Comparing Global Perceptions on Telecom Billing

Predicting which way the telecom tides will turn varies from country to country. Not surprising given the differences in customer expectations, regulatory change, existing infrastructure and so forth. For example, why would Australians believe that the likes of AT&T and BT are in no position to profit from broadband IP services? Content owners in Australia are considered powerful entities--not the telco--and big bandwidth pipes are not yet on the scene. In regions where bandwidth pipes are making headway, opinions differ and the feasibility of usage-based billing is very dependant on these factors. A number of colleagues in the billing community helped gather this comparative data from billing and customer care events in Europe, the United States and Australia. This comparison provides an insight into perceptions prevailing on three very different continents. We collected our data by informally polling audiences at these various events from December 1999 through August 2000.

The respondents are fairly well matched among the continents. On average, carriers, network operators and service providers represent about 40 percent of the audience at such conferences and trade shows, billing software vendors, 30 percent; consultants and systems integrators, 15 percent; and hardware manufacturers, 15 percent. However, attendees around the world perform job roles and functions that vary considerably. In addition, a stretch of more than 9 months can be considered a long time in the telecom industry, and opinions do vary over time. With these factors in mind, we have performed some drill-down analysis and included secondary graphs to highlight interesting information and clarify such variables.

The questions we asked were designed to elicit debate, not necessarily to provide definitive answers, and my collaborators and I do not necessarily endorse the collective viewpoints we uncovered.

Q1. Which type of company is in the best position to profit from broadband (IP) services?

a) Traditional and long-distance telcos (AT&T, BT, Deutsche Telekom, NTT)

b) ILECs, CLECs and local-loop owners (cable, xDSL, UMTS)

c) ISPs, ASPs, Web hosters

d) Content owners



This question probably best demonstrates the differences of opinion among the three continents and shows how cultural, regulatory and competitive pressures have shaped each marketplace quite distinctly.

In Europe the perception is that content owners and brand managers will by and large have the opportunity to control the value chain. However, in the United States, the perception is that access providers still control the balance of power-be it through wires or portals. At the moment, the content owners' role in the value chain is still largely undefined. Often, distribution channels will buy the rights to the content rather than agree to more equitable models such as revenue sharing. However, many predict this to change. In Australia, however, the major corporations-particularly those in the media-are perceived to be in a dominant position, and market is dominated by price. New entrants across all sectors are generally acquired when not protected by regulation (and many Australians would argue that they are not protected at all).

It is also worth noting that DSL is in the trial stages in Europe and Australia. High-bandwidth access is eagerly awaited, but not yet readily available or cheap. It is entirely possible that in a year to 18 months the picture above will be turned on its head.

Q2. Can ISPs be profitable?

a) Yes, if they merge with carriers and sell value added services

b) Yes, if they become portals (selling books, lingerie, etc.)

c) Pure ISPs won't exist in 3 years

d) There's plenty of room for 3,000 ISPs



The United States and Europe seem in relative accord on the future of ISPs. In addition, the second graph demonstrates that European views have recently become more like those in the United States with respect to the power of portals and the survivability of pure ISPs.

However, in Australia, ISPs appear to be viewed as compromised, and the perception is that they are highly vulnerable. The ones not already owned by telecom providers aren't thought to have the muscle to stay in the arena, or even merge equitably.

Although consolidation through M&A is happening on all three continents, one area to watch will be the relationships between fixed and mobile Internet access providers. Clearly the Australians feel that their ISPs won't get a crack at the mobile access channel. However, Europe, and to some extent the United States, harbor a much greater awareness of the need to provide integrated and value-added fixed/mobile Internet services. Mobile networks in Europe will be driven to offer value-added services like mobile commerce, wireless Internet, location-based services, etc., in order to pay for their pricey 3G investments, and may use the opportunity to move away from flat-fee to usage-based billing.

Q3. When will fixed-line bandwidth be free to end users?

a) Within the next 2 years

b) Within the next 5 years

c) Sometime after that

d) Never



Generally speaking, over the past year the expectation has grown that bandwidth will be free to end users sooner rather than later. Noticeably, Australians have quite a different viewpoint. CRM and customer loyalty schemes are given scant consideration: again price is virtually the sole churn factor in every Australian market sector.

Q4. How will the relationship between content owners and next-generation carriers develop?

a) Content owners/brokers will call the shots

b) Carriers/telcos will call the shots

c) Partnerships/mergers between the two will dominate (on an exclusive-supply basis)

d) The regulators will step in and unbundle content ownership from the means of

delivery

Answers to this question were fairly consistent. The key question is whether exclusive supply relationships will remain possible under antimonopoly legislation and what is in customers' best interest. Recent mergers across the value chain have demonstrated current risk management strategies. If you don't know exactly where the profit centers will be, it's a good idea to hold as many cards in your hand as possible!

As can be seen from the second graph however, over the past few months the expectation of regulatory action is growing.

The difficulties for regulators lie in the coordination of what are currently two very different legal and regulatory arenas: content (censorship, copyright, etc.) and delivery channel (spectrum allocation, interconnection, competition, etc.). Given the current trend toward consolidation and cross-ownership through M&A activity of the constituent parts of the telecom value chain, it is becoming difficult to manage these two areas in isolation. Considering this complexity, major changes with this issue won't happen for some time to come.

Q5. Which of these will be generating the most revenue for next-generation carriers in 3 years' time?

a) Wireless/mobile access to …

b) Wireline/fixed access to …

c) On-line retailing

d) Advertising





Clearly we are entering a mobile world. However, the perceived path toward making money from mobile access has not been a smooth one in Europe, as the second graph will testify.

In the beginning of 2000, WAP was going make everyone in telecom a millionaire. By April the bubble had burst, as WAP was rolled out on a larger scale. It turned out to be not much more than an annoying addition to the cellular phone menu that you couldn't get rid of (and usually couldn't set up correctly anyway). At the same time, dot-com mania was at its height, and interest in on-line retailing surged.

However, shortly after this low point, people's attention was drawn toward Japan, where iMode was conquering all before it, suggesting that value-based transaction revenue from commercially saleable content services could produce the aforementioned millionaires after all.

The United States meanwhile, is generally taking wireless Internet at face value, and the technology hype has not gotten in the way to the same extent. Now everyone is wondering whether (and how) the Japanese model can be transplanted into the rest of the world's competitive 3G environments.

Q6. Why is billing for QoS and usage important to next-generation carriers/telcos?

a) Not important-flat fee is the way to go!

b) It allows for end-to-end QoS and enables new services based on voice and video over IP

c) QoS measurement will be more important for IP interconnect accounting than for subscriber billing

d) QoS is either good enough or the customer will go elsewhere

The consensus is that discounting for below-SLA IP QoS will not be attractive to residential subscribers, although this is not the case for wholesale and corporate customers.

There are two other major points of note here: · Assuming that (b) is the safe answer, the lack of awareness or interest in interconnect accounting issues in the United States is substantial. This may be due in part to the primacy of OSS interconnection (post Telecom Act 1996), and the lack of a cascade billing model in the United States which dominates elsewhere. · The flip side of this issue is the strong European view that customers will vote with their feet when confronted with poor QoS. It is interesting also to contrast the views from London in April with those from Lisbon in July. The "customer perspective" has continued to strengthen over the last four months.

Q7. How important is real-time rating for IP services?

a) Absolutely essential, all the time

b) Quite important for some types of services

c) Over-hyped-near real-time is OK

d) What's real-time rating?



Some pretty consistent answers here (apart from the slightly larger number of comedians in Australia!). Clearly the realization has sunk in that the extent (and expense) to which real-time system functionality is developed should be a service-related characteristic-just because "real-time everything" is technically possible does not mean that it must be deployed across the board. (For example, there is an important distinction here between real-time rating and real-time billing.)

Across the year there has been some very good debate on the relationship between real-time issues and those involved in QoS measurement. The requirement for scalability suggests that it will be impractical to measure all QoS parameters for all services and that, as with real-time functionality, the business case must be made to concentrate effort where it is most needed from a service-led perspective.

Q8. Will VoIP replace PSTN?

a) PSTN will remain forever-VoIP QoS will never be business-grade

b) Yes, but only in the backbone-terminals/handsets will remain on the existing local loop

c) Within 10 years the PSTN will be gone

d) Video over IP will replace telephony

(delivered over ADSL, Cable, UMTS)

This graph pretty much speaks for itself. Clearly there is a belief that business-grade VoIP QoS is achievable. There is a strong interest in video over IP from the European respondents. It is interesting to contrast the Australian viewpoint in Q3, which indicates a belief that fixed-line bandwidth will continue to be charged for, with the view in this chart that sees the end of the PSTN. I suspect that the Australian marketplace sees that the dominant position of their major corporations will survive irrespective of the technology employed.

Q9. Will Web-based billing replace paper invoicing?

a) No, but it will be an important value-added service

b) No, because the regulators won't allow it

c) Yes, for business customers

d) Yes, all customers will be billed via the Internet



At the beginning of 2000, there was some uncertainty about the role regulators might play in allowing e-based invoicing and billing without the requirement for paperwork. This has now firmly dropped out of the equation.

Particularly noteworthy is all of the hype surrounding e-commerce and Internet trading. In the United States, where Internet penetration within the business community is far more advanced than elsewhere, Web-based billing is seen as a value-added service, as opposed to the primary means of commercial invoicing.

Current payment mechanisms in the United States are very different from elsewhere. While the average number of personal checks written in the United States is approximately 10 to 15 per month, the European equivalent is zero to 3.

So there you have it. The only thing you can be certain of in telecom is that the answers we collectively come up with today will be the subject of after-dinner jokes tomorrow. Your feedback, observations or after-dinner jokes are most welcome, as this survey represents a small part of an ongoing commitment to keep the global telecoms community connected.

Hugh Roberts is consultant director for customer care and billing events, IIR Telecoms & Technology London. He can be reached at hugh@hughroberts.com.