Closing the Great Divide: Carriers Toy with Converging Pre- and Postpay Services
Michelle L. Hankins
11/01/2001
Prepay, once the only option for the credit-challenged, is now being viewed by providers as a method for offering many next-generation services. However, the dilemma with prepay systems is that they were born separate of their counterpart postpay billing systems. Thus, providers run two systems to manage customers who could purchase multiple services through them, including both pre- and postpay. Not only is this an inefficient way to manage internal operations, but it can often burden customers who must register and track their account information through multiple channels within a single provider.
Some carriers are now entertaining the idea of merging prepay and postpay functionalities. Senior analyst Jason C. Briggs of the Yankee Group says that customer acquisition alone is a major driver for carriers who are thinking of combining pre- and postpay systems. Operators are trying to capture the customers who may have been possible credit risks that they were turning their backs on in the past, he says.
But what most realize is that blending pre- and postpay systems into one would not be an easy task. “Not only is it a highly technical challenge to implement such a thing,” says Andre Kopostynski, EHPT’s director of marketing, “but an entire business process and operations are twisted around, and it’s 180 degrees different from the postpaid part.”
Making Two One
Providers want the rating and billing system to operate as a means of accomplishing payment and not be considered a different service environment. Shirley Evans, director of common applications at Convergys, says there are very few vendors in the marketplace who can really accomplish that. “Prepaid services have typically been adjunct environments, because the switching systems themselves are not able to support them very well,” she says. “GSM is in a slightly better position in some cases than the non-GSM networks, but overall many people have instituted prepaid systems that really are not the ideal, because they do not support the kinds of models for services that the carriers are seeking. They can’t manage data; they can’t manage changing a customer from prepaid to postpaid—after they’ve proven some credit history—very easily without changing phone numbers.”
Eventually, customers are going to want to intermingle service payment options. For example, a company might offer prepaid at night and postpaid during the day, or offer some services prepaid and some postpaid, says Dawn Jaglowski, Atlys product manager with Convergys. “That’s where this market is going, and if you have these separate systems, these carriers will not be able to compete with people who have integrated systems.”
Yet, EHPT’s Kopostynski says, “I think it’s too ambitious today to even discuss a product bundle where we have a set of prepaid services along with postpaid services. I haven’t seen anything out there in the marketplace, either in Europe or anywhere else.” Right now, he says, this would be too complex a task for providers to carry out, and their systems just aren’t equipped to handle it.
Jaglowski says that when providers first came out with standalone prepay systems, many were developed by network vendors because their existence relied so heavily on the network. Thus, she adds, these vendors tried to quickly create solutions that would support the billing and rating of these prepaid messages. “They really didn’t take into account all the back-office functions that needed to take place with all the integration,” she says. “I think people are starting to realize that that just creates a lot more difficulty than it’s worth to have these two separate systems.”
Right now, if a customer wants to go from prepaid to postpaid or vice versa, a provider would have to take them completely out of one system and put them into another. They can’t port the customer’s services over, says Telcordia Technologies’ Graham Cobb, director of intelligent networks business development. A provider would have two financial feeds, so it’s going to have to integrate its general ledger information.
Switching customers over to prepay within the system could be more cost-effective. “If everyone is effectively running a prepaid account, it’s just that some people are allowed to go negative on their balance and others are not. It means they no longer have to group customers by their payment mechanism,” Cobb says. “Prepaid becomes just a way of paying and doesn’t become a defining characteristic of your position within your market.”
One Step Ahead
To date, prepaid is hugely accepted in Europe. Perhaps this is why European operators are particularly interested in making the switch to pre- and postpay convergence. “Europe will likely take the lead in blending the two methods of payment ahead of American providers,” says Briggs at the Yankee Group. This ambition, he says, is echoed in Orange France’s recent deployment of Convergys’ system. Although it does not currently offer an integrated mix of the two, it was specifically chosen with a view toward this type of functionality. Most attribute Europe’s lead in this regard to its wireless network technology, as well as a cultural acceptance of prepay early on.
“If you look at the networks, currently we’re not GSM-based,” says Ann Dupree, wireless intelligent networks product manager at Telcordia, referring to the many standards in the United States. “We’re starting with a different model, a different environment. I think we’re all converging in the same direction; it’s just that one train left the [station] sooner.”
King Content
Undoubtedly, industry sentiment is that content is driving the desire to merge pre- and postpay systems.
A critical element of the revenue equation for many content services is to ensure collection via a prepay mechanism that acts more like a debit system, as opposed to hoping the customer pays at the end of the month. Carriers “don’t want to have the full liability,” Convergys’ Evans says. “They are willing to look at some liability on digital goods that can be more limited; but on hard goods …, for instance, they obviously don’t want to put that kind of liability at risk.”
One issue with content, however, is whether prepay will require customers to keep higher balances in their account to fund use of the services. “The challenge there is that you’re starting to become more and more like a bank,” Cobb says. He believes that network operators will possibly want to forge relationships with banks. “The regulators will step in, in some countries. We’ve already heard some European regulators at least making noises about how, if subscribers are keeping a lot of money on their prepaid account on their phone, then they want to start regulating the prepaid operators as if they were banks. That would be a bit of a challenge.
“There are some implications there, around going toward that model. If network operators are charging the larger transaction, then it changes their business model. But it’s an area where some of the most innovative operators are determined to go.”
Network Musts
The most difficult task is to make everything run in real time. If carriers were to move their existing postpay customers all to the prepay side, forcing those calls through their postpay rating engines, they would be adding a lot more traffic on the system overall, Briggs says. “It definitely takes more processing power and more network elements to do these real-time processes, because you’re actually part of the call flow there,” Convergys’ Jaglowski says.
As markets evolve, she says, one can expect to see providers target “specific kinds of services, and they are really going to be high-value, whereas some other smaller transactions might cost more to process in a real-time fashion than the revenue they are going to generate from it. I think it’s still too early to point out what services they are going to be.”
EHPT’s Vinay Dhar, a rating and billing product specialist, says that determining whether to terminate or extend services to a customer would be a critical capability of a converged pre- and postpay system. In addition, such a system would have to know when to convert a prepaid account to postpaid or notify a customer that an account balance is getting low. “Now it’s not management of the customer only, it’s the management of the service on the network layer also,” he says. “If a customer crosses [from positive to negative balance] or does not have an amount in its prepay bucket, then on a real-time basis the operator needs to terminate that service—which means there has to be a communication from the billing system to the network element in real time, and this communication needs to be both ways.”
“You’re clearly going to have to have a rating engine that’s going to distinguish between a prepay record and a postpay record, and give the prepay record more priority in terms of the timing of the rating and the passing of the information to a balance decrementer, or something that will at least monitor the customer’s balance,” Briggs says.
Trimming the Fat
After orchestrating the real-time element of the network, a provider must then be able to correlate the information off the network with the billing and customer data. To execute this task, mediation is critical.
“It’s been determined, for instance, that sitting on the network in an Internet environment, you only use 1 percent of the traffic information for billing, so you have to have systems that are adequate to determine what’s there and filter out that 99 percent of information that’s not relevant for billing,” says Convergys’ Evans. Mediation systems must be able to support such high-capacity environments for converged pre- and postpay systems as well.
It will be critical to collect service-specific information such as duration, number of minutes, bytes used, an individual event record, content type or quality of service information that would be important for rating and billing. In addition, customer information such as IP address, account number or phone number would also be needed. Evans says this might require providers to gather other information from throughout the network.
Jaglowski says that currently a prepay system would gather information from the network to be able to determine account balance, tear down a call, do termination messages or update the account in real time.
The key with mediation is to not overburden all of the downstream systems with unnecessary information, Evans says. In October, Convergys announced an integrated pre- and postpay billing system in partnership with systems integrator, Logica, merging capabilities of Convergys' Geneva Active Revenue Management software with Logica's Aethos Prepaid platform. The goal is to give providers the ability to offer services on a pre- or postpay basis or a combination of both, enacting such enefits as discounts across all a customer's accounts.
Real Time, Unreal Challenges
In addition to collecting and mediating information in real time, providers face many other challenges in merging pre- and postpay systems. First, the ability to calculate taxes in real time is imperative. EHPT’s Dhar comments that in traditional billing, taxation was always part of batch calculation: the CDR was collected, rated, and then passed on to another module, where the taxes were applied. Now, because it’s real time, taxes will have to be applied at the rating of a call. Providers will thus need real-time communication with third-party taxation modules, meaning they will also have to maintain and update the tax tables in real time, which will be very difficult.
Another big challenge, particularly in content, is to manage the supply chain. With content, many partners can enter the picture. “Then it gets very challenging to collect all those events from the content providers on a real-time basis, and then send that to the service providers who can bill the end users,” Dhar says. “It’s going to be very challenging in this content industry, prepaid.”
In addition, real-time customer relationship management becomes an important capability. Some kind of intelligence must go from the back office out to the customers to inform them about usage levels or account balances. “Currently, when you’re in a prepaid environment, there is no real customer relationship” says Narus spokeswoman Sue Forbes.
This, however, will have to change or customers are likely to churn, says Convergys’ Jaglowski. Efficient Networks’ John Digann, director of quality assurance, believes providers will need to equip their legacy systems with flow-through provisioning via a Web-based portal that will allow customers to control accounts and services. For more on other barriers to merging billing systems, see “Hurdles to Merging Pre- and Postpay Billing Systems.”
Building the Business Case
Given that real-time network elements are more expensive than systems for off-line batch processing, a network operator must put forth a business case to make sure the benefits of moving in this direction are worth the costs, according to Telcordia’s Cobb. He says a provider would have to invest in continuously available, high-performance, high-reliability platforms.
Cobb believes the cost may be a roadblock for some providers. “I wouldn’t say that the whole industry is going that way at this point,” he says. “A lot of operators have invested a lot of money in their sophisticated postpay billing systems that can do very sophisticated things on the invoicing side, and on combining data on various accounts on sophisticated discount structures. We’re not saying [there will be] wholesale replacement of those.”
Kopostynski at EHPT expects the same reluctance: “Given the economic conditions and so forth, I don’t think carriers that have spent upwards of $60, $70 or $80 million for their billing and customer care systems are going to throw that out because there are prepaid opportunities. But the requirement for real time is here now.”
“It comes down to the fact that providers may need to dedicate a whole new unit within a carrier’s organization to deal with such a project,” he adds, “because a provider will need to have real-time intelligence throughout the entire value chain that can look up the balances on the fly. It will need to also have a cost-effective way to communicate the remaining balance to its prepaid customer.”
But there are some appealing features that may sway providers who are looking at merging pre- and postpay to help control such issues as fraud. Providers “want to get the benefits of real-time control of a subscriber’s account and apply that to an account with a credit limit, so they can minimize fraud for their postpay subscribers in addition to the traditional way of prepaid—which is, of course, that people can only use the accounts until they’ve run out of money,” according to Cobb.
The Yankee Group’s Briggs suggests that while carriers will not turn to this mechanism for fraud monitoring over their existing fraud systems, it might be used as a complementary method.
Cobb believes a provider’s ability to position itself in this space will depend on choosing the right suppliers from the start. “Our experience is trying to take a traditional billing system designed for offline use in an IT environment and make it sufficiently robust is very hard,” he says. “It’s easier to add the flexibility into something that’s designed to be a network element.”
Like most large projects, Kopostynski believes, this switch will be incremental or evolutionary.
At this point providers will likely approach the move to a converged payment system slowly. “Its still brand new stuff right now,” Briggs says. “I think fundamentally it has to happen. It just makes sense from a business management perspective.” Yet, while vendors struggle in the next year to explore and overcome the network and system challenges, providers will continue to siphon customers through their two existing worlds of pre- and postpay. If the prepay content model takes hold, major changes in the back office will have to follow.
Email this article
Add a comment
Printer version
Order reprints
RSS Feed
Bookmark article