Back Office - IP Billing Architecture Can Boost ICP Revenue

In addition to using IP for Internet access, businesses of every size are augmenting their local and long-distance services with VoIP, IP fax (FoIP) and a host of other technologies that rely on the Internet as their backbone. Often, the fastest method of deploying new IP services has been to implement a straightforward flat-rate billing system. By limiting the billing options to monthly recurring charges, service providers have been able to launch new products quickly, without months of custom coding and systems integration necessary to process more complex rates for IP services.

Service providers also viewed time-online billing as a lure to quickly build customer bases while seeking volume-driven revenue. A simple, low flat rate was easy to understand and suited the needs of early customers looking to test and ultimately take advantage of the latest telecommunications technology.

As more IP services became available and customers grew smarter about the technology, however, they became more demanding about what services they received and how much these services cost. Business customers now want their ICPs to provide them with packages of services specifically tailored to their needs. Providing these integrated services packages means establishing a billing system capable of converging these services onto one bill.

For many of the early-adopter IP service providers, this type of convergence will be challenging because they launched their IP services on a separate platform from their switched voice services, and often are limited to a system that does not efficiently handle charges per event. A more traditional telephony company's billing system may not be able to rate services on the multitude of parameters used in the IP world. Running separate billing operations for each platform is costly, and typically requires more manpower than if both IP and PSTN services resided on a single platform. Having multiple billing platforms not only hampers deployment of traditional convergent billing features, such as cross-product discounting, but it also keeps service providers from obtaining a single view of their customers.

ICPs in this position need billing systems flexible enough to collate usage information from both switched voice and IP services so they can bill for and track customer usage activity for all of their services. By deploying billing systems that can easily add and change new products and services regardless of what network they're delivered on, ICPs can avoid constant re-engineering of their billing platform each time market conditions shift.

ICPs that launched their IP and switched voice services from a single platform not only have a more streamlined and cost-efficient delivery method, but are also in a better position to adopt the IP mediation technology that will help them graduate from flat-rate billing.

Usage-based Billing

Borne of the desire to create more billing options, IP mediation allows service providers to rate an event based on what was delivered to the end user (not just based on a packet count) and bill accordingly for them. A service provider, for example, can charge a business client a premium rate to guarantee 99.99 percent reliability for the VoIP service it delivers. Or it could charge a reduced rate for the wireless messaging services it provides after business hours and on weekends. Alternatively, it could use the information provided by the mediation system to settle third-party charges, such as web-based advertising.

An IP mediation system typically sits between the IP infrastructure and the billing system. It is responsible for collating information from a number of systems--including routers, web servers and authentication servers--and generating one or more event records per session. While these event records are analogous to a call detail record from a switched services network, they will often include more parameters to determine not only session length, but also data volumes, peak data rates, type of content and other factors that will affect the rate to be charged.

To streamline their operations, service providers can tie these mediation devices directly to other business applications aside from billing. An ICP, for example, might integrate the device with its back-office data warehouse so that a customer's usage information is easily accessible to service representatives. When that customer calls with a concern, the service representative can quickly obtain one view of that customer's entire interaction with the service provider.

Adapting the Architecture

Service providers looking to expand their offerings to include either switched voice or IP services should consider the impact on their existing service delivery architecture. Switched voice service providers will generally have an easier time adding IP services to their menu than IP vendors adding switched voice. The reason? Switched voice service providers, for example, are used to event rating, such as call detail records, when handling interconnect charges. Their billing architectures need to be able to account for the length of the call, the origination and termination point and time of day. These systems can also handle the complex tax structures that can affect each call.

This kind of tiered rating knowledge, coupled with the billing system that can handle it, puts switched voice operators at an advantage for rapidly integrating their voice and IP services and billing for them beyond time online. Unfortunately, while the operators may understand the underlying concepts, they may not be able to easily change their legacy billing system to accept the new parameters needed to effectively rate and bill for IP usage. At the same time, because most IP service providers launched their services with flat-rate billing systems, they face tough decisions about how to add switched voice services and implement event-based rating. Their billing systems typically won't be flexible enough to easily handle event-based rating, and won't be able to collate customer usage information between switched voice and IP platforms. Rather than spending months and thousands of hours trying to rewrite computer code, these service providers would be better off deploying a convergent billing system that accommodates event-based rating and can provide a single view of their customers.

Competitive Billing Advantage

Event-based billing flexibility gives service providers a couple of competitive advantages that translate into increased revenues. First, more billing options enable ICPs to generate more revenue by billing for more than a straight fee for service. Second, it allows ICPs to sell packages of bundled services such as local and long-distance voice along with IP data at a discounted rate. This kind of cross-product discounting serves to build revenue because ICPs can sell more services and stem customer churn by engaging them in tailored packages of bundled services.

While flat-rate billing offers the illusion of the best deal from the customer's standpoint, it is often more expensive because it focuses on global charges for services business customers don't always use. Why should a business be charged, for example, the same rate for data transfers from 8 p.m. to 7 a.m. as it is during normal business hours? Billing for actual usage--based on the volume of data, when it was used, and bandwidth used--can prove to be more cost efficient for the customer in the long run.

As IP services continue to enter the workplace, service providers will reconfigure their billing structures to accommodate event rating and billing. In time, the majority of an ICP's customer base will likely see their bills decrease slightly as they pay for actual usage rather than flat fees. The ICP's biggest business clients, however, will likely see their bills increase moderately because they have requested customized bundles of converged services to better suit their needs.

IP: The Next Generation

Soon, billing for IP services will be less about the IP network itself, and more about the content. Customers will be more concerned about what specific services they purchased at what price than whether or not the service was delivered by the IP network or by frame relay. The next generation of IP technology, IP version 6 (IPv6), will provide even more information for billing purposes than the existing IP version. With this technology, a service delivered, such as video on demand, will have identifiers embedded in it that mediation devices will track. ICPs and customers will know exactly what service was billed for, at what time and at what rate. A billing architecture capable of handling these new parameters will enable ICPs to bill for the services and content in different ways, thereby further increasing their revenue stream and maintaining a competitive advantage.

Geoff Coleman is product manager of Singl.eView convergent billing at ADC (www.adc.com). He can be reached at geoff_coleman@adc.com.

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