Revenue Assurance for Mobile Content

The wireless industry is undoubtedly experiencing growing pains as it tries to accurately rate and bill for content transactions. Inadequate visibility into mobile content transactions, inefficient settlement processes with content partners, advertised services that cannot be billed for and fraud are all creating substantial leakage problems.

As mobile content is catching on with consumers, these mounting revenue leakage issues are becoming even more pervasive.

"A few years ago, the revenue from premium services wasn't big enough to justify the spend on the business systems to support them," notes Steve Shivers, senior vice president of worldwide sales and marketing at QPass. However, he believes the amount that operators are losing to revenue leakage today is "easily eclipsing" whatever revenue they are earning for these services.

Shivers suggests that low estimates of leakage for premium services begin at 1 to 2 percent. But Valista's Farhad Farzaneh, vice president of products, says mobile content leakage ranges anywhere from 5 to 20 percent.

The Market Numbers

The Yankee Group predicts that the U.S. mobile data market alone will represent $15.6 billion by 2008. QPass, for one, has seen tremendous growth in mobile content usage among its customers. The average transaction value for subscribers of QPass customer providers is $2.28. In September, QPass mobile operator customers achieved an average of $7.55 per purchasing subscriber, with an average spend of $36 to $42 per year for mobile content services.

Shivers estimates that mobile operators can easily increase average revenue per user somewhere between 10 and 20 percent by selling premium services. Yet the potential to make more money is lost if systems are not in place to manage transactions and facilitate end-user, content partner and operator billing.

The Key Problems

To remain competitive, mobile operators often will roll out these content services before they are able to bill for them. When one U.K. mobile operator decided to roll out MMS, it offered the service free as a customer promotion, according to Megisto Chief Technology Officer Joel Halpern, but the promotion was free simply because the operator didn't know how to charge for it.

By far, mismanaging the relationships between all of the various entities is one of the greatest leakage points for mobile content. The process of revenue sharing and settling with third parties increases the need to accurately track revenue, and it only heightens the impact of potential leakage for both the content provider and mobile operator.

Take music, for example: A carrier might take a 25 percent cut from the revenue derived from a content transaction and remit the remaining 75 percent back to the content provider. The content provider takes a cut from that 75 percent and remits a percentage back to the artist fund. Regardless of how much revenue leakage has occurred, the artists, labels and content providers contend that it is the carrier's problem and expect payment regardless of a mobile operator's internal system issues. Redknee's Jeff Popoff, vice president of marketing, believes that today many operators are eating the leakage that happens within their walls, while they are paying out to the content providers regardless of whether they are recovering this revenue.

But content providers are not without risk in the mobile content food chain. "A lot of times, [content providers] are at the mercy of the carrier," notes Ted DiaCoumis, Sentori sales engineer. "If they don't have a system in place to validate what's been downloaded, then they are kind of stuck." As a result, some content providers are investing in wholesale billing systems to protect themselves.

Contracts

Establishing contracts between content providers and operators is complex. But as a mobile operator's content partners multiply, rating and billing with respect to the nuances of each contract become even more taxing.

Spelling out the terms for payment and the definitions of services is especially difficult. For example, does a content provider get paid for download attempts—even those that weren't successful? Is there a re-attempt time frame, perhaps a window of one to four hours? Is the customer entitled to download one instance of content again with any re-attempts not to be rated? Also, if subscribers purchase content, how long do they own it? And, as subscribers change their handsets, how do you migrate the content from one handset to another? What are the digital rights to the content in this instance?

Addressing these contractual issues alone would solve many of the leakage problems hounding operators and content providers today, according to DiaCoumis.

Data Visibility

Just determining who is actually suffering the leakage—the mobile operator or the content provider—is a challenge. Often, neither player has the visibility needed to manage the transaction from start to finish.

Farzaneh at Valista says that simply validating that a transaction even occurred is painful for both parties. "It's actually very difficult to do that today," he says. For example, no acknowledgement comes back from the handset verifying that the content was downloaded successfully.

If a transaction fails, the mobile operator often has no insight into that failure. So, when customers call the contact center, customer service representatives typically don't have access to information about the transaction. This was the case for one operator, according to Shivers at QPass, well into 2004. If a customer called the contact center, the provider could not determine if the transaction happened or if the transaction passed through the network without any problems.

To address this issue, Popoff at Redknee recommends that every type of mobile content transaction kick out an event detail record and have that information available to customer care. Making the information available either online or in the call center for a predetermined time before sending it off to the billing system would reduce the number of problems.

As well, marketing departments would like a view into the usage data for mobile content. Operators generally like to rotate hot products to the top of a screen, thereby increasing the chance of purchase. Enabling a real-time insight into these services could help providers become more responsive to their customers' purchasing habits, thus boosting revenue.

Opportunities for Leakage and Fraud

Transactional processes require transactional systems, but some mobile operators are still using batch processing. Megisto's Halpern notes that many providers' prepay systems process mobile data offline. Inevitably, the amount of revenue at risk increases when processing is not handled in real time.

Many mobile operators' billing systems are not set up to handle real time and instead operate in batch mode, delivering data to other systems every 6 hours or as much as every 24 hours. Many carriers on a monthly bill cycle must run bills daily so they would need to run batches at least daily, according to Shivers. "That's not the right way to handle it," he says. Hundreds of thousands of transactions quickly add up, so providers that allow lag time between processing may face even greater leakage.

"They're doing revenue assurance after the fact," says VeriSign Vice President Lee Huggins. Often, mobile operators are sitting down a day after the transaction occurs to attempt to identify leakage. They even employ manual processes in some cases to identify unbillable records that may have been kicked out during the transactions.

DiaCoumis at Sentori says that MVNO's are at a real disadvantage, because these resellers rarely receive real-time feeds from their wholesale partner providers' billing system.

The lack of real-time processing allows opportunities for fraud. Fraudsters buy cards with several minutes on an account and start consuming mobile content services. By the time the system detects that the card is expired and has no balance left, the user has already gone beyond the card's limit. This is particularly a problem overseas. Valista's Farzaneh says the mobile operator often ends up dropping these charges and missing out on revenue. He explains that this is largely a demographic problem, in that the younger users have figured out these loopholes.

This type of fraud could be eliminated with real-time systems that track accounts and transactional activity or perform real-time authorization prior to delivering the content. The operator can also mitigate risk or curb potential fraud by establishing limits for the amount of content a subscriber may access in any given billing period. Systems can detect when a customer's account is running low and redirect the customer to a pop-up portal to top up their accounts.

Tracking the Transaction Lifecycle

To truly decrease revenue leakage, a mobile operator needs to be able to follow mobile content transactions across each aspect of the purchase. "Every error can propagate all the way through the process," Farzaneh explains.

In particular, what mobile operators lack today is a way to roll back their processes to undo transaction errors and their financial consequences.

DiaCoumis notes that no mechanism is in place today to identify a dropped transaction for data. "It's the industry that's evolving," he says.

In the view of Logica CMG's David Love, vice president of telecoms solutions, many mobile operators may be missing out on revenue as content transactions are being dropped at the point of mediation. He was called into one provider who faced this very issue.

At the heart of the problem is a disconnect between the network engineers and the information technology employees who manage the mediation, rating and billing systems. Simply, Love says, the IT staff may not be aware of all the capabilities of the network elements and therefore all the different transaction types that need to be billed. Because of this, they may inadvertently leave some transaction scenarios out of the rating tables.

For example, the IT staff may capture a mobile-to-mobile MMS transaction in which both phones are MMS-capable, but fail to capture transaction information for a mobile-to-mobile scenario in which one of the phones does not support MMS, but does allow a user to go via a WAP session to a URL to see the message. If the mediation system is not set up to capture this type of call detail record information as a billable event, then it just drops off, and revenue is never collected for a transaction that should have been billed.

Love is currently working with a provider that faces dropped data and content records, but it is still too early in the project to fully understand the extent of the problem. He suspects, however, that if one provider is facing this issue, then many others may be unknowingly experiencing it as well. "My guess is it's a lot more common than we think," he says.

Reverse Settlements

In the world of mobile content, reverse settlements are a nightmare for operators and content providers. A carrier might settle with a merchant, but then a customer calls and has a problem with the service consumed. The carrier may give the customer a refund, but be unable to go back to the content provider to collect money for the credit or refund to the customer. "I've never run into a carrier that can reverse settle, … or if they can do it, they do it manually using spreadsheets," explains Shivers at QPass.

In many instances, the carrier will still remit funds to content providers for failed downloads; yet the customer may ask for a refund. Already, the mobile operator will take a $5 to $10 hit for that transaction through the call center.

One Valista customer did not have transactional integrity, explains Farzaneh, and could not associate the transaction with the billable record. As a result, the provider could not track whether a customer already received a refund for a particular transaction—meaning that customers could ask for refunds on a transaction more than once. To prevent fraud and revenue leakage, the provider would need to link the transactions in the various systems: mediation, billing and customer care.

Providers also often have loose processes for issuing a credit. Their goal is to keep customer satisfaction high, especially when their systems may not fully support their business model for the service.

Redknee's Popoff says that many operators are just using "brute force" to attempt to determine which customers receive credits from among those who call the contact center. This, he says, "is a very good way to lose your shirt."

Shivers recalls one company with a policy that people calling into the contact center and arguing a charge got one refund per month of premium services. It was a blanket refund policy, because the business systems could not communicate the relationship between a transaction and any refund activity that may have already occurred with that same transaction.

For most providers, says Sentori's DiaCoumis, their current refund process means that "you are a carrier taking customers at face value when it comes to providing an adjustment for things that did not occur."

Almost all refund fees are being eaten by carriers, Shivers says, because they don't have systems enabling them to go back and charge the content provider. "It's the carrier that's carrying all the operational costs, and it's the merchant that's often delivering the service that's unsatisfactory," he says.

But in the world of content, the provider becomes more like a credit card company: It must track every transaction and tie the refunds and credits against the actual transaction. Farzaneh says mobile operators will need to adopt the model that many financial services companies employ to effectively rate and bill for mobile content. If they do this, they stand to plug some of the leakage holes draining their systems today.

Who Eats the Bad Debt?

To deliver content, who should absorb the risk associated with these premium services—the mobile operator or the content provider? Who should bear the costs instigated by the systems that leak this revenue?

QPass' system can manage a bad debt reserve between content and operator partners, settling low-risk credit customers' charges immediately and keeping this reserve to manage high-risk customers. The system allows carriers to keep percentage of funds owed to the content provider to establish a bad debt reserve. The operator would hold that reserve and then later, after any refunds or bad debt, would pay out anything left over.

This type of reserve fund could also be established to manage accounting issues that arise. This is the model that credit card companies use with their merchant partners: A merchant sells products that are charged via a credit card. The credit card provider pays the merchant immediately and bills the consumer 20 to 30 days later. Then, the credit card company looks at the transactions, investigates them and if needed requests any funds back from the merchant. Meanwhile, the credit card companies hold a fraction of each purchase as a reserve so they can get back their money for a purchase. Many different algorithms exist to determine how much to withhold from each purchase.

To manage the risk for this additional cost, some mobile operators are offering risk insurance to their content partners. An operator might withhold 5 percent of the content provider's earnings, for example, to transfer any of the liability of non-payments and bad debt solely to the provider. This frees the content partner of any risk associated with bad debt for a 5 percent fee. in the ability to obtain statistical information, so you cannot utilize the network more than 30 percent."

Billing and OSS Shortcomings

Softswitches don't do a very good job of providing call detail and thus are a handicap when trying to bill for services or handling trouble tickets on the network. When we asked billing vendors where most softswitches fall short in providing billing and OSS records, we heard several criticisms.

"Interfaces for real-time billing records are scarce," says Stephan Pahlke, director of VoIP Business Line at Intec Telecom Systems. "Most softswitches provide session information in batch-based files. Yet even these batches are created in near-time. It's not the spirit of the real-time Internet, nor is it sufficient for preventing potentially sizeable revenue leakage."

Stefan Pracht, product manager at Agilent, says softswitches can't monitor network performance very well. "For identifying problems on the networks that hurt call quality, no. Softswitches establish and maintain services and connections across the network; it's not designed t