Top 10 Revenue Assurance Problems with VoIP

body_tx "Revenue assurance for VoIP will be orders of magnitude more complex than revenue assurance in the traditional circuit-switched world. Given that, here are my top 10 revenue assurance problems ahead for VoIP.

1 It's More Than Just Switch-to-Bill

Revenue assurance in the circuit-switched world is almost entirely focused on the flow of information from a switch to the billing system. Specifically, it usually looks at three concerns:

Usage reconciliation: For example, dozens of circuits are going to New York City with millions of minutes of use, but the New York calls aren't showing up on any customer's bills.

Error management: The call record collection system interfacing with the switch shows millions of call records, but a lesser number of them are reaching the billing systems as billable events.

Billing accuracy: Every call placed to Switzerland is being billed at 25 cents per call, regardless of the duration. Why? Someone in charge of the rating engine got the international dialing code for Switzerland (411) confused with the 25 cent rate for local directory assistance.

With VoIP, none of the above revenue assurance programs apply. There are no trunk groups to cities; the originating number can't be depended on to rate a call, because the number might not be geographically based; and more. However, you could argue that VoIP is billed as flat rate, or sold as a bucket of minutes, so why would you need a sophisticated revenue assurance program?

There are many reasons, but consideration the fact that no Tier 1 service provider believes it will make money on a one-trick pony (meaning VoIP as a stand-alone service). VoIP will have to be bundled with other IP-based services (video, games and content) that will be priced based on usage and will require QoS. This model will require a set of revenue assurance programs similar to today's switch-to-bill model, but even more complex.

For VoIP, the revenue assurance model will have to be network-to-bill. Network elements, which are scattered all the place, will feed call control packets to application manager servers, which will provide QoS requirements; then on to policy servers, which will provide authorization information; and all of this usage will go to a next-generation mediation system, rating engine, and then finally to a billing system.

2 Order-to-Network Management

Consider a customer who subscribes to a service, but the order is wrong or provisioned incorrectly. The customer service department will be flooded with calls that are forwarded back and forth to sales and or collections. At this point, you could say that VoIP today is self-provisioned, so why is revenue assurance a problem?

Here is what the future business environment holds for VoIP survivors. In an order-to-network program, an order involving multiple services (voice, video, etc.) will require those services to be turned up simultaneously. Say the customer who ordered the big bundled package receives voice service, but the video or that fancy on-line interactive game package failed to be activated. The CSR doesn't know what is wrong, and the customer is getting billed for services not received. Meanwhile, the collections department is threatening to turn off the phone service due to non payment for the services that weren't received, and the CSR transfers the call to collections. But having customers pay now and crediting them later isn't going to bode well. How many complex customer service calls at $35 apiece will it take to solve this problem? This is a cost management nightmare.

3 Order-to-Collections Management

In the legacy world, order-to-collections is called fraud and credit management. So what's different with VoIP? Mobility. You can take a SIP-based phone or adapter and plug it in to any hotel's ISP service, and in theory any LAN in the world, to place and receive calls. The revenue assurance problem here is that user authentication in a mobile setting is weak, and the phone adapter could be easily cloned.

Couple user self-provisioning, the ease of unauthorized Wi-Fi access to the Internet and weak authentication (a typical teen hacker can steal your VoIP identity), and there is a major potential for fraud. Moreover, every Tier 1 carrier sees VoIP as a low-price user application, and games, content and multimedia as high-profit. Consequently, with bundled services, a fraudmeister will be stealing more than voice minutes. And lastly, recall that with weak fraud control in the early days of cellular, uncollectible revenue was a nightmare. In 1996, the peak year for fraud, 50 percent of the cellular usage in New York City was uncollectible.

4 Access Charges

One of the most contentious issues with today's providers of VoIP over broadband is that they don't pay access charges to terminating carriers. Eventually, regulators will close this loophole. When that day comes, VoIP providers are going to have a revenue assurance or margin problem. Every VoIP call terminated could be charged the highest terminating fee. (Intra-LATA termination fees are 2 cents per minute or more.)

Why could this happen? For one thing, you can't depend on the originating VoIP number to rate the call, because it won't necessarily be geographically based. Second, there is no parameter in the signaling or switch record to say it's a VoIP call. This means a terminating carrier will charge at the highest rate, as is done today for terminating traffic with calls that lack origination information.

And one more thing: A VoIP carrier could be faced with a revenue assurance disaster regarding access charges. What happens when a VoIP phone is cloned and starts pumping out continuous calls to random numbers, answered or not. No revenue but a whopping access charge bill.

5 Taxes

Much like the issue of access charges, federal or state governments will likely step in and tax VoIP. The tax bucket is just too large to ignore: 28 percent of the average telecom bill is taxes, fees or surcharges.

Here is the VoIP taxation challenge. The provider won't be able to accurately determine whether traffic is intrastate or interstate based on a non-geographically based phone number, either from the call detail record information or with the issue of phone mobility. Second, new IP-based services will be taxed differently than voice.

VoIP taxation will be technically challenging enough on its own. Beyond that, however, if you undercharge for tax, then the tax people will come after you. If you charge too much, you could be faced with a class action lawsuit. Taxation has to be dead-on accurate, and given the fact that most VoIP start-ups don't even have a system in place to calculate taxes, this is a revenue assurance disaster waiting to happen.

6 Trading Partners

All of the Tier 1 providers talk about the IP-based services they plan to offer in addition to VoIP. The content will originate from third parties (the RBOCs aren't going to get into programming), and it will be on-demand.

Here is the revenue assurance problem. The content provider delivers the product to the VoIP customer. The content provider expects to be paid, and the service provider expects end users to pay their bills. However, what happens if end users claim the QoS was poor or that they never ordered the services in question? Worse yet, you probably won't be able to cut off service if the customer pays only for the VoIP charges.

Bottom line, you still pay the content provider, even though you didn't receive payment from the end-user-not to mention the expense incurred from all of the customer service and collection calls.

7 Enterprise Market

Most service providers jumping on the broadband VoIP bolt-on model, as well as cable companies and others, are salivating over the potential in the small to medium sized enterprise market. And of course the RBOCs see VoIP as their entry service in the global enterprise space. All VoIP providers should be aware, however, that this customer set already hates the carrier's revenue assurance department, because it is also responsible for collections.

Consider that today, in the well understood world of circuit-switched voice, almost every carrier bill has errors that favor the carrier. However, carriers aren't investing to any great degree in upgrades to enterprise billing systems, and carrier downsizing is causing customer support to deteriorate.

When service providers begin to roll out IP service bundles including VoIP, there are bound to be new billing issues with corporate customers. VoIP and other IP-based services are dependent on network QoS, and SLAs are a whole new ball game. Carrier VoIP fees and other surcharges passed on to enterprise customers will be confusing (and likely inaccurate), and more. If these customers hate you now, they will hate you even more when they run into VoIP revenue assurance (collections) issues.

8 Sarbanes-Oxley

In a nutshell, the federal Sarbanes-Oxley Act requires CEOs and CFOs of publicly held companies to certify the integrity of internal controls (billing systems, CDRs, etc.) and the data flows into the financial statements. Also, external auditors have to attest that the controls are ""clean.""

In today's circuit-switched world, carriers can audit the process from switch to bill. And regarding today's IP services, Sarbanes-Oxley isn't particularly problematic, because everything is flat rate.

However, compliance will be orders of magnitude more complex with usage-sensitive VoIP and other IP services. Why? Because auditing the controls will take place deep within the network using the network-to-bill model. There will be thousands of network elements that data will have to be pulled from; most IP-based services will be provided by platforms requiring new, specific databases; network elements will be provided by a mix of network vendors; there are no IP network element data standards to speak of; and finally, the network engineers couldn't care less about Sarbanes-Oxley-compliant working groups.

9 Regulation

Most of the buzz around VoIP and regulatory uncertainties is based on concerns that new investment dollars are on hold. But there are equal challenges in the revenue assurance space due to VoIP regulation uncertainties.

For example, how will E-911 and CALEA mandates be achieved, and at what cost? What if regulators say that VoIP users must be protected from a denial-of-service attack on their phones? What about protecting VoIP users from SPIT (spam over Internet technology), phone identity theft, and more? These are problems that beg for technical solutions-but other than E-911 and CALEA, they are not on the regulators' radar screen just yet."

10 Rush to Market

In most service provider organizations, the push is to get VoIP services to market ASAP and think about revenue assurance later when there is revenue. The problem this C-level mindset creates is taht the above-mentioned revenue assurance problems become more difficult to solve after the fact.

Revenue assurance problems can't be overcome by buying a software package. It's a process that is integrated into the service itself and, moreover, the very culture of the company. Bottom line: the sooner you get a VoIP revenue assurance strategy in place, the greater the chances of success.

If you or your C-level boss have to get up to speed on VoIP revenue assurance, log on to one of the revenue assurance webinars by going to www.telestrategies.com/theclub. They are free to service providers. Also watch for our 2005 Revenue Assurance Tuesday Webinar Series - we'll be running a revenue assurance webinar every third Tuesday of the month. Finally, if you want to kick the tires on products, plan to attend TeleStrategies' Spring Revenue Assurance Conference and Expo on March 1-2, 2005, in New Orleans.