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December 1, 1997
By Dan Baker
By Dan Baker and Nancy Duvergne Smith
If the telecom business is a race
car–fast-moving and subject to quick turns–then billing is
where the rubber meets the road. But a billing engine is only as
good as its grip on the pavement–and customers’ loyalty. Billing
managers build that loyalty by producing a finely tuned invoice
that’s flexible and reliable and ensures satisfying contact with
For billing managers, hazards loom at every turn. Accurate
bills need to go out on time, no matter how many new services,
price changes or discount plans are introduced. Although
marketing is pushing for a single invoice, pulling call data from
multiple in-house service providers and calculating discounts can
be a nightmare. Sure, the latest object-oriented software tools
promise quicker programming changes, but making those hard-coded
legacy billing systems respond flexibly to market demands is
easier said than done. Fast response to these challenges is
critical, yet any change that imperils accuracy or speed is a
To understand how billing managers make critical decisions on
billing system options, Technology Research Institute (TRI), a
market research firm based in Sudbury, Mass., conducted a
worldwide survey of billing executives at 30 emerging small- to
medium-sized telecom carriers. The survey focuses on billing
systems purchases and upgrades for convergence carriers, defined
by TRI to include small independent telcos, cellular providers,
PCS providers, competitive access providers (CAPs), resellers and
international gateway carriers.
As the competition heats up, companies are paying increasing
attention to billing. After all, billing remains the most
frequent and reliable contact a carrier has with its customers.
The key billing system attribute today is flexibility. A
carrier’s marketing department needs the capability to roll out
new services in rapid-fire fashion. To spruce-up invoices and
make them powerful marketing weapons, carriers are upgrading
their underlying billing platforms, software and systems.
Producing bundled bills is the biggest factor driving billing
upgrades today. Telcos figure that bundling will encourage
customer loyalty. First, paying one invoice is more convenient
than writing checks for several bills. Second, customers are
encouraged to buy more services through bundled discounts. And,
should a customer switch even his cellular service to a
competitive carrier, then everything else in the bundle becomes
The tactics of CAPs show how carriers use bundling. In
exchange for exclusive telecom service licenses, CAPs are
offering the owners of office buildings, universities and
multi-unit residential complexes a discount on local dial- tone
service. One key incentive is a cross-service discount on long
distance services. If a tenant spends at least $30 on long
distance services, for example, he may earn a 10 percent discount
on local calls.
Another benefit of bundling is a deeper level of understanding
customers. One biller notes: "To do anything intelligent, I
need one database that tells me which services customers have and
which I can cross-sell." Bundling delivers that single view
of customers who buy multiple services and/or maintain multiple
The ultimate goal is to win and hold customers by giving them
a choice of bill format and account aggregation preferences.
Applied in the customer care area, consolidated billing can alert
carriers to valuable cross-sell opportunities.
Customers also are driving bill changes aimed at convenience.
Some are asking for different billing dates, alternative payment
methods, bilingual formats and environmentally friendly bills
with less paper. Some want simpler bills. Others, particularly
businesses, want complex usage analysis.
The first road hazard faced by billing executives who need to
upgrade is choosing whether to build an in-house system, buy and
customize off-the-shelf systems or outsource billing entirely.
Many large convergence carriers are sticking to their current
in-house systems because they often are more sophisticated than
those available on the open market. Outsourced billing is a
strong contender among convergence carriers that have deeper
pockets. For instance, of the carriers spending more than $15
million on billing in 1996, 49 percent expect to outsource
invoice processing in the future.
Resellers, though, are cooler to outsourcing due to
difficulties inherent in coordinating billing streams from
multiple local exchange carriers (LECs). Says one reseller’s
business manager, "It’s tough enough for us to sort out LEC
billing ourselves. I can’t imagine an external service bureau
willing to jump into this quagmire."
Selecting an off-the-shelf billing system is not a Sunday
afternoon drive, either. Billing vendor showrooms offer shiny new
models with every salesperson claiming high performance and
smooth handling on all road conditions. Yet, the carriers TRI
interviewed cited serious shortfalls. In fact, 67 percent of
carrier respondents view off-the-shelf solutions as neither
sufficiently robust nor full-featured. Despite the risk and high
costs, a healthy 66 percent of convergence carriers said they
were investigating components of next-generation billing systems.
Deploying a three-tiered architecture to build a bridge
between legacy and next-generation systems often is a sound
investment, preserving legacy data and building flexibility for
A three-tiered architecture allows a carrier to migrate
through middleware, making legacy systems act as a database
server to a newer and more flexible front-end user interface. In
this configuration, minicomputers or mainframes perform the bulk
of bill processing. An intermediate process server–usually a
UNIX box–navigates and controls the process flow between the
multiple data servers. Finally, a desktop computer serves as the
One advantage to three-tiered approaches is innovative
features can be added to existing systems module by module in
building-block fashion. Advanced features are critical to keeping
competitive in areas such as bundling of service bills, corporate
account aggregation, single-view customer profiling, bill
formatting, bill messaging, multilanguage billing and data
Bill messaging, for example, is proving a highly effective way
for a telco to show customers the benefits and discount savings
they are earning. Says one rural LEC billing manager,
"Unless we show that discount amount prominently on the
bill, we’re liable not to get credit for it in the customer’s
eyes, and he’s likely to deposit that ‘Switch-Me-For-Free’ check
from AT&T he got in the mail."
For Working Assets, a reseller that’s built a business
addressing the needs of its politically aware subscribers, bill
messaging delivers the extra value that distinguishes it from the
pack of long distance competitors. The company employs bill
messages to deliver political news specific to a customer’s
location or known interests in various social causes.
Lower costs are moving convergence carriers to outsource, the
TRI study found. A full 77 percent of carrier respondents that
outsource cited reducing their billing costs as a critical
driver. By delivering bills at a guaranteed cost, outsourcing
firms can reduce a telco’s information systems costs and lower
financial risk. These service bureaus absorb information
technology (IT) capital costs and keep their infrastructure
current by incorporating the latest technology and spreading the
overhead among many client carriers.
This billing outsource philosophy fits well with a reseller’s
focus on sales and offloading unnecessary capital expenditures.
And there’s always the danger when buying an off-the-shelf
package that two years down the road–with a big boost in
subscribers or other market change –a carrier might outgrow the
Carriers that hesitate to outsource cite high costs for their
size operation or poor service bureau experience. Small carriers,
in particular, say large bureaus cost too much. Says one skeptic,
"Their systems are geared for a much larger operation,
making some of their features too restrictive for us."
Above all, TRI found a demand for billing systems vendors and
integrators to provide systems with a highly flexible
architecture that’s able to plug in new services easily and adapt
to constant market shifts. According to one convergence biller,
the overriding question is not whether a vendor offers specific
industry experience, but rather whether its system can adapt
easily to accommodate future services. "Nothing in billing
is rocket science," he says, "but when a vendor takes
you through its process, you learn if it has correctly figured
out the problem."
Billing managers also are finding it tough to determine
exactly what vendors truly have to sell. "Getting billing
vendors to reveal the true capabilities of their software is like
pulling teeth," says one carrier billing manager. Vendors
may claim, for instance, that their consolidated bill can merge
multiple services, but it may be no more than electronically
stapling billing pages together. Or they may falsely claim their
systems can scale easily to accommodate rapid subscriber growth.
Scalability concerns abound since hitting the wall at, say,
500,000 subscribers might mean an expensive and disruptive
conversion process to a new system.
When it comes to financing a solution, there’s a budget gap
between large and small carriers. TRI interviewed a CAP executive
who was astonished at the "$100 million Godzilla"
billing project a large systems integrator tried to foist on his
company. This CAP finally chose a small but telecom-savvy
integration shop able to adapt an existing small LEC billing
package to its needs.
Selecting the operating system under the hood is also a
critical call. While UNIX, minicomputer and mainframe solutions
hold the lead, contenders such as AS/400 and Windows NT are
UNIX, developed at AT&T Bell Labs in the 1970s, holds a
historically strong position in telecom network systems and has
captured the majority of telecom billing service purchases. UNIX
servers from IBM, Digital and Sun lead the billing market in both
current use and future buying plans. In addition to a breadth of
world-class application support, UNIX’s strength extends to
multiple business support systems such as customer care, decision
support, service provisioning and order entry.
UNIX scalability gets mixed reviews, however. One billing exec
affirms, "UNIX vendors are making great strides improving
throughput and, as a result, UNIX can handle the loads we now
face. To pump billing volumes through, I always believed you
needed a mainframe class system. Today, UNIX systems have
achieved that mainframe class." Large or midsize carriers
facing fast growth are more concerned. When a carrier is billing
500,000 customers, expects 40 percent growth a year, and has a
marketing department screaming for real-time call data access,
then system scalability and throughput become its lifeblood–and
that’s where mainframe machines traditionally have an edge.
Although UNIX is in the lead, convergence billers are not
about to throw out their legacy investments. Rather, many will
build three-tier architectures that enable older, but still
robust, machines to fulfill a useful role distributing data to
the younger generation of GUI-based desktops. The reality is
that, while client/server systems offer powerful applications,
the legacy systems may offer greater transactional horsepower and
better systems management. One new three-tiered solution from
Alltel, Virtuoso II, features an elegant architecture: PC
workstations running DOS and Windows to operate the front-end
tasks of customer care, switch processing and reporting; UNIX
process servers to manage business processes across markets,
including real-time rating and credit/fraud management; and an
MVS mainframe in the background to run high-volume and
compute-intensive transactions, especially final bill rating and
Another contender, the AS/400, has a modest but creditable
following among small, independent telcos. Designed as an
affordable alternative to a mainframe, the AS/400 accounts for
some 8 percent of bill processing for the carriers TRI surveyed,
with near-future growth tagged at 12 percent. The AS/400 is
popular among no-frills billers, carriers who want performance
and reliability with low ownership costs.
For front-end billing and customer care workstations,
Microsoft Windows is ubiquitous, yet none of the major billing
vendors has found much use for Novell Netware, Windows NT and
other PC-based network operating systems.
Among relational databases, Oracle is the choice of
convergence carriers for both installed base and future demand.
Relational technology is state-of-the-practice, but billers are
excited about state-of-the-art, object-oriented databases for two
reasons: First, they promise significant productivity gains–as
much as 50 percent–after a learning curve, according to one
billing executive. Second, the modularity and reuse of
object-oriented software is an attractive way to achieve faster
time-to-market and in-service deployment.
Telecom carriers’ new focus is customer
infrastructure–systems that communicate with customers, build
loyalty and attract profitable new business–and flexible billing
systems top the tool list.
With major industry growth ahead and diversification of sales
relationships, good tools are required. TRI expects the market,
estimated at $1.5 billion in 1995, to grow at an 18 percent rate
to roughly $3.5 billion in 2000.
And, as the telecom business emerges from its infancy, its
sales distribution infrastructure will mature. Today, probably 90
percent of all telephone customers are still acquired, supported
and billed by a handful of very large telecom carriers.
In the future, the industry will more closely resemble the
automotive and insurance industries, which create a core product
and then rely on independent resellers and dealers to move
product out the door.
What do these trends mean for billing executives? The chief
industry goal of convergence billing–bundled bills–must be
based on deep system integration that will produce a multiservice
invoice that meets three needs: First, it must be
customer-friendly, readable and convenient to pay. Second, it
should provide a cross-service "single view" of the
customer’s invoice history to aid customer service. And, third,
it should allow a carrier to build rich customer profiles for
Fortunately, convergence carriers soon will be able boost
their competitive positions by playing a big carrier
game–billing partnerships with solution vendors. Partnerships
already are forming: MFS is partnered with Kenan Systems, and
Citizens Telecom has linked up with Saville Systems, to name two.
These partnerships are golden for both sides. Vendors get
invaluable experience developing systems in live telecom
environments while carriers upgrade their billing engines
supported by integrators with broad IT and business process
experience. TRI believes innovative solution vendors soon will
partner with their smaller carrier counterparts so both partners
wind up with checkered flags.
The information from this article is based on a recent
Technology Research Institute (TRI) study titled, "Wireless
& Convergence Carrier Billing Systems." For a free table
of contents and descriptive paper on this 304-page report,
contact Linda Krpata at TRI, 730 Boston Post Road, Sudbury,
Mass., 01776; telephone (508) 443-4671 or fax (508) 443-4673.
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