Billing Q&A with Jim O'Neill

Q—What is UMTS, and what are the challenges in UMTS for billing?

A—Here is a summary of information from the UMTS Forum Web site (www.umts-forum.org) and other reports on the subject from the GSM Association and the Global Billing Association.

Next- or third-generation cellular mobile radio, known within Europe as the Universal Mobile Telecommunications System (UMTS), is expected to offer broadband multimedia services in addition to basic services such as voice. UMTS is one of the major third-generation mobile systems being developed within the framework defined by the International Telecommunications Union, IMT-2000.

UMTS has the support of several hundred network operators, manufacturers and equipment vendors worldwide. Licenses have been awarded in several European countries, and experimental systems are now in field trials elsewhere. Some 3G networks and services will launch in Japan by May 2000. They must be in place in Europe by law at 1 January 2002.

The objective of the UMTS Forum is to develop a degree of standardization that will ensure the success of UMTS as a worldwide system. UMTS will build wide-band 3G services up to 2Mb/second with globally harmonized spectrum. It will offer advanced personal information and multimedia services well beyond anything available today. UMTS is more than a technology platform or set of standards. UMTS is a body that will identify and define market requirements that become evident as 3G services emerge.

For example, the system will deliver pictures, graphics, video communications and other wide-band information, as well as voice and data, directly to people who may be on the move. It will build on and extend the capability of today’s mobile technologies (like digital cellular and cordless) by providing increased capacity, data capability and a far greater range of services, using an innovative radio access scheme and an enhanced, evolving core network.

The UMTS Forum works as a catalyst with other specialist organizations to examine issues such as technical standards, spectrum allocation, market demand, business opportunities, terminal equipment circulation, and convergence between the mobile communications and computing industries. The forum cooperates with other established worldwide and regional organizations, standards bodies, and recognized operator and industry communities, including the ITU, the GSM Association and other technical standards bodies.

So, how will third-generation systems affect billing? This has been and continues to be the subject of serious debate throughout the world and can only be addressed at this time by examining what the technology will support. Concepts emerging in Europe (and summarized in UMTS Forum reports) suggest that billing requirements of the mobile multimedia market will differ significantly from today’s fixed and mobile markets in a number of ways:

Many more players will share the revenue from individual calls and operations. The value of a transaction (transferred to a partner) may be small.

The market may be restrained if each supplier is required to set up a billing relationship with each user.

UMTS (and other third-generation mobile systems) will deliver information directly to the user, regardless of location, network or terminal.

These systems will provide terminal and service mobility on fixed and mobile networks, taking advantage of the convergence of existing and future fixed and mobile networks. The key benefits foreseen include improvements in quality and security, incorporating broadband and networked multimedia services, flexibility in service creation and ubiquitous service portability. Networked multimedia may be defined here to include services such as pay TV; video and audio on demand; interactive entertainment; educational and information services; and communication services such as video telephony and fast, large file transfer.

Now, instead of the technology in this new digital data world, consider the business drivers. New entrants have been pressured to get their systems into the market and add subscribers as fast as possible. The shortcut most service providers have used is to include data in access charges or add “all-you-can-eat” service for a nominal flat rate.

Another problem has been that network delivery systems typically were not concerned about the volume of kilobytes or packets being transmitted, so recording this traffic in the traditional sense was limited or nonexistent. At the same time, billing systems for the most part could not capture, count or identify the contents of packets moving through the network.

Then, of course, there has been the Internet model, which for the most part has meant unlimited access for a flat rate per month, the only restrictions being how good your line is and how fast your modem is.

For the past year or so, the early stages of wireless Internet have begun to surface, at the same time the rates for airtime and long distance have fallen dramatically. All of a sudden, flat-rate, unlimited data transmission may not look so attractive to carriers, who are seeing their margins disappear.

“Billing for content” is the popular phrase to explain usage-sensitive billing. Discussions are already underway in Europe to get telecommunications industry strategists to push billing for content higher up on their agenda. A main conclusion at last year’s GSM Association plenary meeting was that very few GSM operators really understand the potential of IP, and that billing is one of the last items operators think about.

According to Alex Leslie, director of the Global Billing Association, Billing for content is going to be in everybody’s interests: fixed line operators are facing this challenge with the current Internet model where all they actually have, is the access piece. Revenues for access are decreasing while at the same time more and more free services are being provided. The critical judgement for operators is whether the increasing traffic is going to be enough to compensate for the loss of margin. Basically, operators do not really know what is passing over their networks. As new digital technologies are deployed, it will be critical, particularly for mobile operators, to be able to at least identify what is going over their networks. In Japan, operators are already making revenue out of the content and the services and products which pass through their networks.

The choices appear to be fairly limited at this stage:

Flat rate is easy, but it is questionable whether operators will be able to make a profit in the long term.

Billing for time may not be practical, as most people accessing the Internet may do so within their unlimited local calling area.

Billing for data volume or bandwidth used is becoming more practical as new data capture mechanisms (such as the Internet Protocol Detail Record) are put into place.

True billing for content appears to be the avenue for future profitability—not time or volume, but rather the “value of service received.”

Some of the discussions underway are considering which events could be chargeable by the network operator, and how the costs can be identified in order to bill them. The consensus is that chargeable events (value) will be identified by (billing) application services, and not by the network.

Of course, the cost of the network elements used to deliver value must be considered. Those cost factors would include provision of network services, i.e., throughput and efficiency. To that may be added the value of the content, which would range from low value (e-mail that does not have to be accessed instantly), to high-value, time-critical content (video streaming, videoconferencing, etc.).

Today, the user pays operators for access. In the future, it may be that the content provider will pay the operators for all or part of the user’s access on a transaction basis. (Sprint and Amazon, among others, have already announced cost and revenue sharing plans for services provided to wireless users).

The opportunity for network providers is to get a percentage of the revenue generated by the products and services that are going across the network. They can achieve this goal by becoming an application provider as well.

Here is potential example, using videoconferencing, from a recent GBA workshop in Europe.

A videoconference is established as a client-to-client session with an Internet-based videoconferencing service such as NetMeeting. In this scenario, there is no server in the middle, no service provider, no application provider. The customer uses a very wide bandwidth in the network, and is willing to pay for it. The added value of this service for the customer is the ability to talk to and see the other partner. In this example, two things have to be considered: the relatively low cost of network usage (to access NetMeeting), and the high value of the videoconference. It may eventually happen that the videoconference company will pay the network operator a fee or commission for delivering users to their service.

The billing system tracking all this has to be aware of the applicable charges to end users, and charges to or amounts due from the content providers. Or to put it another way, the billing system of the future has to determine:

Who is billing whom for what

On what basis charging will take place

Where the billing records come from

So often these days, as we consider how fast our industry is changing, the only way to stay current is to keep asking questions, participate in industry forums (such as TeleStrategies’ “Billing 2000” events), and most of all to challenge your network billing and other vendors to explain how they will support your service offerings.