Content: Conquer and Divide

“Free” is the optimal word on the Internet, but future revenue models could hide the costs from consumers and divvy up the profits among partners. Carriers and billing providers prepare for the onslaught of content services that customers may—or may not—buy.

Traffic reports, videos, music, news—the list of content services is ever-growing. Content providers want to push these services to WAP-enabled phones, PDAs, PCs and Web TVs. But inconsistencies among handset makers, HTML-based content, and network performance have slowed consumer acceptance. These issues, along with a host other issues, must be resolved before subscribers will post a premium charge to their credit card, phone bill or ISP account for specialized content.

Most billing providers agree that carriers won’t see revenue from content services before 2003. The supply chain partners need to fine-tune the delivery process, and neither the wireline nor wireless infrastructure is prepared to support rich, billable content services. And which services will be available first—stock quotes to the phone, video on demand, or real-time, personalized e-mail alerts—is still open to debate.

“Customers will be willing to pay for rich services, and those are only available over broadband networks,” says Kip McClanahan, president and CEO at BroadJump, a provisioning provider for broadband services. “Broadband providers have moved past the initial hurdles of getting the physical network deployed, and they are concentrating on rolling out services and billing for them. They are about a year ahead of wireless providers, who are still solidifying WAP and other standards.”

Others disagree, claiming wireless has the advantage because consumers are accustomed to its usage-based cost structure. “We are already seeing content being billed in Europe over GPRS systems. This trend will continue in North America, because wireless customers expect to be charged for additional services,” says Idar Voldnes, president of Geneva Technology.

“We’ll see wireline and wireless services grow in parallel,” says Itay Arad, director of market management at TeleKnowledge. “Streaming multimedia will occur first among businesses. Rich media will then move to homes with higher connections, and MP3 and other files will become available for WAP-based phones.”

The billing companies unanimously defend the idea that consumers will pay for content services. But they get cagey when asked to predict which ones will be billable. Instead, they hedge their bets by saying carriers should have billing systems in place that will accommodate event-, usage- and partner-based pricing strategies.

“The billing companies don’t know what the service will be. So they are keeping their system as agnostic as possible, so they can bill for whatever is around the corner,” says Jason Briggs, senior analyst for billing and payment application strategies at the Yankee Group.

Putting Content in Its Place

Not only are the billing companies hesitant to show support for a single service, they are also trying to accommodate every possible platform scenario. The newer players say they can sit beside the incumbent systems and have data transferred to their platform. But they admit that it will be difficult, if not impossible, to bill for content using hard-coded legacy systems.

“Some billing systems will be able to accommodate content, others won’t,” says Carla Schneiderman, vice president of marketing and business development at Corsair Communications. “Some will be able to use add-on modules. We want to intervene in the current billing stream with minimal changes.”

Corsair has created a wireless intelligent network (WIN) -based platform for the prepaid market. The company expects that prepaid’s popularity will grow as mobile commerce applications become more prevalent. PDA users, for example, may get charged to visit Web sites that haven’t partnered with their provider. Sprint, for example, may have an alliance with The Women’s Network but not Oxygen.com. PDA users with Sprint service would incur fees when going to Oxygen.com, but visiting Women.com would be free.

In this case, Schneiderman explains, the visit for content would be viewed as an event. The event would be put as a descriptor in the routing information. The Web site’s address information would have to be mapped against a table, and billing would be based on the number of minutes used.

While Corsair’s strength is prepaid billing, Apogee Networks is focused on billing for content delivery. The billing provider has been working closely with Adero and The Content Bridge to design the billing needs for content delivery networks (CDNs).

“We could drop into the middle of the system to do content collection and rating,” said Tom Goldman, president and chief operating officer at Apogee Networks. “It’s better to do collection, billing and rating on one platform. But we’re not naive enough to think service providers will throw out their current systems.”

Content network overlays

With its emphasis on CDNs, Apogee Networks must collect consumer and content provider data from all the edge devices—such as Inktomi, Alteon, Redback, CacheFlow and others—that serve the content to the consumer. Apogee uses Content Flow Messaging to communicate with these devices. Using this protocol, Apogee can collect information about the type of content, quality of service and recipient. Combining this information with the content provider’s pricing plan, Apogee rates and bills the content.

Adero is Apogee’s biggest customer to date. In late 2000, Adero shed its business focus as CDN provider; it plans to act as an operator that will distribute payments to all those in the CDN supply chain (see Billing World, November 2000). [Adero’s Realignment plans proved unsuccessful, however. After a poor last quarter, the company laid off 23 employees, and finally sold its billing and traffic reporting software and technology to InKtomi in mid-January. Adero now intends to concentrate on its content distribution services.]

Although a contingent of equipment providers is trying to make CDNs successful, the CDN accounting system, as well as the request directing system and signal delivery, are major stumbling blocks. How central operators will fulfill their accounting responsibilities is unclear to all involved, including those who provide hosting, access or content.

“The central operator’s” role is fuzzy, and it remains to be seen if anyone can build the critical mass to create a brokerage and clearinghouse that will provide revenue flows,” says Ted Middleton, product line director at Digital Island.

Within its CDNs, Digital Island has been providing frequency and utilization information to content providers. Caching tools, though, make the statistics inaccurate. “Publishers want real time and daily logs that capture the actual utilization of their Web sites,” adds Middleton. “Now, these stats are shielded by caching tools, and publishers only receive a subset of the pages being viewed.”

In November, during an early public CDN discussion, Brad Cain, chief scientist at Mirror Image Internet, a member of The Content Bridge, said a CDN accounting system must have a centralized, detailed, real-time logging system accessible by all the partners. The login database and login information may be used to create a number of billing applications.

In addition to access to login information, a CDN central operator must handle different traffic and different CDNs. Under a multiple CDN model, CDNs will have peering points that will call for relationships similar to traditional network peering partnerships. This highly distributed model is ripe for traffic breakdowns. “The central operators” will have to quickly react to all players entering the market to ensure they can account for the passing traffic.

“No one has solved how to manage the flow of information using different protocols and the different structures that will evolve among CDNs,” says Arad at TeleKnowledge. “We all want CDNs to work, but the market must settle down. Content providers and CDN infrastructure providers need to standardize reports, identifying the customer with common languages, event structure and aggregation of events. It’s not even clear how supply chain partners will see events.”

In addition to these concerns, equipment providers and service providers question storage and bandwidth requirements for CDN billing. “The billing is not overly complicated, but it could stress the networks because of the bandwidth required to pass the necessary log files among the partners,” says Mirror Image’s Cain.

Enition is developing an alternative to Adero for CDN billing. The company has created a technology for content providers to exchange tokens at a carrier’s gateway in the IP layer. These tokens represent tolls for delivering traffic, and they include detail records for billing based on information such as access, time and bits transmitted. The record can include when the session started and ended, payment rules, user identification, IP protocol number, IP address, port number and server hardware. This information can then be sent to back-end systems for billing.

TeleKnowledge sees advantages of the token method. “Now, content providers don’t know enough about what is going on with their content. They must trust the portal or aggregator. Enition technology allows content providers and service providers to interact with one another and know how the content is being delivered,” says Arad.

Wireless providers have their own struggles with billing for content. To gather the necessary subscriber information, mobile carriers must physically connect to the content provider’s server and extract the information for the billing system, or put tags into the HTML header, says Darren McKinney, market development manager of mobile Internet for Amdocs.

Currently, a direct connection is the only method to get the billing data. The WAP forum is working to create a WAP billing framework that defines the standard for tags and fields, but it is not yet deployed. Tagging the content is more attractive to the content providers, says McKinney, because it allows them to control the pricing. For mobile operators, tagging provides a larger field of content providers because it is less expensive—and less time consuming—than building separate connections with each content provider.

“The tag-based approach makes more sense,” says McKinney. “It won’t be ratified immediately, so in the short term you will see direct connections to the servers.”

Power brokers

A new trend among many billing providers is the partnership relationship. Many content providers, partnering with Visa and MasterCard, are selling content on their site through credit card payments. But billing providers argue that credit cards aren’t the best method.

Eliminating security concerns and the hassles of small transaction fees are two reasons billing providers say that service providers are a natural choice for collecting fees. Additionally, the customer already has a relationship with the provider, so they may be willing to have fees added to their current bill.

Adding fees to a monthly bill is one option for increasing revenue, but billing providers want carriers to handle revenue distribution for all the partners in the supply chain. Using their new billing modules, carriers can split content revenue among access providers, content providers, advertisers and sponsors. In many cases, the content fees may be included in the subscribers’ monthly fees, thereby maintaining consumers’ beliefs in “free” content. Enabling these systems quickly—in fewer than six to nine months—is one challenge the billing companies say they can meet.

Geneva, for example, claims its system can take any flat file, generated for actions such as a mouse click or an event triggered by a counter, and feed it through its mediation function. The file will be rated according to the owner’s preconfiguration. Next, the revenue is divided among partners. “One piece goes to Customer A and one to Customer B, depending on the relationships among customers,” says Voldnes. “A traffic service, portal and Verizon could receive fees for real-time traffic reports.”

Another potential challenge for carriers is developing partnerships with content providers. The billing companies, however, expect that carriers will have little difficulty getting the content providers on board.

“Partnering with a mobile operators gives content providers a sales channel. They are getting access to the operators’ millions of subscribers. The opportunity to get an e-commerce opportunity in front of these subscribers is very attractive to content providers,” says Amdocs’ McKinney.

These partnerships are necessary, says The Yankee Group’s Briggs, to ensure content providers’ ongoing success. “As the content market evolves, new competitors will join the space and try to infringe on the current players. A content provider’s strongest option is to partner with a service provider, so they can get their product out in the market quicker. For service providers, content is the way to keep customers.”

When networks don’t collide

Listening closely to plans for content distribution reveals the development of new networks that skirt around the Internet. One is being built for wireless content, and another is being developed for wireline content.

On the wireless side, portals are repurposing content created initially for Web sites into content for PDAs and soon phones. The content is written in its own “not-quite-HTML” code; it is tailored for the smaller screens and specific consumer groups, and it sits on separate application servers. On the wireline side, CDNs promise to cache rich media content on the edge of the network, nearer the consumers.

In both scenarios, partnerships among major conglomerations will bring content to the consumer by bypassing the Internet. The traffic will move over predefined, point-to-point connections built by service providers, and the content will be selected based on partnerships with large content providers. These groups will create disincentives for customers who want to access content outside of these partnerships.

Consumers should be familiar with these types of controls, because content constraints are well-known entities in the music and movie industry. These distribution partnerships are trying to choke what made the Internet popular—free, easy access to independent content.

The Internet’s popularity, though, hasn’t necessarily meant success for businesses. Dot-coms using advertising revenue models are finding it difficult to stay afloat, which should open the doors to new business models.

“Companies must find ways to monetize their content, because the advertising model is not working, says TeleKnowledge’s Arad. “Content must be billed for its value, not by bytes. And settlements must be divided among everyone in the supply chain.”

What Content Do Consumers Want?

BroadJump surveyed 1,000 broadband and dial-up users about their interest in various online services. Among its findings:

Over 60 percent of respondents indicated interest in virus protection and firewall applications

50 percent of broadband respondents said they would be interested in streaming audio

Less than 50 percent of respondents stated an interest in video on demand

Less than 50 percent showed an interest in online gaming