Considerations for Outsourcing Revenue Assurance

In this world of hybrid telecommunications companies, even a simple phone call can involve several kinds of carriers. The multi-level handoffs mean that carriers have to mediate and dispute more complicated combinations of revenue, billing and tariff data. And often they have to stand helplessly by as millions of dollars go down the drain.

Many integrated communication providers (ICPs) have a difficult time creating a billing department sophisticated enough to keep up with the shifts and changes in new offerings--whether theirs or those of other telcos. They face constant changes in the age and configuration of switches and other network equipment, they also have to track changes in local tariffs, a near impossibility. With this in mind, a carrier must carefully decide whether to outsource or maintain a staff to deal with revenue assurance.

An ICP, for the most part, is focused on marketing, engineering the network and software, winning new customers, bundling services and providing technical support to customers. Few understand that changes in switches, codes, products or tariffs can cause revenue dropout-billable services provided to other carriers or customers that aren't billed or are billed incorrectly. Left unchecked-telcos often ignore such revenue leakage for more than a year-these losses can even threaten a carrier's existence.

You snooze, you lose

Revenue dropout beyond 90 days is often revenue lost. Disputes have a shelf-life: the older the billing mistake, the tougher it is to dispute. The telco needs a great deal of documentation, patience and personnel to track and win disputes. Many ICPs can't afford to dedicate the people and resources to recover revenue dropout.

It is still true that one carrier originates a call and another terminates it. But there may be multiple carriers handing off in between, all of whom participate in the call and all of whom are entitled to a share of the revenue the call generates.They're also obligated to pay costs and taxes associated with that call.

Tracking the path of the call-who started it, who completed it, who handed it off to whom, how long it lasted-is recorded on each carrier's switch, the device that logs call data and turns that data into a CDR. The carrier then rates the CDR, assigns it to a customer, bills and collects for it. In addition to reconciling its data with its own billing logic (free calls, bundled services, reduced rates and tariffs), the carrier must mesh its call detail record with records from the other participating carriers to figure out who owes what and who gets paid what. The mediation usually needs to be completed before the originating carrier can bill the customer who placed the call, or bill other carriers.

Because call mediation is a complex and sticky process, an ICP is often at a disadvantage when it tries to mediate on its own. According to Ben Scott, EUR's chairman, revenue dropout typically represents 6 to 8 percent of a carrier's billable events. But changes in marketing agreements, codes and tariffs, switch upgrades, or incorrect or lost data may put revenue dropout at 15, 20 or even 25 percent.

This is a direct hit on the ICP's bottom line because the carrier has already rendered the service. And there's a good chance the telco has already paid the carrier who completed the call 50 to 75 percent of the revenue generated from the call, says industry expert Bob Dawson. "If an ICP is paying 75 percent, it's paying way too much," he says. The balance of call revenues generated are used to pay the ICP's remaining costs-sales expenses, engineering costs and overhead.

Common Causes of Revenue Leakage

Revenue dropout occurs most often in the following areas.

Failure to process all your data files: You or cooperating carriers may not be processing all of your call detail records due to file transmission failure, corrupted tapes, data being lost in the mail, or even data being sent to the wrong carrier. Maintain a log of all electronic data files and/or physical media created from your switch and forwarded to your downstream processes. Maintain a log of all data files coming to you, and compare it with what carriers or vendors say they sent you. Make certain your mediation system can confirm the receipt of all of these files. Files should be date- and time-stamped for ease of tracking. Maintain a log indicating the total number of records to be present on each of your individual files, and make certain your mediation system verifies these counts.

Failure to receive call records accurately: If your switch is incorrectly recording call data or cooperating carriers are improperly processing (or not processing) call data sent by you, you could be incorrectly billing and losing thousands of calls. For example, call records may be erring out of the billing system due to unknown customers, incorrect NPA-NXXs, or unknown cities or regions. Understand your interconnection agreements, and make certain that connecting companies are providing the necessary EMI data to you or your billing vendor. Be aware of your source data, and vigorously monitor switch, tandem (meet-point arrangement), CMDS and reciprocal compensation agreements.

Change of call type: Changes in your call types (through new marketing agreements or product offerings) or those of other carriers are one reason why error rates can suddenly surge from 6 percent to 25 percent. Given the complexities of monitoring and mediating call detail and billing records, your billing department may not be able to keep up with the changes.

Switch upgrades: Changes to your or other carriers' switches may affect how data is recorded and passed on to your CDRs. Call data that was properly processed only a month ago may be erring out of the mediation system now because a new switch configuration simply doesn't recognize it, and your error rate escalates dramatically. Once you've isolated the problem, resolve it ASAP by providing easy-to-understand error reports via paper or, preferably, error data files that can be reviewed by switch engineers to make any necessary corrections at the switch. Providing proper error documentation will go a long way toward resolving mediation disputes quickly-hopefully before you have to issue your next billing statement. Ideally, a carrier knows within a few days that error report traffic is unacceptably high. Avoid waiting until one, two or three billing periods have passed before retrofitting a solution. Inaction on your part risks lengthy mediation disputes and having revenue tied up, or lost altogether.

Changes in switch coding: You decide to assign an unused code to a new product offering. The new coding may be valid-but maybe not for the type of call you're billing. In such a case, the business logic recognizes the code and bills for it, but you may be under- or overbilling. Worse, the mistake may go unrecognized until expected revenues don't materialize or existing revenues drop precipitously. Then you must hunt down the mistake. To prevent this problem, extensive back-office testing must be performed for the new product or service. Many ICPs are not set up to do test runs because doing so involves shifting live equipment to the test, or shutting down to complete the test.

Homegrown coding not recognized by your business logic: Some ICPs create in-house coding that doesn't conform to accepted industry practice. Data embedded with these codes may be rejected as unrecognizable or error data by fellow carriers.

Changes in tariffs: Each local jurisdiction has its own tariff and tax code for telecommunications services. An ICP must be familiar with all of them in the mediation process to determine, for each call it bills, which carrier pays what tariff to what jurisdiction. What happens if new products or switches are introduced? How do they affect tariffs? What happens if the tariffs themselves change? The worst thing that can happen to an ICP is to under- or overpay tariffs. If you think mediating with other carriers is difficult, try a local or state department of taxation.

Billing incorrect rates: Nothing raises a red flag faster than an ICP's inability to correctly bill other carriers. Billed rates for both switched and special access bills must constantly be reviewed. Confirm that the rates you are charging match your filed tariff and client agreements. Have easy-to-read and understandable bills that follow industry guidelines. Make certain the descriptions on your other charges and credits and adjustment records accurately explain the reason for charges and credits, so carriers or customers have no need to question them. If you're underbilling a cooperating carrier or customer, they're not going to be in any hurry to make corrections, and may challenge an entire bill if you dispute part of it to pressure for a quick settlement. If you're overbilling, they may pressure for quick payment. Keep in mind that a steady stream of billing disputes inspires a lack of confidence that may result in more challenges, sapping resources and revenues.

Not billing for all of your network: A corollary to the previous point: Many ICPs overlook network components that are in place and billable. Understand what your carrier agreements and tariffs allow you to bill for. At least periodically, compile a complete list of your entire network inventory and confirm that the billing system is accounting for every circuit and network element. Encourage your customers to accept industry standard mechanized feeds (BOS and SECAB) to reduce paper costs and speed bill processing. Maintain at least a six-month archive of billing database and call detail information so you have the information needed to defend any billing disputes.

Duplicate records: It seems self-evident, but duplicate records not only deprive you of what you thought was anticipated revenue, they raise red flags among fellow carriers and customers-a factor that can weigh against you in mediation disputes. It is essential to keep mediation disputes to a minimum. For one thing, you stand a better chance of collecting revenues in timely fashion.

Steps to Avoiding Revenue Leakage

Maintain a database of billing information: Be able to trend the current month to the three previous months. Flag and investigate any notable variances. Key items to trend are switched access volumes, switched access dollars and special access (circuit inventory) dollars. Track these at the city/region and CIC/OCN levels. If possible, maintain live billing archives for 6-12 months.

Perform trial or mock billings periodically: This process can be set up to run as a trial-month billing process or as a "proof of concept" sampling of data for the entire billing process. Compare it to previous billings, and to anticipated billings revenues. Reports and/or data feeds from this process will allow you to check critical areas of the billing process prior to the actual live billing run and anticipate problems. Key items to check include correct rates, traffic volumes, monitoring of new incoming carriers, new traffic types, accounts receivable, order activity and billing factors such as percent interstate usage.

Be proactive: Try to anticipate problems before they arise, and resolve them quickly-within 30 days, if possible. Make sure reciprocal carriers are aware of your changes, and you're aware of theirs. Clear up monitoring and billing problems that currently exist. When mediation disputes arise between you and other carriers, or you and customers, keep them to a minimum and resolve them quickly. The bottom line is that you want to help your bottom line. Recovered revenue flows 100 percent to your bottom line because it's already paid for, and the longer you wait, the less you're likely to recover.

Choosing To Outsource

Many ICPs choose to outsource revenue assurance functions to monitor lost data, examine revenues and handle mediation disputes. Revenue assurance vendors also serve as a liaison between the ICPs and larger carriers such as SBC, WorldCom or BellSouth. An experienced vendor should be able to anticipate fallout from changes in billing codes and even run tests to see how new billing codes will affect data recovery and revenue dropout before it happens. A good revenue assurance vendor should pay for itself by finding and recovering revenue you couldn't get using your own devices. The following are key factors when carriers seek a revenue assurance application service provider:

Experience: How long has the service provider been around? What kind of experience does it have in revenue leakage, and how quickly can it resolve problems? Who are its customers? What kinds of clients does it service in your revenue range? Will it provide customer care to your end user? Ideally, you should look for a provider that deals with both, in B2B and B2C solutions, and clearly has expertise in dealing with ILECs as well as carriers your size.

Expertise: Can it provide industry standard billing and reporting data, in proper formats quickly? Is it current on ever-changing tariffs? Does it deal with ILECs and larger carriers? Can it provide switch and billing data from and to other carriers, as it affects you? Can it set up proof-of-concept billing runs before you actually begin new switch or billing protocols? Does it have the economies of scale to help you maintain relationships and recover revenue you couldn't get on your own?

Scalability: Is it large enough to grow with you? Your capital should be invested in new customers and product offerings-not in back-office operations such as billing. Having your service provider expand with you will actually save you dollars in the long run. Also, ask your prospective service provider if it can offer a complete customized solution. Your special needs or requests should be responded to with a simple "no problem." Otherwise, there's a problem.

Calculation: Some systems feature multi-city/regional reporting capabilities, flexible tariff-based pricing, multi-level circuit discounting and multi-level volume discounting, as well as automatic late charge calculation. These features enable an ICP to look at any given call type, in any given city or region on any given day, and immediately seek out revenue dropout trouble spots.

Curt Mills is systems manager of access billing at EUR, which has more than 40 years of experience as a service bureau and developer of billing services. He can be reached at curt.mills@eurdata.com.