Monetizing Digital Content

With all the hype around IPTV and digital content, little is being said right now about how carriers can actually make money from low-margin digital content services coming down the pike—particularly if they cannot scale or automate in time to keep up with what many expect is impending demand.

Although their wireless brethren achieved some degree of success with ringtones, icons and other small bandwidth files, the wireline and broadband providers will look to premium services like VoD, IPTV and interactive gaming to bring value out of their interconnected networks.

Much is being invested to overlay networks with IMS for that very purpose, yet still little is actually taking place in terms of automating the rating, billing and real-time mediation that will make the whole thing work.

“Operators will leave money on the table if they can’t handle complex relationships, tiered pricing, bundling and discounting,” says Curt Champion, vice president of market and product strategy for Convergys.

Rather than allow current capabilities to drive digital content price schemes and partner relationships down the road, telcos should be thinking of the price schemes and models they want before volumes start to increase.

And instead of continuing with current processes and systems until someone begins to move to local and custom content, carriers should be asking key questions right now, such as: What is our business model for content? What do we want to achieve with digital content services? Is it to drive more traffic to our network, or to actually get into on-demand services? Do we want to allow partners to have real-time capabilities to launch and expire content according to trends? Or do we just want simple revenue splits?

Then automation can take place methodically, so that partnerships, flow-through provisioning and real-time billing mature in such a way that customers ultimately can shop for content as they want, rather than being forced into set schedules, price plans and devices.

Of Relationships and Settlements

Those with the most compelling content will seek out partners that run efficiently enough to not only handle large volumes of content, but to manage and settle transactions in real time.

Because telcos really are not building their own content, the digital rights management, distribution and payments processes initially may be handled through brokerage services rather than direct relationships.

For that reason, large operators may have a leg up, as they will procure better rating because of the wider distribution networks they can promise content providers. The Tier 1s are powerful enough to act as distributor, aggregator and broker, depending on whether they will be selling services to other network providers.

Smaller network providers—meaning everyone but the 800-pound gorillas—will be somewhat dependent on brokers to pool content for them, and to handle distribution and settlement. They will have to pay for content, and they will have to rely on brokers to handle the activity around digital content, such as distribution and settlement.

That’s why two different camps are expected to emerge: one comprising carriers that want to become commodity brokers of capacity, as with PacWest and Level 3 (Williams), and another that will focus on the actual digital content services, such as Verizon and AT&T, which focus on developing multi-play services.

Companies like Google, Yahoo and Microsoft might act as the aggregators in some relationships, and they will partner to leverage the distribution channels and networks that carriers possess. They will make deals to make sure their content is part of the packages of services carriers ultimately devise.

“The operator will become very important to these players, as they are the ones with the billing relationships with customers,” notes Craig McDonald, vice president of North American sales for Valista. The company is working with AOL and a major RBOC to put infrastructure in place to manage a la carte, flexible content packages from third parties. “The multi-party ecosystem will complicate the financial operations aspects of sharing revenue, reporting and tracking through the life cycle of refunds,” McDonald says.

As carriers either aggregate or look to brokers of content, they will need to manage payment life cycles and merchandise when bundling with others so they can upsell and cross-sell, as well as handle the revenue sharing associated with the content purchases.

Although things are pretty simple right now, the bottom line is that complexity of settlement will dramatically increase as relationships form with new services. Whoever is best prepared for that complexity will have the advantage.

Already, Comcast, Cox and other broadband providers own a lot of the content, so they possess the infrastructure to support on-demand services, such as PPV. They also possess the relationships directly or through aggregators with the studios and distributors of content.

Other than the studios, relationships with premium providers (HBO, Starz, Showtime) will also be a factor, as will relationships with broadcast networks, such as NBC and CBS.

Without the ability to monitor all those partnerships, operators will end up bearing most of the burden for credits, counter credits and debit transactions, as partners will get their cut of a consumer’s payment at the time of the transaction, while the telco will be the one to field complaints and issue credits even later on. If it’s the fault of a partner that a file was corrupted or compromised, that needs to be known.

At a time when the focus is increasing profitability, there’s a need to greatly reduce the cost of refunds and credits for on-demand content. That means carriers must account for things on a line-item basis and according to unique contracts that depend on the content and related revenue. “It could be a 50-50 split or something based on the first 100 buys,” explains Champion at Convergys. “It could depend on if it’s delivered to a mobile device requiring a third-party distributor or other variables around QoS.”

“If you sell music, videos or movies at a flat rate of, say, 99 cents, there won’t be a lot of margin. You wouldn’t want that to be eaten up with manual processes,” says Champion. He believes enhanced rating capabilities will be germane to flexibility of rating in the future. “Someday, price may vary according to the age, type or delivery of the content at time of purchase,” he speculates. “It could even vary according to the device, whether PC, TV or mobile, used to view the content.”

Today the content does not require rating, because most of it is available at a set price. The only discounting that takes place does so at the time of the bill. If someone purchases four movies, a discount is applied according to volume. However, the future will necessitate that services be more compelling and that carriers leverage any service provider network—whether wireless, cable broadband or VoIP—to ultimately bundle services and products in unique ways.

Because partner processes and systems will differ markedly from their own, carriers may find it a struggle to manage the sheer volume of transactions generated through partnerships with the likes of Viacom, Disney, ESPN and others.

Death to Spreadsheets

The number of transactions and the cost of each will make settlement complexity a pain point. Feeding data about refunds, credits or promotions into spreadsheets means that downstream settlement solutions will not get necessary data. That will render settlement, revenue assurance and customer care ineffective.

Because there is a dearth of standards governing procedures for content delivery, carriers may end up interfacing with multiple content providers via homegrown systems and transaction formats. That will make it difficult to see and manage all the transactions, such as validating that customers received content and were successfully billed.

“ ‘Kill the spreadsheets’ has become our battle cry,” says Todd Putnam, chief information officer at PacWest, an expanding CLEC that is focusing on wholesale relationships as it rolls out to 36 metro markets nationwide. Rather than struggle to get CLEC status in every state, the company is banking on the idea that VoIP providers and even ILECs would rather leverage its existing expertise with automation and the nuances of the regulatory environment.

To succeed in its initiative to cover 160 million people—more than half the U.S. population—the company recognizes the need to automate and eliminate spreadsheets and manual processes. “The hope is to drive more traffic to our network to improve margins, and ultimately bridge wireless and wireline carriers through expanding interconnect points,” says Putnam.

Flexibility to provide more compelling services, as well as to expedite processes, such as monthly invoice runs, pushed the organization to look at how to handle legacy technologies. “We knew we didn’t want to invest in more legacy systems to handle the ensuing complexity of managing phone numbers, LIDB, E911, 411, LNP and database services connections for multiple partners,” says Putnam. “We instead looked for technologies and standards that were extensible and open enough that integration could be realized at a lower total cost of ownership.”

That desire for integration at a lower cost has galvanized many companies to use SIP over XML and Web Services in efforts to automate processes.

By focusing on automating processes rather than just swapping out legacy systems, carriers can get the most out of existing systems to support basic services, while preparing for future services with newer systems based on open technologies. “Carriers need to first look at how to extract data from legacy billing systems, which means supporting the revenue flow among all contributing partners and parties in the value chain,” says Michelle Nowak, vice president of product management for Amdocs’ broadband cable and satellite division. “As third parties create their offers for content, real-time transaction management of premium services is necessary, as is communication of charges and financial events into billing systems,” says Roger Parks, vice president of global products for Qpass, the digital commerce division of Amdocs.

That means there will be a blend of old and new technologies and systems on many levels.

The foundation for PacWest became XML technology and models like eTOM. With a Java (JVOSS) architecture at its core, PacWest cultivated a good starting point for supporting the hierarchy of relationships that will enable it to facilitate the delivery of digital content.

“Using XML-based APIs to interface to billing and OSS, and eTOM for modeling processes, it becomes possible to verify and authenticate transactions in an automated fashion,” says Putnam. By automating billing on the back end and revamping provisioning and customer systems up front, the company enabled faster integration among partners, “as everyone in the value chain has to act and respond at the same pace,” he says, noting that a focus on collaboration has come to the fore. “With digital content, we know we’ll be injecting more and more partners—each of which will provision its services through its own breed of portals, batch interfaces and APIs.”

For traditional and on-demand services to come together in content portfolios that will someday go over any device, there has to be visibility into each transaction. The authorizations, discounts and denials of service have to become dynamic or real-time.

That will require a convergence of models, as the relationship of one service provider to another has to be understood, as well as an understanding of how and from whom consumers purchase content (whether directly from a digital content provider, aggregator or distributor) and by what methods (whether credit card, debit or after the fact on a phone bill).

End-to-End View

The companies that ponder the big picture will think of settlement as part of their content management strategy from the get-go, as the future will mean going far beyond just paying companies for the content they deliver. Visibility into the value chain is necessary to automate the ecosystem of content management, distribution, relationship management, settlement and self-care. Content management systems have to interface effectively with billing and OSS if customers are to be charged according to the event and the nature of the event, whether on-demand or recurring. Interconnecting with OSS/BSS is necessary if service records are to be expeditiously collected and correlated, and so that charges can be calculated and discounts applied in real time. “A holistic approach should be taken so that the whole value chain—from setting up the partnership, to the delivery of the content, to the management of the content, all the way to the settlement and payment to the partner—is possible without excessive integration,” says Amdocs’ Nowak. “You want a system that supports the entire revenue flow among all contributing partners and parties in the value chain.”

No single vendor can claim a true end-to-end solution, since many pieces are needed to manage and settle content and services in a self-contained ecosystem, but some are trying to move in that direction.

With its Qpass acquisition, for example, Amdocs has assembled self-care and provisioning applications through fulfillment management software developed with companies like Orca Interactive and Leapstone. Cramer, which was also acquired by Amdocs, has been working on workflow and brokering technologies to help carriers manage the process and settle with partners, and the Oracle/Portal, CSG/Telution and Oracle/Siebel partnerships have all taken place with real-time transaction management in mind. They all recognize that everyone in the value chain will want detailed reporting of transactions, settlement and cross-payment methods in a self-care environment.

The goal is to be able to know in real time when downloads of movies, ringtones and pay-per-view events take place so that transactions go directly to credit cards, or pass through to the consumer invoices. Measurement and tracking ultimately must go into reports for self-service among partners, as well as for revenue assurance for the network providers.

“Whether acting as a bit pipe or actually delivering services directly, there will have to be content mechanisms on carrier networks that have the intelligence to know when content was delivered and to what device and via what elements,” says Lee Huggins, vice president in VeriSign’s commerce group. “You’ll have to be able to distinguish between an ad hoc download of a picture or ringtone, or a recurring charge for a subscription to a service, or a credit or adjustment transaction.”

A single view of the life cycle of content delivery, rating and partner settlement means going beyond CABS billers and onto those that handle content and media. Traditional billing systems focus on billing the customer, not settlement of content with partners. Older systems also do not do well with voice, video and data combinations. “CABS systems manage telephone settlement around time of day, duration and distance, which differs from consumer billing systems that look at QoS, bandwidth rates and downloads. Both are necessary and should be fully integrated so at the time of transaction rating, carriers can settle in real time with partners,” says Champion at Convergys.

In other words, there needs to be integration to factor in the relationships between services and the content downloaded. If a package includes a voice service crossing home and mobile phones with shared minutes between the two, as well as a block of content set on a base rate, then real-time rating will be necessary to recognize when the content is downloaded and whether it ceases to be free after a certain point.

“In IMS, where content is dynamically launched onto networks,” says Champion, “the strategy around content and pricing will have to happen immediately so that hot titles and content are priced according to trends.” That means rating systems must look at voice and content, as well as manage the real-time activities according to the price plan and package. Simultaneously, the rating system must settle the transaction. “You want the same system for both, because there is a direct relationship between what you charge consumers and what you settle with partners,” Champion says.

That is important, if adjustments need to be made because the service is not fulfilled. “If separate, errors and revenue leakage will ensue,” says Champion. He notes that will compound when thousands of small transactions fall out, thus eating up the profit carriers intend to make on the content.

Moving Closer to the Network

Because the nature of the partnership will change according to the carriers’ role in delivering a service, intelligent platforms and systems will require that billing, OSS and mediation get closer to the network.

It’s mediation that facilitates conversation between OSS and BSS, so it will have to sit right next to the network, and someday right in the network. It needs to encompass traditional collection, as well as charging and activation to facilitate the conversations among back-office and front-end systems.

“It’s no longer a matter of just accumulating data and then spitting it out in reports or monthly statements,” says Kleavin Howatt, director of product management for Ace-Comm. “The main change with digital content will be the awareness of the network and network elements to the mediation system. It requires a larger scope or re-definition of what is in mediation, as mediation has to become an intelligent platform rather than just a transport for data.

“From the Web page to the network, mediation has to say, ‘Customer A asked for XYZ service,’ so that downstream systems and the network communicate instantly.” It has to be understood that such an event took place, so that billing gets the right information and so that the network knows that it happened.

For example, if an RFID chip is embedded in a sign on a bus route and a person holds a phone up to retrieve a schedule and buy a ticket, a conversation has to take place between the handset and the bus company. Hardware facilitates that process, but the intelligence to go to a database and to retrieve route numbers, times and information relies on mediation, which must also transform data into a format that is readable by the network.

Information then has to be sent back to the handset so that the person has the option to buy a ticket, which then generates another event, which mediation must then interpret and route to the bus company with some sort of verification code, so the payment event is known and understood.

Those are the type of real-time conversations that have to take place.

In seeking mediation solutions, Howatt suggests that companies look for solutions that “grew up” on the network and interconnecting with the network, so there is experience interpreting data from the network. Ace-Comm has partnered with Alcatel to bolster its relationship to the network. “We have been looking at how to enable users to boost capabilities in real time,” says Howatt, “so if someone is downloading a movie with a certain amount of speed, he or she could temporarily boost capacity for the duration of the download with the touch of a button.”

Mediation usually falls into one of two camps: Some have a big-box everything-for-everybody approach to telecom, where they offer everything that is needed at a decent quality and price. Others have single products specializing in things like convergence among legacy, mediation and newer mediation.

As mediation moves into the network, so, too, must fraud management and billing, as they have to take on a real-time character as well. “Billing will move closer to the network, even if it’s dragged into it kicking and screaming,” Howatt says.

The common denominator between billing and mediation will be the aggregation of multi-dimensional CDRs—either before or during mediation. The 3GPP’s ASN.1 standard promulgates the idea of dynamic, multidimensional CDRs, which require flexibility to handle transaction events or sessions invoked over carrier networks. “Carriers need modules that can take multi-dimensional CDRs and aggregate them into a single CDR so there is a comprehensive view of a customer’s session or event with the carrier,” says Kash Maniar, who heads Lucent’s BSS consulting and integration practice. Lucent created its SurePay prepay solution in 2000 and has since worked to expand its BSS consulting and integration practice in response to service providers’ growing need to “modularize” billing.

Maniar believes that billing for content will be so tough that carriers will demand pre-tested, pre-integrated solutions. “The challenge is to provide integration points for IMS in existing billing architecture,” he says. “There has to be flexibility to accommodate BSS architecture so carriers can leverage their investments.” Lucent’s strategy is to pre-integrate its IMS solution with other vendor solutions. It already has a relationship, for example, with Syndesis.

“To reassemble events into individual calls and billable items that feed billing systems, you have to walk the cat backwards,” Maniar says, which ties to IMS. “You need IMS for the pre-mediation step that will enable CDRs to kick out in a format that existing billing systems can handle.” He believes an IMS mediation layer will be necessary to isolate existing BSS infrastructure, so that carriers can correlate and aggregate records to new 3GPP standards.

Lucent currently is working on the “pre-staging” necessary for multi-dimensional CDRs to reveal usage of subscribers for billing, as well as for revenue assurance.

“The challenge of IMS billing is to get your arms around the application servers and components of architecture that are germane to the billing function for each service—not to mention the additional OSS components for AAA, IP assignment and interfaces to billing applications that reflect the usability of services,” says Santiago Ruiz, director of OSS solutions for Europe, the Middle East and Africa at Lucent.

To handle authentication, session control and IP address assignment, Ruiz says, a portfolio should aim to provide AAA functions, service delivery platforms and servers, as well as applications for billing and revenue assurance.