Posted: 12/1999

IP Complicates Convergent Billing
By Susan Helen Moran

In pursuit of the convergent bill, carriers are seeking systems that will combine the
newest Internet protocol (IP) offerings, as well as their traditional services.

Telecom service providers are in hot pursuit of the convergent bill. Instead of
concentrating on bundling just circuit-switched services, many carriers want to develop
systems that will combine the newest Internet protocol (IP) offerings, as well. This
undertaking, however, is not without several challenges.

"Many carriers have mastered getting more than one item on a bill, but the issues
are broadening," says Vince Shaw, director, Telecommunications and Media Practice,
Deloitte & Touche, Washington.

Presently, more than 80 percent of the large carriers in the United States can bill at
least two services on the same invoice, but few carriers are able to converge IP and
traditional switched services without a lot of difficulty.

Yet, more than 3,000 companies provide Internet access today, according to the Yankee
Group, Boston. Plus, the estimated 150 million Internet subscribers is expected to double
by 2003, according to International Data Corp. (IDC), Framingham, Mass. "So, there is
a realization that to succeed in the telecom industry, carriers must provide very broad
service offerings," says Carl Kehres, solutions architect, SAP America Inc., Newton
Square, Pa.

"Operators [must] leverage all available means not only to gain new subscribers,
but to maintain existing ones, and establish as many product anchors as possible within
the subscriber home or business," says Daniel Coyle, spokesperson for Proxima Systems
Ltd., a Montreal-based billing vendor. The ability to cross-discount, cross-sell and
upsell across multiple product lines are the main competitive reasons carrier executives
give for installing convergent billing and customer care systems.

Invoicing for IP with Traditional Services

Why the heavy focus on integrating new IP services into the convergent billing
environment? Because corporate end users want IP. "IP telephony brings significant
cost savings and great new service capabilities to life, but it is still ‘telephony’ and
the expectation is that they should be billed as they always have been–on their
traditional phone bill,” says Joe Lynam, CEO of billing vendor Integretel, San Jose,
Calif.

Corporate customers represent about 80 percent of the revenue for a traditional
telephone company such as MCI WorldCom Inc. or one of the regional Bell operating
companies (RBOCs), even though those corporate customers represent only about 20 percent
of the actual number of customer accounts, state several industry sources. Corporate
customers often represent close to 100 percent of a competitive local exchange carrier’s
(CLEC’s) customer base. So, it’s not difficult to figure out that these carriers could
make their high-value customers very happy with their new IP offerings–bundled any way
their corporate customers want them.

The many partnerships and acquisitions between traditional billing vendors and IP
mediation device and software vendors indicate the expansion of the convergent billing in
this direction.

Integretel and Clarent Corp., Redwood City, Calif., a provider of IP telephony
products, will be working together to produce a combined bill for multiple services as
announced in late August 1999. "Through our work with Clarent, service providers will
be better able to take advantage of IP telephony quickly and effectively, without forcing
businesses and consumers to change their normal phone bill payment behavior," Lynam
says. Billing data from Clarent-based Internet telephony providers will flow to
Integretel, which will collect and print the call detail onto a customer’s local phone
bill.

Prism Communications, a new CLEC in New York that will be providing some new IP
services, recently signed a deal for ADC Telecommuni-cations Inc.’s Saville CBP, a
convergent billing system, and Saville Care, a customer care module. ADC, Minneapolis, has
contracted with XAACT Technologies, Inc., Santa Clara, Calif., to supply its XACCT-usage,
a metering and mediation solution for IP networks, so it could allow its customers such as
Prism to bill for both IP usage and traditional telecom services.

XAACTusage provides a single point of interface between the IP network infrastructure
and a billing system. It is a multilayer mediation system that can capture usage data from
several network elements including routers, switches, firewalls and application servers.
It converts the data into "XACCT detail records" (XDRs) that are much like call
detail records (CDRs) generated by telephone switches, according to an XACCT spokesperson.

LHS, an Atlanta-based billing vendor, and XAACT announced their partnership in June to
integrate LHS’s customer care and billing software, BSCS, with XAACTusage. "As voice
and data start to converge, telecommunications providers are starting to offer IP-based
services such as IP fax, IP telephony and streaming multimedia," says Klaus Kleber,
an LHS spokesperson. "Providers realize simply billing ‘time on line’ for these
services is not sufficient. They must bill for them based on a variety of parameters such
as type of service, volume of use, bandwidth and number of transactions. The integration
of BSCS and XACCTusage will enable service providers to create accurate, usage-based bills
based on a wide range of parameters."

In September, Certis Ltd., London, a billing vendor that markets its own product,
ADCAMS billing and customer care solution, throughout Europe, also chose to partner with
XACCT Technologies. "Adding XAACTusage to our family of billing solutions means we
can offer service providers a migration path from today’s circuit-switched networks to the
next-generation IP networks without having to tear out and replace their billing systems
and processes," says Doug Brown, Certis’ director of network solutions.

Yet another example of a billing vendor-IP vendor teaming up took place in June when
Convergys Corp., Cincinnati, one of the largest–if not the largest–billing vendors for
the wireless industry–acquired Technology Applications Inc. (TAI), St. Louis. The former
TAI, an Internet software development and systems integration company, specializes in
usage processing, usage rating, reporting credit card billing and invoice billing for the
IP market.

Other vendors are building entirely new billing systems that vendor spokespersons say
are already truly convergent and can handle both IP usage and traditional usage without as
much additional mediation. Proxima, for example, has built from the ground up a convergent
system that reportedly includes billing for IP services as well as circuit-switched
services. Mystral is "software specifically designed for the rapidly converging
telephony, cable and Internet markets," Coyle says. Still other billing vendors, such
as Portal Software Inc., Cupertino, Calif., are known first and foremost for their
capacity to bill for IP services–and were built with that in mind.

Even So …

Even with so many positive effects of a convergent billing environment and the majority
of carriers, it seems, heading in that direction, some telecom executives see it as less
of a priority than other billing considerations. "Itemiza-tion, accuracy, timeliness
and flexibility in billing format take precedence over whether a bill is convergent,"
says Bob Meldrum, director of marketing, Time Warner Telecom Inc., Greenwood Village,
Colo. But he admits that convergent billing will grow as a priority as his carrier evolves
into the future: "As we evolve, the bill will become more convergent to meet customer
needs over time. We know this because we work very closely with our customers. Together we
craft different products and services with our customers sitting at the same table. As our
corporate customers evolve their businesses, they say they will need a convergent bill for
better efficiency," Meldrum says.

Other carrier executives worry about their ability to handle partial payments from a
customer who receives a combined bill, but takes issue with the amount being charged for
one of the multiple services listed on the bill. "The accounts receivable could
become a nightmare," says one accountant at a local telecommunications company who
requested anonymity.

However, most vendors are more optimistic that partial payments will not cause a
problem for carriers that have a good business flow-through model in place. "If the
customer pays their Internet bill but not their long distance, SAP’s software rules-based
system can handle the partial payment," Kehres says. For example, a carrier can
configure the rules such that if the bill is for long distance and paging, the paging
service will be paid first and the remainder will be applied to the long distance account.
"In most cases, carriers configure these rules based on state and local regulations,
or on a business decision to pay one cost center before another," he says.

Tying a convergent billing system together with the accounting and other operations
support systems (OSSs) can have additional benefits. Many industry experts believe that
the best way to gain and retain high-value customers is to make sure that everyone inside
the carrier can get information on the customer in real time and online. "A single
view of the customer is what a convergent billing environment [is for] from a financial
billing receivable collections and management perspective," Kehres says. "If you
can’t get a 360 degrees-view of your customer, you are at a disadvantage," he says.

For example, some carriers’ collection departments have no quick or automatic way to
distinguish between two end users that are both 60 days overdue and each owe a balance of
$50. However, one may spend an average of $50 per month on services, whereas the other may
spend $100,000 per month with the carrier. It would be helpful, reasons Kehres and others,
to know the difference up front before sending a nasty letter or–depending on the
service–a cut-off notice.

Transitioning to a Truly Convergent System

Historically, to meet market demands, many large carriers bought additional, smaller
billing systems separate from their main billing system. "From a process, people,
service and maintenance view, this multisystem environment is difficult to handle,"
Kehres says. But, at the time, it was the only way to get new telecom products quickly to
market in the relatively new competitive environment. These carriers may be forced to stay
with the aggregated form of bundled billing for the time being.

"A number of carriers will be running both a circuit-switched [network] and
investing in an IP network for the next few years. [I] believe it will be 10 years before
carriers move totally to IP," says Rich Aroian, vice president of marketing and
alliances, ADC Software Systems division, which sells network equipment and recently
acquired Saville Systems, Burlington, Mass.

When that day arrives, convergent billing could become a non-issue. "IP, the
transport mechanism for the Internet, allows you to provide a number of different services
[including voice, fax, video and data] on one network," Aroian says. "So, it is
naturally convergent." Thus, if a carrier provided all its services to its customer
base over IP, it would, hypothetically, need only one billing system. No stapling,
combining or aggregating of invoices or record formats and no mediation would be
necessary.

"Carriers will get out of circuit switching altogether and pump millions of
dollars into putting all of this over the Internet–IP, synchronous optical network
(SONET) and asynchronous transfer mode (ATM)–using routers and other methods to carry
bandwidth [which] will result in a total convergence of many of the services and
products–voice data and video on one network," says Al Rogers, a senior consultant
at system integrator Logica plc’s Telecom division, London. "This will result in a
need for new support systems–we do not even know how to bill for this yet," Rogers
says.

"The problem is that no one is [really] dealing with billing for this new
environment. Customer detail records are understood by the billing systems, but when we
get into the packet environment, there is no standard of what a detail is. XAACT, Cisco
and Comtel are trying to design mediation devices that try to take this information off
the IP network and convert it into something like a [standard] CDR that can be understood
by the legacy and other billing systems. [But] this is probably five to six years
away," Rogers says.

SAP’s Kehres seems to agree: "To collapse the present multibilling system
environment will be difficult."

Integrating Diversified Billing Systems into a Consolidated Platform

Susan Helen Moran is a free-lance writer based is Oakton, Va. She can be reached via
e-mail at [email protected].