Content Settlements: Market Nascence Still a Nuisance
Michelle Hankins
06/01/2002
For mobile operators, wireless content and data are seen as the next-generation revenue stream. However, with content delivery comes new business models and a whole new network of value chains.
By far, managing partner relationships is the greatest challenge for mobile operators. It's not unusual for carriers today to work with 100 partners, but for many that number may eventually reach into the thousands, as is the case with DoCoMo, which currently has over 1,200. Perhaps service providers can deal with each relationship separately, but even so they will require intensive, robust systems that are both scalable and flexible in pricing to allow content providers to competitively differentiate rate plans. Robert Blumenthal, vice president of products and services at Canadian provider Telus Mobility, says the company is working with more than 120 application providers. "It would be nearly impossible to add all these relationships in a traditional billing system," he says.
Foremost on carriers' minds is managing the risk associated with partner relationships. They want to ensure that no revenues are lost and that payment to partners is executed properly.
Today many carriers are developing their own content provider standards. Often these consist of a standard contract, procedure and systems interface for dealing with content service providers (CSPs). Telenor Mobil in Norway has established a contract outlining such issues as product pricing, reconciliation and confidentiality of end user information. The company has established a Web site devoted to handling its partner relationships. There, CSPs will find basic information about how to sign up and begin interfacing with the operator.
VeriSign's Maria Watts, vice president of marketing, stresses the relevance of dealing with partners: "We think partner management is going to be as important as, if not more important than, subscriber management."
The Legacy Hold-up
When it comes to pricing, the billing system represents a stumbling block for mobile providers seeking to deliver content applications. "Billing can really hurt the content community," says James Morehead, Portal's director of wireless market development. "These legacy systems are so hard-coded … they require custom development by the billing vendor to implement a new service. The impact of that custom development is that you cannot build content communities with legacy infrastructures. It's just too expensive."
In many cases, wireless carriers' legacy systems are unable to bill for new services other than voice minutes. And this leaves many content providers shocked when they find that carriers cannot charge for the services they want to offer. Traditional billing systems can handle settlements with roaming partners, but carriers are just now starting to analyze and implement systems to bill for content. Amdocs' Darren McKinney, senior manager of mobile markets, says operators typically choose one of three routes: upgrade systems, add parallel systems with content-supporting capabilities, or-the least common approach-
manage a complete overhaul of their existing systems.
Naming the Price
Pricing flexibility is a serious challenge for many providers. Pricing that makes sense for one service may not suit another. Ultimately rating systems will have to capture the nuances of these various pricing plans.
"It's difficult to be consistent with all of the application providers," Telus' Blumenthal notes. "You really have to treat the pricing on an application-to-application basis, and that's assuming you're not charging incrementally for usage. Most carriers are either charging by minutes or kilobytes or something, and that always complicates matters considerably" (see "Free Wireless Data Access: A Winning Business Proposition").
Portal's Morehead describes pricing content services in which a carrier may have 15 or 20 games partners with about 150 different games, and the tracking is different for every single game. Every game has a different price point and a different tracking unit, depending on what makes sense.
Having a billing system flexible enough to support various price plans is imperative, especially since some content providers may rely on price as a competitive differentiator. And since content is tied closely to culture, it may be priced differently in different regions based on the value of the service as perceived there. In addition, time of day and location-based services may figure into future pricing schemes, and mobile operators systems have to be ready to support them.
Force-feeding Content
Most providers are beginning to supply content services. In many cases operators are trying to force-feed content rating information through their existing billing systems and tariff structures. Amdocs' McKinney says this is frequent in Europe.
For now, says Patrice Peyret, Mobileway's CEO, "it's not quite possible for a content provider to set a fixed price uniformly across multiple networks, because in order to do that you would have to really drill down deep into the billing system of the various carriers, so you could force the billing system to charge specific amounts of money."
He explains that most services are rated with whatever tariffs exist in the carriers' traditional billing system. "The benefit of doing this is that the interface to the billing system of the carriers is very simple," he says. "The drawback for the content provider is that they have to accept that their content may be priced differently depending on the carriers. This is not an unusual situation. In many situations, when you publish content, the end user price depends on the channels you've been using, so most content providers are happy that we can collect money on their behalf."
According to Peyret, many carriers in Western Europe and Asia have implemented premium rates for charging messages according to what they contain. In this "container-based billing" there are expensive packets and less expensive packets, depending on their content. Carriers thus have some ability to tag messages with different prices and then charge different rates to end users by determining which entry in the carrier's tariff tables most closely applies. This information is then interfaced with the carrier's billing system to indicate how much a message is worth.
Right Here, Right Now
A critical element in rating and billing for content is having systems that operate in real time. However, such capabilities are difficult in traditional, custom-built, closed systems, because a carrier often has to integrate with many devices maintaining real-time links to service authorization and activation.
In a prepaid scenario, real-time systems must check against the person's account before provisioning the service. As well, fraud can be a problem if systems cannot track events in real time. "There would be delays in authorization, there would be gaps in cutting off the service, and that could easily result in fraud," says Portal's Morehead. The need to track in real time becomes imperative, especially when a carrier is paying third parties. "It's one thing when fraud gives away usage on your network. You own the network-it's kind of soft money, it's a missed opportunity; but it's a different thing when that fraud actually gives money away to a third party. That's cash."
Authorization in a prepaid environment is a little more complex, because the event has happened and the carrier has assumed that the client already has money in the account, which may not always be the case.
According to Telus' Blumenthal, even though Telus portrays itself as the provider with more wireless Web usage than all other Canadian carriers combined, the company currently cannot perform real-time authorization.
"We haven't done that to date, because most of the applications are pretty small-value, and usually when their phone goes into a zero balance condition their phone gets 'hot-lined' anyway. So we might miss one or two, but it's not a big revenue exposure at all," he says. "But when we look into the future-into things like mobile commerce applications, where the value of the transactions might be significantly higher-we're going to want to implement an authorization capability. … We're working on that as we speak, as we're anticipating some mobile commerce applications today." Blumenthal says an authorization system would sit in the middle and be the glue between Infranet and the traditional system.
The Info Exchange
To manage content settlements, carriers must somehow connect content providers' systems to their own. They must be able not only to track usage to bill end subscribers, but also to remit payments back to their revenue-sharing content partners.
However, carriers are not often willing to open up their networks to another party. Mobileway's Peyret says most carriers are reluctant to let clearinghouses or even content providers directly interface with their billing systems. "Sending a CDR to a billing system is something that's reserved for extremely trusted companies or other carriers, like for roaming purposes," he says.
Nevertheless, in some rare cases, a carrier may open up its network to facilitate content delivery tracking. "We have this in France," Peyret says. "One of the carriers there has actually offered to let us connect directly to their billing system and send CDRs to their system. They do this because they have a lot of prepaid customers."
Convergys' Pam Rayome, Settlement Suite product manager, says, "The ability to accept, convert and distribute any kind of record that may be required out to partners is a pretty important aspect of our capabilities." Indeed, today the standards are immature for supporting these data transactions, and not all carriers are using standards, such as IPDR; but many carriers are using the call detail record specifications designed specifically to handle data.
To remit payment back to the content provider, Telus collects IPDRs. "Each provider also has their own records noting how many they've sent to us," Blumenthal says. "We'll take those, validate which ones are properly received or not and provide some feedback to them, and then we just remit whatever is valid to them in terms of a check. To date there hasn't really been an issue."
The Business Models
Carriers are mainly implementing two models to deal with partner settlements for content delivery. So far the most prevalent is to have a direct relationship with content providers. When relationships number in the thousands, clearinghouses may prove extremely useful to mobile operators. Likewise, many providers may want to deliver their content through multiple operators, and for that reason may want to use a clearinghouse as well.
Mobileway is a clearinghouse that distributes data over wireless networks across the world. It handles the logistics of collecting the money from the carriers and bringing that money upstream to the content providers. Mobileway's Peyret says clearinghouses fit a number of situations. Many content providers who are not experienced with interconnecting with telcos may ask Mobileway to assist them in linking with carriers and collecting remittances. A prime example, however, is content providers that may want to extend their services' reach overseas. A clearinghouse such as Mobileway would be relied upon to handle complex business negotiations with operators in those other nations that a content provider might not want to facilitate on its own.
Likewise, some carriers may want to rely on a clearinghouse to keep data logs and tell them how much the data-SMS messages, in Mobileway's case-is worth. In such a case Mobileway, for example, would then learn the interfaces and implement code in its servers to manage the APIs or protocols the carriers want it to use. Clearinghouses typically do not bill the end users; they simply collect all the transactions that went through each of the carriers with which they have revenue-sharing agreements, and then figure out how much money is owed to content providers based on agreed-upon percentages. A proprietary mediation gateway translates information between the clearinghouse systems and the carriers' platforms.
While clearinghouses do serve a purpose in this space, many in the industry believe that both direct relationships and clearinghouses will coexist into the future.
Peyret says, "Mobileway has no intention to be the choke point of the entire industry. There's no way we could be that. We offer more value to international players than we do to national players, undoubtedly, and we are pretty good at providing ubiquity."
Content's Plethora of Opportunities
Data can even drive traditionally offered services like voice, considering that one of the most common SMS messages is, "Call me." That indicates an imminent need for convergent voice and data platforms.
Of Portal's content customers, Morehead says, "Every single customer win we've had in the last year and a half has included an analysis of how we could support [the carriers'] voice services in the future." He points to more than 30 Portal data and billing contracts that could translate into possible integrated wins.
Providers "want to have a convergent platform that lets them easily bundle to provide services across voice and data," he says. For example, if a customer wins a trivia game, he would get a free voice call to the person he beat. If that customer sends a digital photo to a friend, he would get a two-minute free phone call to call the friend. "Those are things that are much easier to do when you are on a single platform," Morehead says, "where voice and data usage is flowing through the same rating engine, flowing to the same balances at the end of the day."
Carriers are seeking truly convergent voice and data systems, as well a convergent pre- and postpaid environment. Especially in Europe and Asia, Morehead says, providers are turning their heads that way.
As a telecommunications provider, creating a compelling rate plan to entice customers to sign on to your service can mean the difference between large-scale profitability or consumer churn.
So when it comes to data and content, mobile operators are hard-pressed to make sure their pricing structures are quite literally on the money. The industry has yet to fully resolve exactly how to charge for these next-generation services. Many operators are charging wireless Web usage by airtime—and they are taking heat from customers about lag time and costs. Others are charging data by kilobytes, but opponents argue that this pricing mechanism is too obscure for consumers to grasp.
Canadian mobile operator Telus mobility has rethought traditional pricing for wireless data and content, and Robert Blumenthal, vice president of products and services, credits that with the company’s success in this space.
In essence, Telus mobility gives away access to wireless data and content, charging a flat monthly rate to connect to the wireless Web. The company is banking on making up revenue in the per-transaction fees for wireless content delivery. Telus offers flat-rate packages of $5, $10 and $15 for various content access levels. “We also have a package that costs you zero dollars,” Blumenthal says. “So every client we load onto our network, and this goes back over a year, automatically gets wireless Web service, and it’s free to use—no access fee at all.” But when customers use the applications that do cost money, they pay per usage. The pricing plan encourages “a very low barrier to trying” those applications, Blumenthal explains.
A customer may pay 5 cents, for example, to answer five trivia questions. Or, a subscriber may play WAP Wars—a popular wireless Web game—in which a player can execute up to six plays daily, with each move costing 10 cents. Obviously, when pricing content, the operator must include network costs, but the winning proposition may prove to be inputting this cost into the actual content service and relying on volume to drive revenue, instead charging for capacity and applications. Simplicity is critical, says Blumenthal, who believes other methods currently used to rate wireless data are flawed. “Kilobyte—what does that mean?” he asks. “How many kilobytes is a message?”
Some providers have been dinged for the practice of rounding up daily, when pricing data by the number of kilobytes downloaded. Yet many providers are considering or even implementing this type of rounding in their wireless data pricing—a method that might not sit well with subscribers. AT&T Wireless and VoiceStream are two providers charging by the number of kilobytes transmitted.
Sprint PCS charges by the minute for its wireless Web usage. But minutes are metrics that people understand when they make phone calls, Blumenthal says, not when they interact with data services. “If you’re in a model where you are also charging airtime, you have this double-edged sword where people feel like they are being charged twice,” he says. “We tried to avoid that by sticking to a very simple model.” At least for now, the Telus pricing model seems to be working. In aggregate, Blumenthal says, Telus has more wireless Web usage than the other Canadian carriers’ combined. He adds that traffic is likely as much as any U.S. carrier, which would typically be 10 times Telus’ size. Blumenthal cites Telus’ price plans as the main factor in the large uptake of its wireless data services. “It’s driving usage and adoption,” he says.
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