voice over IP, which involves pulling usage data from gatekeepers, but overall he’s just not seeing the real-time requirements that would justify the need for an IP-based mediation system.

The voice over IP application can be extended to include fax over IP. Because a lot of international communication is still based on the tried-and-true fax model, fax over IP in some ways has taken off faster than voice over IP.

Usage-based mediation devices are being used for cable modem service. Because cable modems are always on, the old dial-up access mentality quickly becomes irrelevant, and providers need to find other ways to bill for this service. One approach is to monitor the volume of data—whether it’s HTTP traffic, video or something else—and charge based on that parameter. This is how Australia’s largest telecommunications provider, Telstra, has approached the problem of billing for cable modem service (see sidebar).

Besides billing based on volume, cable modem providers can also look at charging for metrics such as content, quality of service or any combination. “That’s the beauty of all this, because it’s possible to use any variable or combination of variables,” says Kagan. “You can look at quality of service at peak times, and check on a per port basis on the type of traffic—H.323 or HTTP, for example—and all these things can be individually tariffed.” However, most cable modem service providers currently are billing based on a flat monthly rate, because they don’t have the infrastructure behind the service to collect usage data based on other parameters.

Among the other applications for which providers are deploying usage-based mediation is application rental. The whole notion of the application service provider (ASP) has gotten a lot of attention in the past year. Instead of shelling out thousands of dollars for financial, enterprise resource planning, and other software packages, companies can instead rent applications at a much more modest price. A usage-based mediation system could see what type of application is being accessed, the quality of service and how much content is being used, and it could capture this information and pass it along to a billing system.

Growing Pains While every provider that wants to keep up with the times is looking into offering new services and deploying usage-based mediation and billing, often it’s easier said than done. Many of the examples mentioned above are still in the field trial stage, with only a handful of real-world examples in the works. Real-time billing applications have inherent benefits, but many traditional telephony providers plan to stick by their existing package.

One major stumbling block is the possible problems in integrating an IP-based mediation platform with a legacy billing system. By their nature, most legacy billing applications are geared to receive mediation in batch mode, not the real-time frequency with which IP mediation systems capture and process usage data. “Traditional billing systems might accept data from a mediation platform once a day, but IP mediation means you’re collecting and processing data in real time, or else you’ll lose packets,” says Vikash Varma, program director for Hewlett-Packard’s Smart Internet Usage.

He recommends that providers who want to use IP mediation with legacy billing should continue data collection and processing in real time, but then after processing the data should be dumped into a file, which can then be moved downstream periodically. “It’s important that we sit down with the customer and ask how they’ve configured their billing application and what it is capable of accepting,” Varma says. “We need to understand the existing system and know how often it can take data, and then work with that defined environment.”

Narus’ Kagan adds that with appropriate enhancements, upgrades and modifications, legacy billing applications may be able to deal with usage-based information.

A different take is to try to leave the billing system as untouched as possible, according to EHPT’s Lehes. Instead of tinkering with an established and effective application, he suggests, providers should look into pre-rating IP services and feeding that information into the legacy billing system. “This would put a very low requirement on the legacy system,” he says.

Another consideration is that most traditional billing systems don’t have the flexibility to support next-generation products and services, because the type of data required to bill for these services is different from that required for traditional telephony, says Lehes. This disparity is related to the lack of standards for a flexible record format that would be compatible with different types of mediation and billing systems. Current record formats such as the North American AMA and the European wireless GSM have been well-defined, but at the same time they are very restrictive when it comes to introducing new services.

The Internet Protocol Detail Record (IPDR) initiative has made progress on creating a standard record format for IP service usage. The group has already addressed a number of topics, including terminology, syntax and transport procedures. Member companies are now working on prototyping experiments, which they hope to demonstrate in the next couple of months.

But the current concern is this: If IP mediation systems cannot collect traditional telephony CDRs, and if mediation products that are optimized for circuit-switched traffic can’t monitor in real time, then what course of action is available to a provider offering many types of services?

One option would obviously be to run two different mediation platforms: one to handle traditional voice traffic, and the other to gather and process usage data for IP and other non-circuit traffic. However, before jumping into this, providers need to have a solid understanding of their existing infrastructure. “If a provider has a strong convergent mediation solution, it can be extended with IP capabilities, but there just aren’t that many products on the market that can do that,” Lehes says.

Instead, the arrangement most providers will likely have to face is parallel mediation tracks—one for circuit-switched and another for IP-based traffic, with both feeds going into their respective mediation systems and then to a common billing system.

This may not be ideal for all situations, and some carriers may not want any extra interfaces into their billing system. Another option in cases like this could be to feed IP mediation usage data into an existing mediation system. The IP-based detail record would go to the existing mediation platform, which could reformat the information to conform with established CDR formats. A consolidated file consisting of all IP and circuit-switched detail records would then go on to the billing application. Once the IPDR format becomes a standard, this reformatting likely will not need to take place.

The ultimate goal will likely be to have a single mediation platform that’s collecting data from all types of service events, whether they're circuit-switched voice calls, cable modem service, or voice over IP. This approach may require switch vendors to open up their products, because today they are not nearly as accessible as IP-based network gear. Most of the major switch manufacturers, such as Lucent, Ericsson and Alcatel, have partnered with billing and mediation vendors or are developing their own mediation platforms in-house. Many of these vendors have been adding more and more software to their switches, essentially giving their switches mediation functions such as data collection. But this enhancement shouldn’t obviate the need for IP mediation platforms, says HP’s Varma. He says that mediation systems focus on three areas: collecting raw data from network elements, processing this data and delivering it to applications that need it. He adds that even if a vendor is adding more capability to a switch, the provider will still need a mediation system to act as a clearinghouse for usage data coming from many different sources.

“In some cases, collection and sometimes processing is done on the switch, but you’ll find very few networks in the world that use equipment from one type of vendor,” Varma says. “Providers still need mediation in a mixed environment, and they need it for other downstream functions after collection takes place.”

Mediation Data

After an IP mediation system collects and formats usage data, the information can be useful to a number of front- and back-end systems. Although billing is the most obvious beneficiary of this data, a number of other functions might also benefit from the IP mediation information:

Reporting: A carrier could get information such as aggregate volume per time period, the type of traffic, and the source of traffic coming from other service providers. Rather than relying on sampling, since mediation platforms look at all traffic data and process it, the carrier can produce accurate reports based on the data. This type of information can be invaluable to management personnel, because they can see right in front of them what is happening on their network.

Analysis and profiling: IP mediation data would allow the carrier to see, customer by customer, how much of a service is actually being used. In a tiered service model, this information could help move customers into service packages that might benefit them more. With this proactive customer care, the carrier can reduce the likelihood of the user leaving the service. In some cases where customers are moved to a premium package to save them money, the carrier might actually guarantee itself additional revenue from the higher-priced plan.

Churn: IP mediation data can be used by churn management software. “Most providers don’t even know that they might have a 10 percent to 12 percent churn rate per month, because they are only focused on making sure they acquire new customers,” Varma says. “But they don’t realize that they may be losing many more customer than they are gaining, and it costs much less to maintain existing customers than going out and signing up new ones.” Usage data coming from IP mediation platforms can be fed into churn management software, which can then apply algorithms and crunch the numbers to see which customers are likely to drop a service.

Capacity planning: Because the usage data is complete—meaning it contains information about where traffic is traveling, when the peak usage times are, and the types of traffic traversing network devices—it can be used to ensure that the provider’s infrastructure is sufficient for the traffic load.

The mediation data can also be sent to a data warehouse, where it can be stored on optical disks or another medium and be easily accessible to a company's different business units.

Challenges Ahead

Providers that migrate to a usage-based mediation architecture may face their share of difficulties, but not being able to capture all usage information and therefore bill for it isn’t exactly an attractive alternative. There are several IP mediation platforms on the market, as well as real-time billing applications. The chore will be for traditional telephony vendors to marry this new technology to existing systems, and for newer providers to set up an infrastructure that is not only scalable but flexible enough to handle future next-generation services.

Sidebar

Usage-Based Mediation Goes Down Under

As providers begin to roll out broadband services such as cable modems and DSL, they quickly realize that they can’t charge for the service the same way as for dial-up Internet access. In a dial-up model, they can assess a flat fee for a predetermined number of hours and then charge additional amounts for usage beyond that level. But because broadband services are always on, time is basically of no consequence.

Telstra found itself in this situation when it began delivering cable modem service to its customers about 2 years ago. “If you rule out time—and distance doesn’t really matter, since it’s not important where the content comes from—the meaningful measurement parameter becomes volume, which is what Telstra had to adapt to,” says Vikash Varma, program director for Hewlett-Packard’s Smart Internet Usage (SIU).

The telco started out offering customers a monthly flat fee of $100 Australian, but since it was costing Telstra $0.21 per megabyte to transfer data over their transpacific circuit, a customer could be unprofitable from day one, Varma says. Before radically changing its pricing system, Telstra first did some traffic metering using SIU to understand customers’ usage patterns. Telstra determined that about 80 percent of its customers were averaging about 60 Mbytes to 70 Mbytes of data transferred (this includes data being viewed, regardless of whether it was stored locally by the user).

Based on this information, Telstra moved to a tiered pricing model. An entry-level package for $60/month included up to 100 Mbytes of data. For average users, this was basically an unlimited usage plan, because they would rarely, if ever, approach the 100 Mbyte limit. “By dropping the price they opened up the market for many more customers who were willing to pay $60 but not $100, and they actually increased their number of customers,” Varma says.

Telstra also created a second package for $80/month that gave customers up to 200 Mbytes, and a $150/month package with 500 Mbytes of data. HP’s SIU keeps track of how much data each user accesses.

In addition to restructuring its pricing plans, Telstra also started mirroring or locally caching popular foreign sites such as CNN.com. The company also built up local content to make it interesting for customers to stay within the local data center.

Telstra’s cable modem service went from severely unprofitable to running in the black. Not only that, but the company was also able to provide many more options for customers.