Revenue Assurance for the Data Communications Stream

Revenue leakage can happen at many points along the winding route of the communications stream. Technical hurdles, difficulties in providing end-to-end service and inaccuracies in billing are just a few tributaries where revenue can be diverted from profit pools. Without plugging the holes in the revenue flow, many experts agree, trying to maximize earnings in the data communications world could be like trying to run water up a hill.

For traditional voice networks, companies have long been aware of revenue leakage, and understand where it can occur. But in the world of data communications, a new set of issues poses potential problems for providers.

Though revenue assurance reviews for data are typically the same for voice, the results are usually different. Proper billing for services is critical for revenue, but can often be hard to measure for data. Variance from typical flat rates to billing for special services can be difficult to calculate.

Technology: Data’s Riverbed

Providing data communications capabilities is a relatively new area. Both hardware and software tools are improving the quality and speed at which data can be transmitted. Yet the technology that moves data across networks is evolving almost faster than users can take advantage of it.

Carl Geppert, an Arthur Andersen partner specializing in revenue assurance, says that technology differences and the need to deploy additional equipment - such as modems or specific routers - differentiate data revenue assurance issues from those of voice communications.

“Certain data services are directly dependent on the types of networking facilities in place out to the customer,” Geppert says. “There tends to be a disconnect on the residential side between the target customer base for residential DSL service, versus the capacity and capability of the network to provide that service to specific customers.” Losing customers - and hence revenue - because of the inability to physically provide a data network connection and keep it up and running is a big issue for providers.

Bobbi O’Connor, director of billing services for Sprint long distance, Dallas, oversees Sprint’s revenue assurance measures. She lends that although the company used to face switch updates quarterly, such changes are now occurring almost weekly. With constant updates, the possibility for leakage goes up significantly.

While Sprint is well versed in revenue assurance techniques for voice, the possibility of revenue leakage for data was mainly introduced with the company’s ION service, which provides a thoroughfare for both voice and data communications. O’Connor believes the technology for data communications is missing one crucial component - an ability to track and retain, with high certainty, data records of transactions.

“None of the switches in the data world have any kind of bulk storage,” says O’Connor. “Once they deliver the data downstream, they do not retain it; they immediately start writing over their files. If somewhere along the line - from switch down to invoicing - you lose that data and you are required to go back to the switch to recover it, there is no recovery. You may identify [that] you’ve lost it, but there’s not recovery.” In terms of revenue assurance, this can be a costly factor.

Working with multiple vendors who in many cases may be more interested in increasing the number of features available on a switch than in building in revenue assurance features, such as storing data, is an element that O’Connor says adds to the risk of revenue loss. “One of the first challenges is getting the vendors to realize what the value is in storing data, even though a lot of storage at the switch degrades the performance of a switch,” she says. Owners of the switch must decide whether sacrificing performance to provide revenue assurance is a priority.

Linda Gimnick, senior consultant, TMNG, adds, “Historically, switches did not have this type of data storage built in. It was an evolution that happened over time. So, probably, we will see the same evolution happen in the data world.”

“I don’t think switch vendors see any benefit in revenue assurance from their viewpoint. They can sell their switches and get more companies using their switches based on features, and not on revenue assurance,” O’Connor maintains. “Until a lot of players in the game go into usage-based billing and start putting pressure on the vendors to provide this type of storage and retention of data, I don’t think it’s going to happen.”

Each vendor may also use a different protocol, and interacting with multiple protocols could potentially cause leakage. “The switches have element managers, which are vendor owned,” says O’Connor. “The switch may pass the data in one form to the element manager and the element manager will do a translation. The translation within that processing device then could be passed on to a company in a second or third form, so it’s a challenge for any telecommunications company using a multitude of vendors, because you’re converting different protocols.” Here, there’s always a risk that data is translated inaccurately at the switch. Revenue is based on the accuracy of these translations. The ability to provide quality service end-to-end is a threshold issue for companies, Geppert says. Interconnection between a data provider’s network and the underlying carrier’s network requires that both have the capacity to handle such traffic. Service could be provided in any one of a number of combinations on the data side. Most often the carrier is utilizing the incumbent’s network facilities, particularly the local loop facilities, and then collocating and interconnecting within the serving central office, according to Geppert.

“You may, as a data provider, make a promise to the customer that you may not be able to keep that may be caused by a breakdown in your process. It may be caused by a breakdown in the underlying service, underlying facilities' providers’ process or a combination of both. So, you have a number of interface issues with the underlying network carrier that are prevalent on the data side.”

An ILEC is under no obligation to build out facilities to maximize a CLECs throughput, yet data sent across a network may, for instance, hit a bottleneck at an ILECs tandem switch.

Collocation arouses issues such as the incumbent’s timely allocation of collocation space and facilities. The more time it takes to yield space, the greater the revenue losses that can mount.

Line sharing adds a level of complexity to the process, Geppert says. “On the same local loop or access line that connects the customer to the central office, you may have different voice and data service providers on that same line,” he says. This is a major risk area for revenue leakage, and raises additional interface and coordination issues between incumbent and competitive carriers.

How to measure and negotiate service-level agreements (SLAs) is the difficult task, according to Senior Manager for Revenue Assurance Sammy Kumar, Price Waterhouse Coopers. “If one carrier owns the line and shares it with others, the carrier who owns the line is responsible for keeping that service level at a certain level, but the carrier who sells that to the end customer is responsible for the customer. It’s the internetworking side, which is extremely complex. Carriers could end up losing a lot of money,” Kumar says.

Out of Shop and On the Shelf

Product development is outpacing the companies’ ability to determine mechanisms for revenue collection, experts agree.

“Many data competitive local exchange carriers (CLECs) are concerned with obtaining customers and worrying about revenue assurance later,” Geppert contends. Thus, sales and marketing departments are often aggressive in the development and sale of new products and services. “The company’s ability to bill for new products is not necessarily a concern in this environment,” Geppert states.

Pam Bowen, senior director of revenue assurance at ICG, sees potential for revenue leakage if product development and time-to-market concerns pass by billing departments before adequate billing processes are developed. Still relatively new to the data world, ICG has examined revenue leakage for voice and will begin doing the same for data in the months ahead.

Bowen sees the interaction between the product development and billing departments as critical. “It’s a long way from drawing a picture on a white board to actually making it work for the customer,” she says.

Radically Different Customer Relations

According to Geppert, one element of the new data communications paradigm is the drastically different nature of customer-provider relations. Whereas voice customers typically have a face-to-face relationship with providers, many data customers may never come into contact with service providers. Instead, they receive a CD-ROM in the mail and initiate service via the World Wide Web. Billing for this type of relationship calls out for revenue assurance review.

“There may not be much contact with a customer that signs up for Internet service, but you still have to develop a process to capture service order initiation data and monitor the status of requests for service on through the billing process, to ensure that all the customer requests for service ultimately get provisioned and billed,” Geppert says.

Billing: An Issue Gone Flat?

Billing for data may appear easier because it is typically a flat-rate, but Geppert maintains that specialized services often introduce variations. “There are different flat-rate billing options based on speed or locations. That price may be changing or may be driven by competition,” he says Just the “mix-and-match” phenomenon and the differences in billing mechanisms, Geppert argues, may cause confusion and ultimately lead to revenue leakage.

Billing mechanisms, says Kumar, are “complicated by a number of factors. First, every business customer will have a special customer arrangement. No one will want exactly the same thing. You may have elements of products that are the same, but each customer will want different things and will be special unto his own in the billing system.” Continues Kumar, “The billing systems are having to evolve or to handle understanding what network elements that they involve. For example, can the billing system understand the implications of when things are ordered and turned on and off?” Many companies handle this issue by manually working around the process, tracing the accuracy between provisioning and billing systems manually.

O’Connor agrees that while fixed-rate billing often does not pose many difficulties, the challenge of dealing with issues such as varying rates can be a problem. Tiered pricing, she maintains, is one of those important issues.

“If you decide to give a customer, or charge them so much, for the first 1,000 megacells or kiloframes and then discount it as you go along, if you’re not collecting all the traffic then you are ultimately affecting what you are billing the customer. You could end up overbilling or underbilling,” she says. “If we deal with large customers who look for a pricing plan that offers some type of capping or thresholding or if, in the future, they’re going to resell this type of service, then that’s where we run into problems.”

Tiered pricing structures depend on highly integrated systems to record use. “There are few billing systems today that can handle issues such as tiered rates. If you are providing services to larger customers, you want to offer them the flexibility of cheaper rates for greater use, you need to have a billing system that can count that and provide for it, and very few do,” Bowen relates.

But, Before the Bill

“The billing department is usually a recipient of a revenue assurance issue that originated somewhere else,” Geppert says. “We’ve either provisioned the wrong service or [done it] at the wrong speed or something has happened in the up-front processes that will have come to roost in billing. “There are issues with service orders not being properly provisioned and ultimately billed. In the case of service orders that suspend during processing, there will be a timing issue, where services are being provided but not billed for, until the suspense condition is resolved. Also, service disconnections are commonly not timely, resulting in billing being stopped but service still being provided,” Geppert explains.

Examining the Trends

Reviewing various corporate processes can often reveal information about customer patterns that can assist companies in providing effective services. Business practices can be retooled to capitalize on the use of the network and maximize customer satisfaction. This process is typically called trending.

“Trending is a sound financial tool used by all companies to identify whether their business is increasing or decreasing and in what ways and for what reasons, so data would lend itself to trending just as easily as voice,” Pam Bowen explains. According to Geppert, common measures include trending of monthly revenues by type of service, revenues per line/circuit/customer, and operation measures such as cycle time from service initiation to billing, customer churn and percent of service requests activated.

Plugging the Holes

In order for revenue assurance to take place, automation is key, says Senior Manager Michelle Teofan, KPMG. “Carriers now are starting to transmit every five minutes,” she says. “If you have ten switches that are transmitting every five minutes, there’s no way you’re going to perform controls over that manually.”

She adds, “Internet service providers are billing on monthly recurring fees because monitoring traffic based on packets is too tough. Those billing on a usage basis are using a log generated off the edge router, which was never meant for billing purposes. Right now, the industry is playing catch-up.”

Geppert believes the challenges to automation including working with legacy systems and multiple billing environments where service offerings cannot be bundled, especially if they have different billing schemes. Complexities are many for incumbent carriers assigning or allocating revenues from a bundled package of services that the customer orders. Disparate billing applications or systems that do not interface with provisioning and service order systems are also automation challenges.

O’Connor agrees that automation is a necessity. “[Recovery efforts are] going to have to be automated and very dynamic, because as we start to offer more products, it’s going to become more and more complex,” she says. “It would be nice if the collection points off switches were intelligent enough to know when they are missing data and actually did automated recovery themselves.”

According to Teofan, it is important to understand the revenue stream architecture, start with the network and go through to the financial system. Identifying and prioritizing revenue exposures and control points is key. “The later you catch a problem, the more costly it is to correct,” she says. Revenue assurance reviews for data are typically the same as those for voice, though the results are usually different.

Customization of customer accounts is a problem, Kumar maintains. “How do you automate something like that?” he asks. “Whatever you build as a model is good for one customer, but it has to be altered when you move to the next customer.”

Yet, Kumar believes the billing companies are in touch with the marketplace and are rushing to produce products that can be handled by the next generation of telephone companies.

While Bowen’s revenue assurance team is just beginning to analyze revenue issues for data communications, the company plans to implement a program within the next 6 to 12 months. But O’Connor believes that good revenue assurance practices for most companies are three to five years down the road.

Little information on revenue leakage for data is available. But regardless of the numbers, experts note that spilled water cannot be gathered up. Companies cannot go back and do cleanup efforts if the data are not available.