The Sticking Point for Wireless Data: Settlement

Wireless service providers want to become the hub of activity for mobile commerce. And with that, they are also going to take on some major responsibilities.

The wireless carriers will not only give users access to various commerce and content sites, but in most cases they will directly forge business relationships with content and commerce providers, financial institutions and anyone else involved in wireless transactions.

Probably their greatest challenge will involve the mobile operators and their partners’ ability to settle and clear these advanced services.

Mobile commerce typically encompasses two major areas: content and commerce. One could argue that they are really the same, but there are differences on the payment and billing side. Content could be defined as information coming to the handset, such as stock quotes and weather forecasts. Commerce might include buying tangible goods such as a book or DVD.

Technically the two types of transactions could be lumped together, but for payment purposes they are often treated very differently. Commerce transactions initiated through a wireless handset are usually handled the same way as a transaction through a wired browser, meaning the customer would use a credit card for payment.

For content, most providers charge a monthly flat fee to access the wireless Web. This gives access to the provider’s “walled garden” of third-party content providers, meaning that content partners of the wireless operators would show up on the main menu. In some cases, users can also type in URLs, but only WAP-enabled sites would make sense on a small wireless handset.

Beyond the flat fee, wireless providers may also charge extra for access to premium content. Also, most providers require that customers use up minutes in their voice plan to access the Web.

Even if pricing for end users isn’t all that complicated, mobile operators still have to settle and clear transactions involving wireless data with potentially numerous partners.

Correlating Information

Because wireless data services will require the participation of several different entities, each of them will naturally want their piece of the transaction pie. But before any divvying up of the revenues can take place, the operator needs to know which customer used what services.

“The problem is getting to the point where you have enough information to reconcile with your trading partners and get to the settlement stage,” says Parry Snow, vice president of global marketing at Cibernet, which handles roaming and financial settlements for wireless carriers. “The trick is getting information from the network or network element in a format that’s usable.”

Formats can range from CDRs to IPDR or RADIUS. “With many trading partners, you have many different formats,” Snow says. “In one case it could be a log file off a RADIUS server, and in another it may be some type of ASCII file that’s created off an application server. It could be a simple measurement of packets or kilobytes.”

With traditional wireless voice services, CDRs come from a switch and go to mediation and billing systems. Those systems can tell whether a CDR belongs to that carrier or a roaming partner. If it’s a roaming record, the carrier can put the data record into CIBER or TAP format and send it to a clearinghouse. But wireless data throws a wrench into the machinery.

“The same scenario will work if that data is being served and encapsulated in a CDR,” Snow says. “But most of the new m-commerce and wireless Internet services are somewhere else out on the IP network. Gathering that information and having mediation or billing make sense out of it doesn’t really exist today.”

While mobile data services will complicate the correlation of usage data, more advanced applications will make life even more difficult. If customers are being billed based on volume of data or even quality of service, many billing systems can handle that. But for value-added services such as streaming audio, there will be more to gathering enough information for a billable and reconcilable record. “When you need to know what the content is, such as an MP3 file or a game where you have a different rate plan, capturing that and translating it into an intercarrier billing record of some sort is really where the challenge lies,” Snow says.

One problem is that specific data such as a song or movie title may not exist within the packet itself. “You may have to do an intelligent look-up based on the source of the data and relate it to an IP address or some other database in order to figure it out,” Snow says.

With advanced services such as these, operators are under pressure to move toward real-time processing of information. “Today everything is traditionally batched and processed within a 30-day window,” Snow says. “You can’t do that with commerce, because you are taking on too much of a credit liability as a carrier.” For more on how wireless carriers are assuming the role of financial institutions, see “Wireless Operators Bank on It,” page XX.

Clearinghouses for Wireless Data

Roaming relationships for traditional circuit-switched wireless voice services have been fairly well understood for a number of years. Basically, wireless operators that don’t have cell towers and network infrastructure in particular areas will sign agreements with operators who do have coverage in the area. When a user roams on another carrier’s network, that carrier can identify those calls and put those detail records into a format such as CIBER or TAP, which were created to simplify settlement.

CIBER and TAP standards will also play a key role in enabling wireless operators to settle transactions involving wireless data. “Existing TAP and CIBER formats can both capture information about data or content and can bill for one-time charges or other miscellaneous charges,” says Snow, but “they probably don’t have the expertise to provide itemized information on a bill.”

That may be the case, but both standards are evolving. The TAP standard already has provisions for wireless data, and Cibernet expects to support it with its CIBER 3 standard by the third quarter this year. CIBER 3 will support transactions regardless of whether they are commerce, content or voice. “We’re going away from the traditional voice, fixed-length record that’s been around for 14 years and are going to an XML record format,” Snow says. “We’ve designed it knowing that there are competing air interfaces and that we’re moving to a more IP-based world.” He adds that the specification will support IP addresses and other business relationships that the carriers haven’t addressed with existing back-office processes.

The next version of CIBER will also work closely with standards that will help facilitate collecting network data, such as IPDR. “I think IPDR will be very complementary to CIBER 3,” Snow says. “IPDR evolved from the network side, so it will be a good mechanism to get information out of the IP network.”

Building Out for Data

Wireless data services, whether used at home or away, will require the same types of services due to the sheer number of partners involved. Companies that have been settling voice records are building out services for settling wireless data as well.

In March TSI Telecommunications Services, one of the major clearinghouse providers, unveiled a new clearinghouse specifically for wireless data providers. The suite of services, called isolutions@tsi, includes several components such as Event Management, which monitors and analyzes which IP services customers use. It also provides data collection, rating, clearing and settlement of wireless data records for operators and content providers. In addition, TSI has partnered with EHPT to bring its IP mediation functionality to TSI’s product suite.

Other components of the wireless data clearinghouse include Packet Network, which provides a secure network for interconnection between wireless operators as well as connection to the Internet; Commercial Location Services, which enables the automatic provisioning of location information to location-based services; and Messaging Management, which manages routing and delivery of SMS messages and provides interoperability between wireless operators.

In a nutshell, TSI’s services involve capturing feeds from an operator’s network elements and putting that data into a uniform data record. TSI will then check if there’s an agreement between the operator and content providers. If not, TSI aggregates the records into a file and reports them to the operator, who can then see where its users are going. If there is an agreement, both content provider and the operator have access to the file of records. TSI can support a variety of standard record formats such as IPDR or proprietary billing system formats.

Data clearinghouses can perform secondary mediation and other value-added services, says Cibernet’s Snow. Cibernet is one of TSI’s partners. “In North America, the billing systems generate CIBER records, and the operator sends that to the data clearinghouse,” he says. “They then perform edits on the CIBER records, such as checking rates and validating values. They are a data processing center on behalf of the operator, so rather than the operator having virtual or dedicated connections to 250 trading partners, they work with a TSI or an EDS.” Snow adds that in Europe, data clearinghouses sometimes create TAP records or correct them on behalf of the carrier.

Even though TSI has created the means for wireless operators to clear and settle wireless data records, the company has thrown the ball back into the providers’ court to come up with suitable business models. “The important thing is that the operator and content provider have an agreement,” says Ann F. Holmes, manager of business development and strategy at TSI. “This solution will work if they don’t have an agreement with each other, because we’re able to detect that, but we will tell operators that so many of their users are going to a particular site that they might want to consider creating an alliance.”

Whether there’s a formal alliance may not matter if operators and content providers are talking to each other directly, but Holmes says end users should be given a choice on how they are billed for wireless data transactions. “If you already have a relationship with a stock broker, then you don’t want charges for stock trades on your phone bill,” Holmes says. “But if I’m getting a localized traffic report for 25 cents, that’s something I’d want on my bill. I don’t want a billing relationship with the content provider that’s delivering traffic reports, but if I already have an account with Amazon, then they have my credit card number and I don’t need a separate relationship.”

Holmes says that from TSI’s perspective as a data clearinghouse, credit card transactions and micropayments on a phone bill could be treated differently. “We would have to do less in the case of a credit card transaction, however if an m-commerce transaction charged to a credit card carried compensation effects, we would participate,” she says. This means that even if the user is buying a book directly through the merchant, if there is a compensation agreement between the merchant and the operators, then TSI would get involved with the wholesale aspect of the transaction so that both parties know when the operator should receive a commission.

TSI would handle the retail rating for an operator or deliver records for retail rating by the operator in the case of micropayments. “We would know whether or not retail rating was required of us because it would be indicated in internal tables in conjunction with the record of the transaction itself,” Holmes says.

She adds that the types of relationships between operators and content providers will become very complex. “An operator might have two different types of financial relationships with the same content provider; they might have hundreds of content providers, with a different relationship for each one.”

Initially, the isolutions@tsi product suite will support WAP gateways when it’s up and running in the third quarter. Holmes says that TSI is focusing on Western Europe as a place to start offering the wireless data clearinghouse services, but that it also has prospects in North America.

Another take on the wireless data clearinghouse model comes from Wmode and its ClearMode system. ClearMode brings carriers, content providers and customers together but in a different manner from TSI and other traditional clearinghouses.

When an end user performs a transaction through a WAP-based content provider, the provider sends the user’s wireless device ID to ClearMode for validation of the account. Then ClearMode processes transactions generated by the content provider’s systems, puts them into a standard record format, and sends that information to the carrier’s billing system so the charges can be placed on the user’s phone bill.

“We have relationships with content providers and run our clearinghouse in real time,” says Emanuel Bertolin, vice president of marketing and sales at Wmode. During a transaction, such as a wireless subscriber downloading information that might cost $1.95, Wmode uses the device ID number coming from the content provider and does a look-up on the carrier side to find out the billing relationship between the customer and the carrier. “Assuming they have a good billing relationship with the carrier, we send an acknowledgement back to the content provider,” Bertolin says. “We don’t get in the way of the content; we carry the transaction, and our clearinghouse takes that charge and creates a CIBER (or TAP3) record as if it were a roaming record.”

Wmode makes use of the carrier’s existing billing infrastructure and partner relationships, and authorizes transactions in real time. “Most records get resolved monthly; we run in real time, which is great if you’re doing prepaid or can’t wait until the end of the month,” says Bertolin.

Roam If You Want To

With talk of CIBER and TAP records for wireless data, you’d think we were talking about roaming. In reality, those traditional roaming records are the cornerstone for settling and clearing wireless data transactions, whether a user roams or not.

But if users do leave their carrier’s wireless network, they’ll want their data services to follow. Once providers sign reciprocal agreements with other carriers, the trick becomes not only how to capture usage data but how to figure out which carrier gets what from the transaction.

“The first thing is to define the relationship with the roaming partner,” says Cibernet’s Snow. “Is the serving provider simply an access provider that’s routing everything back to the home gateway, or are they routing customers into the services via their IP portal?”

Snow adds that carriers have to define relationships with customers and with roaming partners, including what services they or the roaming provider are giving to the end user. One example involves advertising. “Why should the home carrier get compensated from an advertising agent when it’s the roaming provider’s network that’s actually pushing the information?” Snow asks. “If it’s the home network, is it even valid information that the customer wants?”

They key is for carriers to clearly define relationships not only with the roaming partner but also with the subscriber.

TSI’s Holmes adds that roaming with wireless data services can complicate matters, because most carriers are especially concerned with their home market and upgrading their own networks. When customers receive data services outside their home area, they can actually get routed back to their carrier’s WAP gateway. “You’re still getting data services from home, but then it’s a matter of settlement of traffic volume—whether bytes of minutes—with the operator of the roaming network,” she says.

Holmes says there could be two separate settlement processes going on: one for airtime and one for content. With future 3G networks, which are based on an always-on packet infrastructure, the minutes disappears from the equation, but there will still be a need for roaming agreements.

Getting Your Piece of the Pie

In today’s wireless world, most providers have their walled gardens of preferred vendors with whom they’ve entered into business relationships. Particularly important is the ability to accurately collect usage data so it makes sense to all partners. As wireless operators upgrade their networks to handle packet-switched data and as many more users start using wireless data capabilities, those business practices and technology developments will be a key factor to the future success of wireless operators.

SIDEBAR

Wireless Operators Bank on It

In the world of wireless transactions, service providers will play a key role in ensuring that content gets to users and that commerce transactions are handled appropriately. This will require service providers to forge relationships with financial institutions. But in some cases, the wireless operators may be performing functions that are normally the province of banks and credit card companies.

Whether wireless carriers want, in a sense, to become banks has provoked differing opinions.

Many providers feel that they have a lot to offer on the financial transaction side. “We own all the customer information and relationships,” says Rob Hyatt, executive director of data services marketing at Cingular Wireless. “We don’t necessarily want to be a financial institution, but we consider our billing relationship with our customers to be an important strategic differentiator. What very few people in the Internet economy have is that billing relationship; AOL has it, but Yahoo doesn’t.” Cingular has created alliances with a number of partners and relies on content aggregator InfoSpace for bringing other merchants to its customers.

While Cingular has stopped short of competing with Visa or American Express, it would like to get more involved with micropayments. Because the company is already incurring the cost of generating monthly bills, it makes sense to leverage that existing format and use it for additional charges, says Hamish Caldwell, director of product development at Cingular. “If there’s a small incremental cost to adding more value to that bill, then we’re very interested in that,” he says. “Our 20 million subscribers already get a bill, so there’s a good benefit to the end user, to Cingular, and to the merchants.”

Since wireless carriers already assume some credit risk by giving service to customers, adding small dollar amounts to the bill shouldn’t be a big deal. But others question whether the carriers really want to put themselves in that position. “Our position in dealing with customers we have today is there’s a tremendous value in being that central hub, but does the operator want to be that central hub?” says Mark Fowlie, vice president of product marketing at Amdocs. “If I’m an operator I do want to facilitate mobile commerce, and I may take risks in that. But I’m not so sure if carriers will want to do that.”

Wireless operators that have dozens of content and commerce providers will need to be able to gather information quickly enough to determine if individual customers have sufficient credit to make a particular transaction. “You have to know if you want to extend credit to that customer, authenticate that customer, and make sure you have the right relationship with commerce providers to provide customer service as well as complete the delivery of the transaction,” says Parry Snow, vice president of global marketing at Cibernet.

He adds that taking on this role of determining a customer’s creditworthiness could trigger tension with the financial institutions. “I see a real battle between carriers and credit card companies,” Snow says. “You can store credit card information within a phone or in a smart card, so carriers can use the same extension of credit within their own monthly billing systems so purchase prices would appear on monthly statements. That’s probably the way they are leaning, so they keep control of the customer and have that monthly visibility and communication with the customer.”