Prepaid’s Untapped Potential

In an attempt to increase revenue and mitigate churn, carriers are stepping up efforts to court the untapped buying potential of the prepaid customer base by luring them to postpaid services or augmenting postpaid offerings with prepay payment options.

In the U.S., AT&T, Sprint PCS and Verizon Wireless are exploring content, gaming and presence technologies that will drive people to next-generation services.

Despite the higher cost and inconvenience of prepay to consumers, there will be a sensitive balance to strike between the services offered and the types of legal obligations customers will be willing to enter. Because prepay traditionally fosters control over expenditures and commitments, customers will shy away from legal obligations or the risk of unexpectedly high bills.

Carriers like Alltel, with its SimpleFreedom promotion, and AT&T, with its GoPhone promotion, are starting to appeal to different demographics of customers by offering low-cost phones through large chains without credit checks. Such promotions will be a means to "hook" non-traditional postpaid customers, thus enabling upselling and cross-selling opportunities. Customers could be coaxed toward postpaid through free minutes and awards that garner higher standards of customer care, further boosting their loyalty to the network. These incentives could galvanize prepaid consumers to give up personal details—including data that can be culled for more effective target marketing.

As target marketing campaigns succeed in luring prepaid customers to postpaid and vice versa, convergence will be paramount. Thus far in the U.S., CDMA 2000 and TDMA networks are not yet supporting convergent pre- and postpaid applications. Yet, in other parts of the world, it’s a different story. In Italy and Sweden, Hutchinson 3G (branded as "3") is rolling out some convergent services that are rumored to be heading for its U.K. properties as well.

Merging Distinct Architectures

Converging distinct pre- and postpaid architectures will be arduous, as each possesses unique characteristics. Prepay is simple and reliable because it involves simple tariffs and generates no printed invoices; yet, it is sophisticated in that it requires real-time control to handle strict timing constraints. Conversely, postpaid is simple in that billing runs can be done overnight, rather than in seconds, but complex in that there are more complicated tax rates, loyalty plans and credit schemes.

“There also exist political contrasts, as prepay usually is controlled by the network resources, and postpaid by IT resources, as it traditionally was the IN that managed the traditional voice calls in real-time,” says John Trembley, director of telecom and networking for TimesTen. The company’s technology is incorporated into Amdocs and Schlumberger Sema systems. The company has also worked directly with Sprint PCS and Telecom Italia Mobile.

Because network probes collected data from NEs (such as softswitches, AAA servers and charging gateways) and processed and computed balances, it was the probes that interfaced with billing systems in order to allow the network to know subscriber balances and what actions to take.

With impending convergence, however, the process will not be so straightforward. There will be ramifications in mediation, billing and the network. The model that emerges around each of those elements will depend on each carrier’s architecture.

Mediation: The Achilles’ Heel?

While changes will occur at all levels, it is mediation that will go through the most formidable transformation.

Mediation systems don’t necessarily have the capability to retain balances over the long haul or to generate invoices. That process invites latency, as the collection of network usage information, rating and charging and the ensuing communication among IN, mediation and billing elements, translated into minutes—minutes that are unacceptable in data services, where it translates into revenue leakage and churn.

“Mediation will ostensibly become more intelligent in that it will manage bidirectional messages between the SCP [service control point], rating and billing in real time,” says Dawn Jaglowski, Atlys product manager at Convergys. “It will be important that mediation hubs or gateways be agnostic, as the type of NEs will differ according to the SCPs with which they interact.”

With mediation fielding complex media streams, it could become the Achilles’ heel of convergent platform strategies. Carriers will need mediation engines designed with APIs capable of reaching out to multiple data collection points without tremendous coding. It will be imperative, too, that billing and customer care providers bring an integrated front end so that CSRs and self-provisioning subscribers can have a smooth and seamless process for ordering new services and hybrid accounts.

“While traditional mediation devices will still handle the collection of protocols and conversion of data for OSSs, new mediation systems must now sit in front of the customer relationship or between the customer and the provisioning of the switch by the CO,” says Brian Rank, business development manager at Intec Telecom Systems. He believes the evolution of mediation will go through three phases: protocol mediation, active mediation and business mediation. “Capabilities will evolve as business mediation for WLAN and GPRS type services in 2.5 and 3G will make the network increasingly important.”

“Mediation, as the facilitator for transaction-based processing, will no longer be a one-way pipe to billing and fraud systems; it must capture data and match it back to the network for provisioning,” Rank adds, noting more sophistication in mediation will enable it to become responsible for rating. “Then it will receive a small amount of the balance from the IN system or balance system, which manages the master of subscriber balances.”

The key is that there must be a single point that knows the balance for the subscriber. “That could be left to the real-time system or an external billing system, enabling mediation to deal with real-time activity, without putting the balance at risk,” says Graham Cobb, director of IN networks and business development at Telcordia. The technical trade-off, Cobb says, has to do with speed of response and reliability on where carriers put that information.

“Mediation can actually take the responsibility for managing small portions of the balance, so, a $50 account can be held on the traditional IN or billing system. When the subscriber turns the phone on and logs into the network, the mediation layer can request a small amount—say $5—from the balance master and then track what the subscriber does in using up that small amount,” says Cobb. “Once that amount is used, the mediation layer can request more from the overall balance of $45.”

In content purchases, mediation and billing systems will have to be as reliable as the intelligent devices asking the questions. To be fully content-aware, mediation must support a wide variety of protocols, such as POP3, HTTP, FTP, SMTP, WAP and MMS. And, mediation will increasingly work with rating, billing and the network in converged platforms. As a means to that end, billing and IN companies are partnering with mediation companies to enable convergent architectures.

“It will be the intelligent equipment that will intercept and analyze packets of information that track the flow of data,” says Joe Hogan, CTO and founder of Openet Telecom, who notes real-time rating platforms will decide cost, and real-time mediation will receive the request from intelligent equipment. “When IN equipment picks up on a URL or Web page hit requesting premium content [whether videos, MP3s or games], it will trigger mediation, which must then approve that request.”

For that to happen, there has to be an integrated process, where IN—comprised of SCPs—directs interfaces of tear-downs and call set-ups. “That process has to be controlled by the rating engine, which should have a high-availability component to it, so as to determine whether to set up the call based on the prepaid balance of a customer,” says Rick Findlay, director of wireless industry solutions for Convergys.

As IP switching and voice switching equipment become reliant on active mediation, carriers have to be able to allow customers to change data and voice services, which requires call records with each service change. That has to go through mediation, get rated and go through billing—all in real time. Carriers should realize that real-time rating doesn't necessarily mean there are real-time billing or real-time pricing capabilities.

“Products should have real-time messaging capabilities for prepay customer care applications, or for making postpaid applications real time, says Reid Drucker, a partner at Accenture. “To that end, data-centric mediation players seem somewhat better positioned for the convergent world than the others.”

“Carriers figuring out how to deploy text alerts against subsequent event types must keep in mind that updates in batch, although fast, are not real time, so batch systems will not be suited for multiple services on converged platforms,” says Steve Zielenski, vice president of strategic solutions for Portal Software. He notes that RFPs should seek out systems that manage multiple balances with an orientation toward bytes, value, content, text and MMS.

Delivering control to provisioning requires real-time control and dynamics, so provisioning products that talk to rating and balance management must also work in real time. “If an application takes off, you don’t want to lose hundreds of thousands of dollars because you can’t change the price at the right time,” says Zielenski.

Since prepay’s support for limited rate plans makes charging for content and special discounting difficult, the roll out of systems that can change pricing instantly is important right now.

Where reporting intelligently to the mediation system was easy in a postpaid environment, the requirements for real-time rating and balance management, as well as credit authorization for prepay, require that mediation openly communicate with the network’s IN and balance management systems in charge of master subscriber balances. Balance management systems would be accessed from CRM systems, which will permit CSR staff to view users’ balances so that they can top up customers’ balances by accepting credit card or cash payments, or set up direct debit arrangements to automatically top up accounts. With that capability, CSRs could also award credits for dropped calls and other issues.

As carriers evolve toward self-care, they will rely on mediation to handle the business logic processing—necessary to match data to network elements in real-time provisioning and self-provisioning. “Mediation is the aspect in the relationship that has to be maintained between application providers and service providers,” adds Rank, noting that carriers’ systems will ultimately have to migrate customers from postpaid accounts, while simultaneously maintaining pre-pay balances.

“While the goal is to converge on a single platform and single OSS for pre- and postpaid, carriers must be aware that hybrid solutions often drive customer care costs in terms of the number of times customers call into call centers,” says Michael Anderson, vice president of global market development with ADC.

That increase in calls to customer care centers is attributable, in part, to the fact that spending and credit-limit systems don’t enable immediate re-provisioning. “That means it takes three to 12 hours to reactivate accounts,” says Tom Erskine, vice president of product development and marketing with Boston Communications Group, which handles billing services and real-time subscriber management and payment services. “That will dramatically increase calls to customer care centers as customers become frustrated.”

While prepay always has been a real-time story, as the network would cut users off once balances expired, carriers now will want to send text messages to enable the users to automatically top up their accounts, moving closer to the holy grail of self-care applications. That will require that convergence start at the front-end with customer care responsible for facilitating a smoother provisioning experience.

Firehose In Your Face

In Europe, where prepay is commonplace, SCPs are built into networks to facilitate cost-effective prepay services. In the U.S., however, there is a cost element for carriers with decreasing capital expenditures and legacy prepay and network elements in place.

“Carriers are not done once they consolidate prepay customer care management with billing; rather, they will discover a billing system needs real-time signaling commands to the SCP in order to control prepay voice calls,” says Anil Uberoi, senior vice president, marketing and business development at Xacct Technologies. The company's IP mediation and real-time charging control node is deployed at Vodafone France and Sagitel—both of which will offer MMS as a prepaid service. “After carriers have real-time signaling to see balances, they then can get into data and content, where all of this is magnified thousands of times over.”

Data services—whether MMS, ring tones or WAP Internet browsing—require that charging records from multimedia messaging centers will have to describe the type of message and the cost and correlate the records. Mediation will have to identify the IP address, the type of subscriber, the service plan—whether pre- or postpaid—and credit limits. It will then communicate with rating to determine the rate for the requested service.

Carriers have to be wary of the fact that charging plans will bog down existing NEs with all that information. In generating billing data, carriers want to make sure they only send information that the application needs.

“At any given time, there could be 50 NEs flooding information into the mediation equipment. Equipment has to be designed to find the right answers to the firehose-in-your-face requests that flood in all at once,” says Openet’s Hogan.

For now, existing and emerging mediation players will have to partner to provide carrier-class solutions. Mediation will have to have open interfaces to convergent billers responsible for validation. Data, and applying prepaid billing models to data, will become a new challenge in real-time billing. Because of the manner in which data systems generate records for rating and billing services, they will not handle the prodigious data volumes that come out of IP systems.

“Carriers have to see it in a lab to consider the scale necessary for new services,” says Mark Tubinis, CTO of Watercove, whose GGSN network products are jointly deployed with Telcordia’s IN components at Orange UK. He believes Orange UK is the only one with real-time charging in an intelligent network approach. To manage leakage, carriers will have to change the rate of information flow, “which requires that they be able to see the services and policies about how to charge; then, they can prevent flooding mediation with superfluous data,” says Tubinis. That means systems will have to “automatically correlate the service information to the bearer [transport] level, so mediation doesn't have to rely on application charging information, which sometimes doesn’t come in a timely fashion.”

Since it largely is the responsibility of the network to convert data and send traffic through IN and service node systems in prepay, next-generation systems may employ auxiliary balance management systems to facilitate more involved rate plans for services such as “broadcast texting” or “friends-and-family” discounts, where parents have postpaid accounts and children prepay under the same account, or similar bundles for enterprise customers—where corporate accounts will be postpaid for business calls and prepaid for personal calls.

For this to happen, there needs to be standardization for how billing, IN and mediation interact in a convergent world. While there has been standardization through 3GPP for open access to networks, enabling content suppliers to access systems to invoke transactions, it is still imperative that billing system vendors be able to open up to real-time transactions from IN systems. That may be facilitated by such technologies as CORBA, which will allow some integration with IN, but IN vendors—though fast and reliable—are not so open.

Lack of Standards

While carriers know that the traditional means of handling CDR feeds will not work with real-time transactions, finding “pre-standards” options that are up to the task will be an evolutionary process.

“Convergent prepay, postpay billing systems will first exist as integrated applications using standard network feeds—either directly from the switch or network elements,” says Drucker. He believes “the lack of true convergence today is due to a lack of standards.”

Part of the problem is that network equipment manufacturers build the routing, aggregation and service control for GGSN and are reluctant to give up control of the aggregation and routing business.

However, IN suppliers are taking notice of that need to balance their control over the network with the fact that operators need real-time elements to interface with flexible billing.

“IN suppliers have to be more open and flexible without affecting speed,” says Telcordia’s Cobb, who notes his company recently formed a strategic alliance with Daleen on the billing side. “We put external rating and tariffing on to real time IN or prepay systems, so carriers have more sophisticated billing, rating and tariffing modules running on IN systems.”

In GSM and GPRS environments, there will likely be GGSN for content and SGSN for voice and SMS gateways for SMS and voice switches. “That translates into multiple points of mediation,” notes Dave Dague, vice president of marketing for Sentori, which is working with Belize Telecom and other Central American operators. Sentori has partnered with Comverse's IN group for real-time rating to integrate prepaid provisioning into Sentori Captivator customer care and provisioning. “Many carriers, billing and customer care providers purchase charging gateways from infrastructure providers. However, that is very expensive when considering the costs of building out GSM and GPRS. Therefore, a critical success factor will be for mediation engines to become the de facto charging gateway, according to Dague. “At that point, carriers can map APIs to connect to switching and network nodes where data is collected and communicated to a merged database.”

If mediation gateways become the de facto charging gateways that reach out to multiple collection points to correlate information, it will become imperative that the databases synchronize or that carriers employ front-end query databases that are accurate for customer care applications.

In cases where mediation isn’t at the core, it could be IN that becomes the center of real-time charging.

Merging Databases

In instances where a postpaid parent calls to find out about her prepay child’s account, it will be a function of command queries to prepay databases, even though the caller could be a postpaid account. A visual “dashboard” will have to be assembled so the CSRs can view both the pre- and postpaid accounts simultaneously.

“Carriers could implement ‘ghost accounting’ to maintain balances for prepay customers as they are ported to postpaid accounts,” says Robin Burton, head of marketing at Cerillion Technologies, which offers CRM and event-based billing. He notes a “dummy account” could be pulled up when a CSR types in a phone number for the postpaid customer. “Even if you don’t know that person as a prepay customer, you can get an anonymous account to pop up with phone and SIM card details and view the postpaid account’s credit card or cash payment history simultaneously.”

Those types of capabilities will make synchronization of the databases the biggest part of convergence. Data migration will require the creation of myriads of fields, where account hierarchies will be devised for mixing and matching. That will require tremendous integration work.

Convergence of databases will require both billing, care and network expertise, making systems integration an expensive, yet necessary evil.

“Maintaining two distinct IT approaches and schedules for upgrades and two sets of operational procedures can mean it will take 6 to 12 months to get a new feature or plan rolled out,” says Jim DeNarco, product manager of CSG’s Kenan prepaid products. The holy grail, DeNarco says, is breaking the logic of the prepaid system into two pieces—business and session logic in call control for voice.

In the meantime, the aim for carriers should be to have control mechanisms that interface with network elements to eliminate latency when maintaining balances for each service and subscriber. “When maintaining separate balances for email, MMS, and push-to-talk for the same customers, carriers must deal with separate and distinct rating mechanisms. Carriers should be able to take an immediate action, whether for advice of charge, bandwidth shaping or blockage of service, depending on the balance and the rules set for that service,” says Milind Gadekar, vice president of marketing for P-Cube, which offers IN elements that provide an IP overlay for service control. P-Cube currently is in development with Vodafone (UK and Germany), Orange and e Plus. “We are developing control mechanisms for reporting in postpaid and pre-computation and control for prepaid,” says Gadekar. Currently, P-Cube is working with Hewlett-Packard, Amdocs, Mind CTI, Openet, and Xacct, to develop joint prepay offerings. “Service control will be huge for anyone with CapEx issues, as I don’t suspect carriers will be rushing to replace GGSN with next-generation GGSN anytime soon.”

Indeed, undertaking this work is much more than a technology project, as it often is a “transformational business effort” that fundamentally changes how a business works, says Accenture’s Drucker. “A completed real-time solution has many network characteristics that go beyond a traditional IT implementation.”