Billing for Telecommunications Services

How accurate, intelligent billing can help to build brand loyalty.

By Eric Arnum, Editor of EMMS

As the telecommunications industry continues to change its structure radically in the face of increasing competition, the ability of carriers to keep up with the changes is being severely tested. It's not sufficient to design a new service, a pricing plan, and a marketing campaign. Carriers must also be able to deliver a clear, concise, and accurate bill for their services, and then they must be able to talk intelligently about its contents if the customer calls in with questions.

Billing for Telecommunications Services

It's not as simple as it used to be. The bill is the primary means of continuing contact between carrier and customer. New services and new competitors are placing additional pressure on the billing and customer care departments to "get it right" and thereby preserve or improve the carrier's image. But rapidly changing rates combine with new distribution channels to add complexity to the price list. Bills must now go out in multiple languages, multiple currencies, and multiple sizes and formats. Some customers want to be billed for everything at once, while others want separate bills for separate services. Some customers don't even want to see their bills on paper any more, preferring some form of electronic delivery and possibly an electronic payment option.

Building Brand Loyalty

With the challenges facing telecomm billing departments today, the old slogan that the customer is always right has never been more true. The monthly bill conveys an image to the customer. Inaccurate, sloppy, chaotic, or complex bills result in a loss of confidence and ultimately in dissatisfaction. The important difference today is that in many areas customers have a choice of carriers, and they can take their business elsewhere.

Conversely, an easily understandable and accurate bill, when combined with targeted marketing and responsive customer care services, can build a brand loyalty that insulates a carrier from the inevitable price wars of the future. The competition can be neutralized because customers are satisfied with their current service.

Gaining new customers is the job of the sales and marketing departments. But increasingly, the retention of customers is becoming the job of the customer care and billing departments. This is where the carrier makes its case for a continuing relationship with the customer.

There was a time when for many carriers, the monthly bill was just that: a bill with a total amount due and not much more detail. The message was: trust us, pay us, or we'll cut you off. Those days are gone, because the second and third carriers to enter a given market are doing so with brand new billing systems that can deliver a neat and personalized message to individual subscribers about what they bought, what they saved, and what they could also buy to increase their savings in the future.

The monthly bill projects an image. In the old days of government-owned monopolies, the bill was faceless and impersonal, and one size fit all. In the increasingly competitive environment of today, the bill must project a more personal touch, delivering a crucial message to customers: We know what we're doing and we care about you.

The best way for companies to project a favorable image is to install a new billing system capable of adapting rapidly to changes in the market and in customer preferences. The billing system must be able to start small and grow large, while maintaining the personal touch at all times. It must provide accurate billing data to customers, and it must provide insightful statistics to the marketing department.

Opening Up New Markets

At times it seems as if everyone is entering everyone else's markets. Competition is appearing in almost every market segment. Cable television companies are trying to become voice and data carriers. Telephone companies are trying to become entertainment broadcasters. Broadcasters are becoming cable companies, and everyone is looking at the Internet as a new market opportunity. Wireless voice and data services are becoming less of a complement and more of a competitor to their wired peers.

Around the world, telecomm markets are being swept by a wave of deregulation. The Telecommunications Reform Act of 1996 opened up the local and long distance markets in the United States to new competitors. Wireless spectrum auctions that began in the U.S. in 1995 opened up the personal communications services market as a new growth industry for paging, cellular, and wireline carriers to enter.

Meanwhile, the European Commission has kept in sight its goal of opening up its member states' telecomm markets in 1998 to competition, both from within Europe and from outside. Some government-owned carriers are being privatized, others are joining international alliances, and everybody is getting ready for transborder competition to take the place of national monopolies.

Already, in markets such as the United Kingdom and Sweden, telephone companies and cable TV companies are providing consumers with second and third choices where there was previously only one. The British government was one of the first to privatize its national carrier, but several other governments within the EU are about to follow suit. Across Europe, even in places where a local monopoly still exists, new wireless carriers are challenging the established wireline carriers for their customer base. Many people now have the option to use a cellular phone as their second or third line, rather than asking the phone company to install yet another twisted pair.

Flat Rate or Usage-based: The Need for Versatile Billing Systems

Some people say the trend is toward flat-rate billing, while others say the trend is toward transaction-based billing. There is plenty of evidence for both points of view. The Internet and cable television, for instance, have traditionally billed a preset monthly amount for a given bundle of services. Some say telephone services are moving this way, as the cost of calls continues to drop.

A trend toward transaction-based pricing also is in evidence, however. Pay-per-view and video-on-demand services are forcing the cable TV industry to bill for what was watched, not what was available. They must increasingly bill by the program, not merely by the month. Wireless voice and data services continue to command a premium per-minute price for their scarce resource: bandwidth. Some say that when music, phone calls, and video become commonplace on the Internet, the old model of inexpensive flat-rate monthly bills also will have to change to a usage-based billing mechanism.

The attraction of flat-rate billing schemes is obvious: it is much simpler to count the months than it is to count the customer's actual usage. The Internet community has long championed such schemes, allowing customers to use their services as much or as little as they want for a preset monthly fee. But the appearance of streaming audio and video technology on the Internet threatens to fill up the available bandwidth to such an extent that Internet service providers will have to add capacity at an incredible rate.

Users of streaming technology, whether it is used to deliver audio or video programming, may require a thousand times as much bandwidth as the typical e-mail or World Wide Web user does today. While Web pages and e-mail messages average thousands of bytes in length, the average audio or video clip is counted in millions of bytes:

Live concerts and phone calls require constantly open connections, meaning that some customers may require 28,800 bits per second for hours at a time. For higher quality video, ISDN lines may be required, which means at least 112 Kb per second must be available in order for picture quality to be acceptable. With flat-rate billing schemes, there is little incentive for heavy users to ever disconnect from the network, so the inevitable result will be video and audio streams that continue for hours at a time.

The flat-rate billing model will no longer work when some customers account for a thousand times as much usage as their peers. Therefore, the Internet service providers will need to move to a usage-based model as their customers move from text and Web pages to audio and video downloads. And they will need a billing system that also can make that migration.

Cable TV companies also may not be able to continue with flat-rate pricing. In addition to pay-per-view and video-on-demand, cable television companies also will need a new billing system to handle transactional billing in the telephony market.

Telephone carriers, although they already bill their customers for usage, also will need a new billing system in order to keep up with the increased demand for custom calling plans, discounts, service bundles, and additional enhanced features.

Almost all carriers face an increasing amount of competition. Some will see a rapidly increasing number of customers, starting in the thousands and growing into the millions. Others will see their market share erode, as their customers defect to new and lower-priced options. Some carriers may even see their average monthly revenue per customer decline, especially in markets such as wireless and online, where the occasional and light users have finally been persuaded to subscribe. Billing services must therefore be versatile enough to adapt to changes in the customer count without increasing the cost per customer.

The Wireless Revolution

The European wireless market is in its third year of rapid growth. It is set to more than triple in size from 23 million subscribers in 1995 to 72 million subscribers in 2000. For most of those new subscribers, the cell phone will be their second line. For some, it may be their primary line, if not their only line.

	In the United States, wireless phones are already popular and are becoming more so. By the year 2000, some researchers expect 30 percent of the U.S. population to have access to a wireless phone, especially if the new Personal Communications Network (PCN) market takes off as expected. In Europe, GSM is expected to remain the favored type of wireless network, holding on to as much as 74 percent of the installed base in 2000. Wireless services add another level of complexity to the typical bill. On the one hand, basic conversational services will be supplemented by value-added messaging services such as voice mail, e-mail, Short Messaging Service (SMS), and fax. On the other hand, customers may increasingly use their phones and personal communicators for home banking, shopping, and online service access. The messaging options will require a different billing model. Per-minute fees do not make sense when a 60-minute conversation can be reduced to a 16-page fax or a 40KB e-mail message. In the analog world, a minute is a minute, but in the digital world, a minute of voice playback is just one of the possible presentation formats of a sequence of ones and zeros. It may become possible, for instance, to record an entire compact disc as an MP3 attachment and send it to someone as an e-mail attachment. The receiver can then play it back at normal speed. Will the customer pay for the number of minutes it takes to transfer the file or for the amount of data it contains?

Another complicating factor is the tradition of having wireless users pay for minutes of airtime, whether they are making or receiving a call. This works for voice mail because the playback is usually in real time, and it's usually a spoken message. But assume a wireless subscriber receives a 5MB music clip in her mailbox. However, instead of listening to it, she redirects it to a playback unit attached to her wireline phone. Should she pay for receiving it? Forwarding it? And who pays for the data transfers if she deletes it before listening to it? There also is the question of location. Wireless subscribers are not only free to roam between different carriers' service areas. In the case of GSM customers, they also are able to choose among competing carriers in the same service area. They can divert calls to their home or office or to a voice mailbox.

In the future, services will appear that allow one telephone handset to be used as both a cordless phone and as a cell phone. When the user is at home within reach of the cordless telephone's base station, their calls will be billed at wireline rates. When they are out of the area, the calls will arrive over a wireless service, which might cost two to three times as much. It could be a ground-based GSM service, or it could be a more expensive satellite-based service. In some urban areas, it could also be a Telepoint-like service, providing high-bandwidth connections over relatively short distances. The billing system will need to account for how the call was delivered as well as its duration.

When transaction-based services become commonplace, it may begin to make sense to charge not for the duration of a call, but for its value. For instance, merchants could decide to give shoppers a freephone number and charge them a percentage of purchases as a telecomm fee. This type of billing scheme will need to be available for both wired and wireless calls, especially if the popularity of GSM and PCN (called Personal Communications Services--PCS--in America) soars as expected.

More bills, variable prices, increasing complexity, and possibly decreasing revenue per bill--it's no wonder most telecomm carriers are either installing or evaluating a new billing system. A well-functioning billing system can provide them with a competitive advantage, while an aged, simplistic, inaccurate or overburdened billing system can cost them customers.

Extending the Services and Options

Gone are the days when carriers offered ratepayers a few simple choices. Some cable TV companies used to have three rate plans for basic, standard, and premium service. Phone companies used to have a few rate plans for businesses and homes, with discounts for time of day but not much else. Some had the luxury of a monopoly--one where they could get away with providing customers with only an amount due and no details. Pay up or lose service was their blunt message to customers who had nowhere else to go.

Now there are a seemingly endless number of options at every level of service. Besides phone calls, some cable TV companies also are providing high-speed Internet access and burglar alarm services to their customers. There's also pay-per-view and soon video-on-demand options. Besides video, some telephone companies also are offering bundles of wireline, wireless, paging, long distance, and data services to their customers. And there's everything from personal number services to call forwarding, voice mail, caller ID, and premium audiotext services joining the mix.

Accuracy and Professionalism Build Customer Satisfaction

	Meanwhile, billing departments are in many cases becoming extensions of marketing departments. The monthly bill is an obvious place for promotional messages to be inserted, and the more personal and relevant they are to the customer, the better the chance of them having an effect. But even the data the bill contains is a valuable commodity--one that can identify buying and usage patterns, and one that can be used to measure the success or failure of special offers, custom rate plans, and other promotions or discounts.

It's not as if the billing department should begin conducting marketing research. But the department and the billing system it operates should be able to provide its data to others in the company who need to spot trends and identify market segments. One way to do this is through the replication of all billing data into another system, possibly into a data warehouse that exists for no other reason than to satisfy the what-if questions of the curious.

To be effective, such a data warehouse needs accurate and timely data, most likely in a format very different from those used to create monthly invoices. To be successful, such a system needs strong links to the billing system, and it must be directly available to people outside the billing department. As competition and complexity continue to drive the telecomm market, the need for research will only increase. But it need not create further pressures on the billing system or its staff.

Today's billing systems also need strong links to customer care departments. Some say there should be a single system for both billing and customer care, since one is really a result of the other. Billing is the output and customer care is the reply. Since the monthly bill is the primary means to deliver a message to a customer, the customer care department is usually the primary recipient of the responses. The customer receives the bill and then calls with questions, gripes, or requests for changes in service. The usage details and special offers contained in the monthly bill create the questions that the customer care departments must ultimately answer.

The customer care department also needs access to accurate and timely data, on not only what the customer bought, but how and when they paid for it. It needs to know about service problems, late payment patterns, and how the customer's rate plans and service bundles have changed over time. This way, it has an opportunity to answer a question fully, resolve a problem, hasten a payment, and ultimately reduce the time it needs to spend satisfying the customer. The customer care staff has a chance to add a personal touch to a customized bill, creating an impression for the customer that it knows both who he is and what he buys.

Restricting Access

As simplistic as it may sound, customers like the familiarity of a billing format that remains consistent over time. Customer satisfaction will remain high if the bill remains accurate in content and professional in appearance. Customers want their bills to arrive, their payments to be processed, their questions to be answered, and their problems to be resolved on time. The monthly bill is the primary link between carrier and customer--the primary delivery mechanism for news and special offers and the primary means to build brand loyalty and retain customers.

It's a one-two combination that reduces the opportunity for competitors to entice customers to switch carriers. That personal touch can help reduce the urge to switch if all that's on offer from the competition are lower prices. High levels of customer satisfaction will create a brand loyalty that a another carrier will find difficult to overcome.

Billing systems also need links to other technologies that help to improve customer satisfaction and reduce cost. One such technology is an integrated voice response system that customers can use to call in and answer some of their own questions, such as when a payment was received or how much they now owe. This obviously requires links to the payment processing system as well as to other databases within the company. An automated call distributor used as the front end of a phone system can help customers route their own calls based on the type of questions or the kinds of services they buy. It also can help customers find out how long it will be before the staff is able to help them.

In some cases, the billing and customer care system needs links to outside credit bureau, and in most cases also to the installation and repair departments. They can thereby help answer questions about when services will be turned on or off, and possibly they can even prevent a scheduled service shut-off if payment is received at the last minute.

Another new trend found especially in the cable TV and Internet industries is to build some form of child-sensitive access options into the service. Some carriers will want to restrict specific channels and services, while others may want to restrict access by the time of day. But even in the telephone industry, carriers are finding that customers want calls to specific countries and services restricted. Businesses sometimes unwittingly pay for expensive overseas calls to an employee's relatives. Wireless and calling card users sometimes pay for fraudulent use of their accounts. Parents want their children's access to expensive audiotext services (and especially the adult-oriented services) restricted.

While these restricted access options are not central to the job of the billing system, in some cases they may be. For instance, some customers may want to budget their children's access by the day or by the month, turning off their Internet access after a set amount of hours or shutting off their pay-per-view rights after a certain spending threshold is reached. Such quota systems will become especially desirable after parents receive their first huge monthly bill for services their children accessed.

Indirect Distribution Channels: Creating a "Wholesale and Retail" Billing Structure

Emerging indirect distribution channels require more versatility in the underlying billing system. On the one hand, carriers are adding grocery and convenience stores as outlets that accept payments, in addition to the local banks whose business hours were not extensive enough for many working customers. On the other hand, some carriers are opening their own shop-fronts, not only to accept payments, but also to take orders for new services and enhancements that are too complex to transact over the phone.

In addition, carriers are turning in some cases to resellers and third-party retail outlets to sell some of their services such as wireless and paging. Carriers must therefore use a billing system that can charge both wholesale and retail rates or possibly one that can bill on behalf of these new distribution channels and return a commission or royalty. In some cases, they must provide the indirect distribution channels with the billing data that these third parties will use to create invoices in their name, with the carriers getting their cut once a payment is received.

To prepare for the possibility of a disaster knocking out the billing system, companies must create mirrored sites and backups of their data. As new services are added, the billing department will need a testbed on which to pilot new invoice formats and check for unforeseen errors. They also need to create a resource for the market researchers, possibly by replicating their billing records in a data warehouse that simultaneously increases the availability of the information and decreases the need for the billing staff to reprocess it for internal use.

Customized Billing

The trend is toward customized billing in every way. It may be as simple as delivering different sized printouts to different market segments. Some may want to receive A4 pages while others might prefer a smaller size. Some may want all their details on one bill, while others might prefer just a summary on paper with the details provided on tape or disk. The format of the invoice can itself increase or reduce customer satisfaction, especially in markets where the old monopolies used to deliver invoices on machine-friendly yet user-unfriendly punchcards that contained warnings not to fold, spindle, or staple.

Customers are in many cases demanding the electronic delivery of their monthly bills, automatic billing to their credit cards, and possibly even an electronic payment option. They want to neither receive nor return paper, preferring to receive their records on tape or disk. Researchers believe that by 2000, 60 percent of business customers and 20 percent of consumers will receive their monthly bills in an electronic format.

Researchers expect that while 25 percent of large customers will still prefer to receive their electronically formatted bills on a physical media such as CD-ROM, the great majority will want to receive them in a purely electronic form such as EDI or e-mail messages over the Internet. Others will want them to arrive in the HTML format used on the World Wide Web, rather than in a plain text or EDI format. A billing system therefore needs to be as versatile as possible in regards to the format and delivery mechanism preferred by the customer.

Single or Multiple Bills?

One big question telecomm carriers have is whether they should bill for all usage on one bill or whether they should provide separate bills for wired and wireless, voice and data, or phone and cable TV. Some experts say that such an all-in-one bill might be counterproductive, forcing a customer to realize how much they are really paying for all their different options and bundles of services. Separate bills, and possibly even staggered deliveries, may become a requirement if this proves to be true.

Regardless of whether customers get one bill or several, the marketing and customer care departments will want to know about their aggregate spending. Large customers also may want their aggregate spending to be used to qualify them for volume discounts, even if they prefer to pay for each service separately.

Some customers may want to pay for the usage of their telecommuters and others who work at home or in the field and have that usage also applied to their volume discounts. Other customers who want their bills broken out by division or office for internal purposes will still want discounts based on their total spend. Marketing departments may wish to provide promotional discounts on one service to users of another service, such as offering free local phone calls to cable TV customers. Billing systems must therefore be able to combine or separate service elements on a customer-by-customer basis.

The importance of discounts cannot be underestimated. Furthermore, some carriers will overtly inform their customers about how much they're saving, comparing their totals to those offered by competitors. A few will even compare one rate plan to another, refunding the difference and/or switching the customer to the better deal. Some carriers are emulating the cash-back and rebate offers of the automobile industry, while others are copying the frequent flyer concept with their own reward clubs. These promotional innovations create further stresses on the billing system.

Dealing with Taxes, Currencies, and Languages

In both Europe and America, billing systems must deal with different national and local tax rates, facing in some cases the possibility that different products and services will have different value-added tax and sales tax rates in the same location. European carriers also face different currencies and national languages, and even in America there is an emerging demand for non-English billing services.

Many carriers are finding that a flexible billing system allows them to respond to competitors' offers quickly by modifying their own rate schedules on a monthly or even weekly basis. Others find that a flexible billing system is necessary to deploy new services rapidly. It makes little sense to design a new feature enhancement quickly unless its accompanying rate schedule can be integrated equally quickly into the billing system.

Especially with new services, the billing system must be scalable from hundreds to possibly millions of subscribers. Systems must be able to start small and grow with the size of the customer base. It would prove to be costly and disruptive if the start-up billing system must eventually be replaced by a midrange system and later by a large-scale system.

An entry-level system must be able to handle comfortably about 25,000 subscribers. As the subscriber base grows, carriers should be able to add hardware without changing over to another software system. A truly scalable system should be able to grow into the range of a million subscribers in this fashion.

Dealing with Future Demands

The rapid pace of change in the telecomm market is likely to continue into the foreseeable future. Telecomm services will be delivered by an array of competing carriers, in an assortment of bundles and pricing options.

Companies that used the one size fits all billing model will find that their customers want more. If they can't deliver, the carriers will watch their market share erode.

Companies that sold a few core services at a more or less consistent price will find their customers want more bundling and discount options. Besides time-of-day discounts, customers also will want location-based discounts, as well as discounts based on their total spending. And they will want increasing or decreasing detail, frequency and delivery options on an individual basis. Just as no two customers are alike, neither will be their bills.

A billing system that can quickly adapt is the answer. It must be able to grow or shrink as conditions warrant. It must be able to provide complete or summary information in a variety of printed and electronic formats. And it must interoperate with other internal systems that the company uses to determine the demand and pricing models for new services. But most of all, it must project a positive image to the customer, who will increasingly have other places to take their business.