Revenue Assurance for Cable Broadband

Data and enhanced video offerings add revenue to the multiple system operator's bottom line. However, to offer these services, MSOs are forced to make significant investments in existing provisioning and billing systems-or purchase new systems.

Revenue leakage is almost guaranteed, given the technical and business challenges in the new broadband environment. Providers can expect an increase in incomplete transaction capture, rating and billing disagreements, and interconnection mismanagement. Knowing how to identify these losses, as well as adopting proactive and on-going revenue assurance strategies, will contribute to the financial success of the new services.

Provisioning

Ineffective set-top box management, truck rolls and fraud management are major offenders that have traditionally stolen potential profit from MSOs. However, provisioning new digital set-tops and DOCSIS-compliant modems will create an entirely new set of problems.

Using new set-top boxes, customers will be able to purchase and install their own boxes and order their own services. It's unlikely, though, that customers will be able to order services instantly. Head end equipment is not yet outfitted to automatically detect new set boxes connected to the cable plant, or able to determine who the box belongs to and what services are being requested. Due to these limitations, MSOs will mostly likely continue to send out technicians to install the service.

For an MSO to provision a digital set-top successfully, the carrier must enter the provisioning information into the billing system, access control system, and head end. Frequently, though, these systems are not provisioned correctly due to errors entered manually by the staff. When these errors occur, the set-tops cannot be polled, and billing errors can arise-such as free service, free pay-per-view, or billing customers who are not receiving service.

For digital video customers, MSOs should execute an automated reconciliation of the billing system, access control system and head end. MSOs can compare the customer's services recorded in the billing system to the ones they are authorized to receive according to the access control system. In addition, MSOs should compare their authorization system's record to the set-top management system's records and the billing records for three-way agreement.

MSOs offering high-speed data must also verify that their various systems are in agreement. To accurately bill for this service, the MSO and ISP must synchronize their provisioning and billing systems. Doing so is often difficult because the MSO is responsible for one side of the equation, and the ISP for the other. The separate ownership makes it more difficult to coordinate the systems and introduces more opportunity for revenue loss.

Transaction Capture

Provisioning for new video services, such as impulse pay-per-view, is an area ripe for revenue leakage. When these transactions are initiated through set-top boxes, they are often lost or delayed. MSOs are having difficulty getting the customer purchase information out of the set-top boxes and posting it to the subscriber's account, because equipment in the central office can't communicate with the box. Typically, the box is not responding because the telephone line that sends the transaction to the central office has been unplugged. It can take more than 30 days for the operator to identify this problem, and even longer to determine the root cause and correct it.

Interactive TV is even more prone to revenue leaks. Similar to impulse-pay-per-view, the transactions will be stored in the set-top box, collected at the MSO's head end, then transferred to the billing system. Errors likely to occur during this transfer include suspend service errors, unrecognized serial numbers and unfamiliar purchase codes. If any of these occur, the transaction is dropped and the revenue is lost.

To find transaction capture errors, MSOs should implement automated tools that walk through and reconcile the flow of video transactions from the set top and through the different databases in the head end, collection system and billing system.

Rating and Billing

Rating errors are prevalent among video offerings, particularly where multiple rate structures are used across cable systems. Many charges are specific to a local cable system, such as taxes, franchise fees, and programming and service rates, and as such they increase the complexity of rating. For example, in some regions, a premium channel may be rated as part of the customer's basic cable service. In a nearby area, the same channel may have a premium rate. These variances are often not captured in the billing system, and ultimately not billed accurately. This same issue also applies to taxes and franchise fees charged to the customer. (To see how AT&T Broadba* * *

By Ted Schaefer, Peter Treyvaud and Tim Nesternd finds tax errors, see "AT&T Broadband Counts on Revenue Assurance.")

On the data side, rating and billing errors may increase as MSOs move beyond monthly recurring fees to new pricing plans. Usage-based fees, which are seen in various countries outside the United States, may become the norm. To accommodate such plans, MSOs will have to develop billing systems that can identify, capture, measure and rate per-use or usage-based transactions. The operators will have to prevent and identify incomplete capture and measurement of transactions, inaccurate rating, and inaccurate or incomplete billing.

Interconnection agreements

Revenue leaks often occur due to due to mismanagement of or noncompliance with interconnection agreements. As MSOs move into data services, these agreements will have a significant impact on the bottom line. Interconnection agreements with telephone companies and ISPs, such as @Home or Roadrunner, provide a framework for using each parties' networks and facilities. Typically the agreements address:

Rates or charges for provisioning services

Monthly bill calculation

Service standards and other delivery metrics

Settlement processes

Dispute management procedures

Penalties for non-compliance

Managing these agreements is manually intensive for MSOs. Extracting information from their own systems and getting the required data from the interconnecting telephone company or ISP is complicated. For example, an agreement may require an MSO to remit payments to the ISP based on the number of subscribers. For this payment to be calculated accurately and verified, the operator must extract the number of subscribers serviced by the ISP from its own systems. This figure is then compared to the ISP's subscriber list. Because getting these numbers is labor-intensive, it is common for MSOs to make the payments without verifying the numbers' accuracy.

To effectively manage interconnection agreements, cable operators must develop systems and automated tools-as well as a solid management infrastructure-that enable easy access to the information required to substantiate payments to, or from, interconnecting partners.

The future gets more complex

Programming and advertising are key components that will play an increasingly significant role in revenue assurance activities in 2001 and beyond. Increased programming rates, improved advertising technology, higher customer expectations, targeted advertising (based on demographics), and multiple rate structures will further complicate profit-and-loss statements. To compensate for and effectively manage these advancements, MSOs must implement increasingly complex billing systems and processes-which are separate from video and data billing systems.

In video alone, MSOs will have to manage targeted advertising to special demographics. Today, new digital technology allows MSOs to send advertising spots to local head ends that pinpoint ads to a particular region, neighborhood or household. Rating and billing for these ads require a separate billing system that captures how often the ad was played, where it was played and the ad's rate.

Changing regulations will also affect billing systems. Billing for data services will become much more complicated, as MSOs open their cable network to multiple ISPs. Although open access is not required now, local authorities and other industry groups are clearly pushing toward it. The FCC recently gave notice it would explore issues surrounding high-speed cable modem Internet services, which could lead to rules requiring MSOs to open access to other ISPs and other high-speed systems.

If that occurs, MSOs will be exposed to a more complex set of revenue assurance issues. For example, the cable operator will have to identify and route customers to the ISP selected by the customer and ultimately bill the ISP for the use of the MSO cable infrastructure. Alternatively, if the billing model is for the MSO to issue customer bills, it will have to remit payments to multiple ISPs.

With these coming challenges, rigorous revenue assurance policies must be deployed to reduce leaks. MSOs delving into the new services will best ensure a successful future by initiating these practices from the outset.