Advice of Charge: Simplifying Wireless Data Pricing

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Advice of charge is a simple concept: At its most basic level, it refers to informing a customer about a charge that will be made to the customer’s bill if a service requested is actually used. Today, most U.S. providers offer advice of charge only if a customer calls a call center to specifically inquire about a service cost. However, several providers in Europe offer advice of charge for voice, especially during roaming, and are working toward such services for wireless data.

While sophisticated advice of charge techniques for complicated services are a way off, this functionality promises to simplify the quagmire of pricing complexities for various next-generation wireless data services and make them more readily understandable to the consumer.

For What and Whom?

Advice of charge (AOC) is a pre-billing function that tasks the rating engine with calculating the cost of using a service and relaying that information back to the customer. If the customer accepts the charge and uses the service, the rating engine must then send this rated information to the billing system to be applied to the customer’s account in a post-pay scenario. With wireless data services, “pricing becomes much more complex,” says James Morehead, director of wireless market development at Portal Software. AOC would help a customer manage and understand the complexities of pricing.

While most North American providers have yet to offer advice of charge for their services, some European providers are using it to communicate with customers. Telenor Mobile, for example, informs its customers of a charge via a WAP session, according to Morehead at Portal, which is working with the Norwegian company. Telia is in fact informing customers of prices via a real-time transactional rate determined for the services, he says. In Asia, NTT DoCoMo is reportedly offering advice of charge for its wireless data services as well.

According to John Konczal, vice president of product marketing at Telution, the company implemented a system in Brazil a few years ago wherein AOC was a requirement for winning the deal.

Why AOC?

Perhaps one of the greatest benefits to advice of charge could be the opportunity for wireless data operators to give customers a greater understanding of their services’ pricing. If a customer is sending, say, a picture message, it is a way to let the customer know the price without the customer having to remember it.

“It really is a way of making the charging system transparent,” says Am-Beo’s Eoin Leahy, chief technology officer. “Not that the business rules that create the charges are going to be any simpler, but once the subscriber has visibility of what they are being charged for a particular item before they get the service, then regardless of how the price was arrived at by a service provider, the consumer still has a level of satisfaction.” He believes advice of charge enables the service provider to develop extensive pricing models that maximize revenue in a complex and dynamic environment, while also giving consumers the comfort of knowing exactly what they are likely to be charged before a transaction takes place.

David Mancuso, director of corporate marketing at Watercove, believes that just as consumers like to see price tags in stores and know how much each transaction is going to cost, so too will they appreciate being able to know upfront the price of wireless data services. “Especially with new services, they want to have control over what they are spending,” Mancuso says. Telution’s Konczal believes consumer demand for AOC will occur once wireless data services truly mature. If wireless data services are expensive, customers will see the benefit of advice of charge, but he says that right now the need has not fully arisen.

Do Providers Want It?

Portal’s Morehead says, “AOC is pretty much coming up as a requirement in every RFP we see. It is a requirement we’re seeing in replacement of legacy systems and in replacement of adjunct systems.” However, he notes, for most providers AOC usually does not constitute a standalone purchase.

Konczal says that today AOC is more driven by the CFO than anyone else, because it can be useful for managing bad debts.

A provider could likely prevent customers from calling into the call center to ask about pricing of services, says Penny Gillespie of Giga Information Group. She says that CSRs spend a lot of time explaining plan differences to consumers. Furthermore, a provider incurs a greater cost if customers who call the call center then do not use the service.

AOC could increase customer satisfaction because customers would not be waiting in the call center queue, it would decrease the wait for those who do call in, and it would open up the call center lines for more high-value business revenue questions and opportunities, according to Gillespie. “It saves aggravation to both the consumer and provider in the long run,” she says.

Watercove’s Mancuso says advice of charge can even be used as a marketing and research outlet for providers. He notes that the idea of data mining in wireless is a very new and powerful tool, and AOC gives providers better visibility into the network to enable services in real time. Through advice of charge, an operator can understand what services the customer is using. It can track plans to see which has the greatest rates of return. “Whatever gets rolled out to the mass market [can be] based on that learning,” he says.

Yet some say providers may be skeptical. “If I warn a customer [about a price],” Konczal says, “they may not place the call, or they may not stay on as long.” In addition, for wireless data services, he believes providers may suspect that customers want AOC but worry that it will reduce the number of transactions.

Konczal also believes offering AOC could be supported by some departments within a provider but not by others. There is a battle between the financial department, the marketing department and the network people, he asserts. Financial people want AOC because it stands to decrease bad debt and credit risks by informing customers of possible charges they could incur. The network people don’t want the expense of having to implement the necessary technology, and marketing people are left asking themselves whether this will help or hinder service usage.

But Am-Beo’s Leahy disagrees with the assertion that providers could shy away from offering advice of charge because it gives the customer the chance to opt out of using a service. He says customers are glad to be advised of charges prior to buying and will often buy the service if its price is competitive.

Giga Information Group’s Gillespie believes that the decision will depend on the long-term strategy of the company. “You may have higher revenue [in the short-term] by not advising the customer,” she says, “but if it turns into bad debt or the customer feels slighted, they may go somewhere else.”

Watercove’s Mancuso says advice of charge earns a provider points with customers. “That’s just customer loyalty stimulation—why wouldn’t I want to do that?” he says.

The Underlying Systems

Offering advice of charge requires retrofitting the billing system; having a transactional, real-time interface into the billing environment; or installing a stand-alone, real-time rating engine.

Some vendors are working at the network level to make systems within the network and information taken from it smarter. Companies like Megisto Systems, Proquent Systems, Tahoe Networks and Cisco Systems are developing products to support this task.

Mancuso says providers need to bring more of the intelligent dialogue within the core network to integrate service and transport intelligence.

Anil Uberoi, senior vice president of marketing and business development at Xacct, explains that many GGSNs and SGSNs are not user-aware, nor are they service-aware. “They just give you a connection and get out of the way,” he says. Now, not only do these new machines give the connection, but they also know what services and content are involved. Mediation interfaces with these systems to track the network information, do real-time correlation and send it to the rating engine.

He points to the example of a user accessing a Web portal. The user must be authorized to use the service, and at the same time that information is sent to the LDAP database or user profile system to ask what discounts can be applied to the rate today. So, not only must an advice of charge feature be able to know what rate plan would apply to the specific customer, but also which discounts might apply either as part of the plan or as a special offer from the provider. The discount information would sit on a policy server and would allow for discounts such as those based on time or various promotions.

Yet even if systems could rate in real time and correlate all the necessary information, scalability is still an issue.

Real-time Rating

On the rating side, Am-Beo’s Leahy admits, “It’s nontrivial for many if not most operators to take their existing postpaid infrastructure and migrate it essentially into the real-time or prepaid service delivery elements.”

When a provider does realize its legacy billing system will not support advice of charge (among other things), it then often focuses on what sort of system it will buy and whether it requires a total overhaul of the current billing mechanism. Some will thus move to keep the billing system but implement a new rating engine to minimize the amount of change needed to their systems and to incur the least cost.

Leahy explains that the rating engine is typically going to sit behind a node in the network that is taking care of the delivery of the service. Traditionally, he says, that node is a telephony switch, and when the switch completes a call, it sends a termination record, for instance, to the rating engine. For advice of charge, things are a little more complex, because the rating engine has to be asked specifically a what-if question by the serving element—whether that serving element is a voice switch or content. It might be a streaming media server, Am-Beo’s Leahy explains. The streaming media server would ask the rating engine how much someone would be charged if the customer wanted to see an image from the soccer World Cup, for instance. Then, the rating engine would relate the rate to the promotion or discounts being offered.

It then knows when to pass that record on to the billing system or, in the case of prepaid, to the subscriber management system that would handle the subscriber’s balance. When the request comes in from the service node for an acknowledgement that the customer did in fact use that service, a serving element may link a session ID to the service request that would depend on the service provider’s infrastructure. Typically, for content delivery a session ID would be associated with a subscriber, so for subsequent requests the subscriber would just use that session ID. This way, the provider could see exactly what was going on with the user’s account, as well as what was going on next.

Settling Up

Advice of charge and issuing real-time information is not just something that is becoming relevant to the interaction between service providers and end subscribers, but also between service providers and their partners.

“We’re seeing actual requests for information to be relayed in real time between the service providers and the content providers,” Leahy states.

The goal here is to advise a provider of its current balance with a content provider so it can measure its liability to content providers at any one time. This is becoming very important because of the revenue leakage risks around content-based services and because fraud is a huge problem in the industry. In voice, fraud may amount to minimal network costs in some cases; however, in wireless data, the loss of used content because of fraud costs the provider real cash that it will owe to its content providers. “It’s very important for network operators to be able to consider network liability in real time, because bad debt on content services can add up very quickly,” Leahy explains.

The Future of AOC

Advice of charge holds promise beyond merely informing a customer of how much a service will cost. Xacct’s Uberoi explains that price informing is merely the first generation. This, he notes, is currently happening with some carriers on a trial basis with GPRS services. But most providers are already seeking next-generation (dynamic) AOC, he says. That service would involve the more personalized pricing based on the user’s profile. It would include queries about whether customers qualify for discounts and dynamic and personalized pricing, based on the value to the customers or their rate plan.

Taking this one step further, a provider could offer promotional discounts on the fly through an advice of charge mechanism. For example, consider an offer that every time a subscriber sends a picture message to a friend, the subscriber receives a free two-minute call. Morehead at Portal points out that, while this seems simple, enabling it would require most providers to do six to eight months of customization work.

In addition to cross-product discounting, Leahy says providers can use advice of charge as an opportunity to do comparative pricing—that is, showing a customer how much a service would cost on another provider’s network. “You can make it a rich contact channel with the subscriber,” he says.

Morehead envisions a time when providers could enact pricing based on the time of day during peak network usage hours. In this scenario, he explains, the prices for services would be higher at busier network times. If the network is congested with network-intense data services, it might be hindering voice quality. This could offer a way for providers to curb usage to their own benefit. “This is not happening now, but you can see the possibility and value of it,” he says.
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