Channel Partners

April 1, 1999

8 Min Read
Opcenter: Patchwork ICP "Networks" Complicate Convergent Billing

Posted: 04/1999

Patchwork ICP "Networks" Complicate
Convergent Billing
By Jon Sehr

Most growing competitive local exchange carriers (CLECs) and interexchange carriers
(IXCs) consider themselves more than local or long distance companies. They often call
themselves integrated communications providers (ICPs) and are building convergent
offerings, bundled packages of various services, to lock down strong customer
relationships before incumbents are permitted to provide similar offerings. These packages
generally consist of a mix of local voice, long distance, mobile, Internet and
high-bandwidth data services such as asynchronous transfer mode (ATM) or frame relay. The
challenge, however, is that growing providers rarely, if ever, have the network facilities
necessary to supply all of these services to their customers. This means service
unbundling and resale are necessities.

Emerging ICPs, then, bill their customers directly and push, if nothing else, a brand
name that all services are associated with, regardless of the underlying provider. A
growing competitive provider needs its customers to know they are being cared for,
creating a rosy fagade to shield the customer from the chaos that often occurs behind the

Time for Some New Tricks

As ICPs build their businesses faster than they can possibly build out their networks,
they become increasingly dependent upon incumbents to provide underlying services, either
through loop unbundling or resale. The customer can’t be the wiser, raising some
challenges for the ICP.

David Vranicar, senior vice president of information technology, Birch Telecom, Kansas
City, Mo., provides a straightforward example that will apply to just about any CLEC.
Though Birch does have some of its own switching and network facilities, it still relies
on reselling San Antonio-based Southwestern Bell service for a large portion of its
customer base in Kansas and Missouri. Aside from access, transport and switching, Bell
also provides Birch with directory assistance and operator services.

"We have very consciously tried to shield the customer from any confusion. We’re
trying to build the Birch brand and the idea that we’re providing the service. We don’t
highlight the fact it’s being provided by another," Vranicar says.

Ironically, due to the nature of consumer protection laws that protect
access to dial tone, if a subscriber only sends a partial payment, the payment first
mustbe applied to the local phone service, the customer’s emergency lifeline. Anything
left over is then distributed to other underlying providers.

As Birch is in its initial growth stages, its plan is to let customers know who’s
looking out for them, regardless of the underlying provider. In this case, opposite from
those discussed earlier, Birch may not provide the service, but they do have the
customer’s attention, and a large part of that is accomplished through brand
association–the products are branded Birch, the operators answer "Birch
Telecom" and it says Birch on the bill.

This is all fairly logical, but it’s not so simple. Resale-based CLECs struggle with
two major issues: customer activation and trouble repair. If a customer calls with a
problem that is actually a Bell network problem, Birch must rely on Bell for the proper
information and to go fix it. Similarly, when a customer is awaiting switchover and
activation, there’s no guarantee the Bell technician will show up on site when he’s
supposed to. Birch can’t point the finger at Bell like Bart Simpson saying, "I didn’t
do it."

"It’s difficult and in some cases takes longer than we’d like, but it’s just the
way it is. You have to find ways to work around that," Vranicar says.

Vancouver, Wash.-based CLEC GST Telecommunications Inc. provides a more complex
example. GST has made several acquisitions in the past year, mainly of small long distance
carriers. It owns network stretching from Washington to Idaho, along the West Coast, into
Arizona and over to Texas. The network involves 14 switches with intermachine trunks on
which GST carries its own traffic as far as it can. For off-net customers, GST has
agreements with AT&T Corp., Sprint Corp., MCI WorldCom Inc., and Qwest Communications
International Inc., Denver. The service providers pass usage data for off-net customers to
GST and they bill customers directly. Customers are signed on to GST long distance
service, unaware of the underlying arrangements or providers. In some cases, these
customers use GST only for long distance and their traffic may never touch GST’s network.
GST does, however, retain control of rate plans and billing in all cases.

Cautionary Billing Tale No. 1:
Convenience Turns Cannibal

Fundamental changes
occurring in the way billing and payment are done greatly affect marketing efforts and
control of the customer, says Deborah Strong, vice president of management consulting, DMR
Consulting Group, Montreal. For example, many people pay their telecommunications bills
with a credit card, effectively consolidating all of their invoices onto a single
statement. The problem for providers is that the credit card provider controls the
marketing messages that accompany the bill; the carrier has effectively surrendered its
right to direct bill and sell to the customer in an effort to provide some convenience.

GST provides local service mainly with dedicated and channelized T1s it calls
PowerTrunk and PowerFlex, respectively. In these cases, the T1 connection to the customer
is provided by the incumbent but all switching is provided by GST, as long as the customer
is within the CLEC’s footprint. Some of its customers have locations outside the
footprint, in which case GST must rely on resale to serve them. GST also purchases
unbundled loops to serve those customers that do not require T1 capacity. The CLEC also
owns a frame relay network, is building an ATM network and provides Internet access
through its San Francisco-based subsidiary Whole Earth Networks.

Currently, GST runs multiple billing systems, a result of its numerous acquisitions,
and brands its services with the former service provider’s name noted as a GST company.
GST is in the process of moving its entire customer base onto Cambridge, Mass.-based Kenan
Systems Corp.’s Arbor/BP convergent billing platform to simplify its offerings and move to
a solely GST brand name, says Patti Bowie, director of billing at GST.

Moving to the convergent system will allow GST to add value through the bill. First, by
combining data for all services on one system, GST can implement promotions and discounts
much easier than it can with multiple systems. Second, GST can offer numerous reporting
and data manipulation features to the end customer by delivering bill detail on diskette
or CD-ROM. "Most people don’t want the bill just neatly presented when it’s 1,000
pages of call detail," Bowie says.


One of the essential pitfalls of convergence–accomplished through arrangements with
multiple underlying carriers–is handling partial payments. An ICP might be the central
provider and might own the bill, but it’s also therefore responsible for collections.

Cautionary Billing Tale No. 2:
Agents of Change

Problems may arise when
service providers use external agents to sell their services. With a service–such as long
distance–that’s easily transferred from one carrier to another, external agents and
internal salespeople may trade customers back and forth to keep the commissions rolling.

To prevent this, independent consultant and billing specialist Jim O’Neill says
commissioning plans will become far more complex, requiring billing systems to become more
robust to manage them. Rather than a percentage of sales, commissions may be based on
collections or customer longevity. The plans will vary depending on the service in
question and the types of commission fraud to which they are vulnerable.

Ironically, due to the nature of consumer protection laws that protect access to dial
tone, if a subscriber only sends a partial payment, the payment first must be applied to
the local phone service, the customer’s emergency lifeline. Anything left over then is
distributed to other underlying providers. This creates float issues for the wholesalers,
unless they manage to guarantee payment from the LEC, in which case, the LEC is on the
hook for its own delinquent customers. If the other providers aren’t paid, they can cut
off services such as long distance or wireless, making the customer a churn candidate.

Now, customers that don’t pay their bills aren’t necessarily customers worth having,
but the ICP needs to hold onto those customers who generally pay their bills and might
just have a problem for one month. An unexpected service cutoff could drive an otherwise
good customer away. The laws governing these issues vary from state to state, making this
an extremely complex issue for any multistate service provider.

Additionally, in recent months there has been debate over establishing "truth in
billing" requirements to combat slamming and cramming. Essentially, these rules will
require billers to note exactly where charges are coming from and who’s providing
underlying services. This could be a thorn in ICP brand managers’ sides as they fight to
establish their brand names by keeping customers shielded from underlying carriers. They
may be faced with no option but to reveal the true patchwork of their networks in the fine

Jon Sehr is a freelance writer specializing in telecommunications services billing
and operational support systems.

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