Reported TWC Usage-Based Billing Trial Sparks Debate

Usage-based billing has been a contentious issue because of the technological challenges it presents, and because of the PR nightmare it can create in terms of alienating customers.

Despite the challenges, the massive adoption of broadband video and file-sharing networks is motivating service providers in telecom and cable to reevaluate current rating and billing strategies and technologies. Time Warner’s reported experimentation with usage-based billing (UBB) for Internet services comes as a result of the fact that five percent of its users consume half of its bandwidth. Bandwidth hogs have driven Time Warner to re-think the economics of its current billing model.

Though this consumption-based billing announcement does not tie directly to the net neutrality issue that plagues some telecom ISPs, it could serve to legitimize the use of applications that do traffic “shaping” by monitoring bandwidth or conducting deep packet inspection (DPI).

The fact UBB allows “shaping” of traffic through the use of monitoring and inspection of data used by customers immediately pits privacy issues against good business policy. The fulcrum for balancing privacy and bandwidth concerns will be visibility to the customer.

“This type of thing has failed in the past because customers did not understand what their usage had been up to a given point in time,” says Brian Cappellani, CTO of Sigma Systems. 

That was true with voice, and will be compounded further by data services. “With voice, it was easy to list the number of minutes associated with a voice call, but with data, you can’t just throw up the bits per second on a bill and expect customers to know what it means. You have to somehow indicate what service is tied to those bits. So, for example, a bill should say ‘10 gigs of bandwidth were used for BitTorrent and another 10 gigs on VoIP,’ so the user understands at a granular level what is consumed, and how that compares to what they are allowed on their plan or bundle,” explains Cappellani. 

That level of detail could turn an ill-advised campaign that confuses or angers customers into a campaign that helps everyday users benefit from the premiums that could be paid by high-bandwidth users — whether businesses or individuals.

Making It Happen

If it deploys an innovative blend of mediation, rating, billing and CRM advancements, Time Warner could serve as a model for the telecom industry.

By employing active mediation, rating and bandwidth management, it is possible to relate usage to individual subscribers. If devices and MAC addresses can be tied to customers and their rate plans, it is possible to integrate advice-of-charge and messaging about upsell/cross-sell opportunities with customer plans.

“The usage-based charging approach could offer Time Warner Cable the opportunity to potentially blend in other promotions based on usage, such as tiered usage discounts, separate peak/off peak usage, sponsored usage, and so on,” says Sanjay Mehta, senior director of product marketing for Oracle Communications. “This is a clear indication that the cable industry sees billing as a strategic tool for driving revenue growth. We would expect Time Warner Cable to gauge the applicability of this billing function and how it could be leveraged to deliver more compelling promotions and bundles.”

He’s quick to point out that this type of usage-based charging has already been used on the enterprise side of the equation. For it to succeed on the consumer side, service providers will have to proactively perceive limits and integrate intelligent messaging into infrastructure. “If a customer is about to make a download, there should be an opportunity for the service provider to text a message about an upgrade to accommodate the immediate need for more bandwidth. If a pattern is detected, perhaps there could be a way to trigger an upsell offer of a better service plan for the customer,” says Cappellani.

“Conversely, If you are downgrading the performance of a service after a person hits a certain threshold, there can be an automatic data flow into CSR systems and into customer portals that reflect usage information so that agents know how to explain downgrades, or so that customers themselves can see the reasons for downgrades online,” says Cappellani.

Whether most service providers have the type of infrastructure to engender that type of intelligence and transparency will depend on whether they’ve invested in real-time rating, charging and billing, bandwidth management and CRM systems.

Provisioning systems for new services are savvy enough to recognize what elements tie to what services because they interface with mediation and rating, but thus far, that has not been enough to help telecom service providers react to customer choices and habits in real-time manner.

But at some point, telcos will have to more accurately measure how their customers use new services and network resources. They will have to bill for usage in a transparent manner if they are to convince users UBB is a positive for the majority, as opposed to an invasion of privacy intended to improve the bottomline.

Time Warner Cable, which has 7.4 million residential Internet subscribers, will no doubt attempt to approach UBB in a way that will not confuse or disenchant consumers.

The company wants to avoid any misperception, such as that burdening Comcast, whose bandwidth management technology has come under criticism for causing the prioritization of certain Web traffic moving across its network. Time Warner, Comcast, and any telcos that follow suit will have to be sure to communicate clearly how UBB improves the overall customer experience for the greater whole.