Joseph George, Director, Revenue Protection and Interconnect, MACH, explains why operators in emerging markets are increasingly opting for a managed service approach to interconnect billing...
The ability to leverage economies of scale, keep up with intense competition and rapidly rollout new services has always been crucial for operators in emerging markets. To survive and thrive, operators across Eastern Europe, South Asia, Africa and Latin America have learnt to support lean, agile operations and the area of interconnect billing is no exception.
It’s no secret that the appetite for data services is growing rapidly in emerging markets. For example, data revenues in Africa will reach US$18.5bnby 2016, making up 22 percent of the region’s total mobile service revenues, compared to just 12 percent in 2011.[i]Consequently, operators in emerging markets know that support for international data roaming will be crucial to driving higher revenues and reducing subscriber churn. Operators face the need to provide global mobile data services regardless of subscription type, device type or access type, as well as compelling and flexible pricing plan options. However, successfully monetizing international roamingrequires operators to economically support complex interconnect billing processes.
While accurate interconnect billing can typically generate between 30 and 60 percent of overall revenues for some wireline and wireless operators, it can also account for up to 30 percent of operating costs, due to the need to painstakingly reconcile Call Detail Records (CDRs). For most operators, the level of un-reconciled CDRs reaches 4-5 percent each month, which translates into a significant and, for the most part, avoidable financial loss. This is a particularly severe problem for operators in emerging markets, many of whom still rely on inadequate spreadsheet-based systems for billing and reconciliation that cannot provide granular control and visibility into processes.By deploying high-quality billing and reconciliation systems, operators benefit from greater control and efficiency, economies of scale and substantially reduced revenue leakage. Such systems also ensure optimal routing, the ability to quickly adoptto new rating/billing scenarios and better margin management.
However, the rollout of a high-quality, in-house billing solution is simply not an option for many operators in emerging markets. In regions with low ARPUs and paper-thin profit margins, operators cannot afford the high CAPEX and significant OPEX necessary to deploy comprehensive in-house systems.For example, ARPUs in Latin America are less than half that found in the USA and Europe, with mid-range markets like Argentina seeing revenues of around US$13 per month.[ii]Even for operators who can make this financial commitment, in-house systems still carry considerable risk,sinceimplementation can be both lengthy and expensive.This is particularly unattractive to operators in emerging markets, who tend to value agilityhighly, knowing that they can find themselves quickly outmanoeuvred by competitors.
This need for agility also extends to the interconnect billing system itself. Operators need to be able to respond to wholesale price pressuresrapidly and actively manage revenue and margins. As flexibility and adaptability become more important for interconnect business processes, it is logical to consider whether owning and maintaining an in-house interconnect billing system makes sense. The growing complexity of the market that such systems are required to supportmitigates against an in-house management model.As ‘Software as a Service’ (SaaS) and cloud-based data management and processing environments become increasingly accepted, it is sensible to consider a managed service environment for interconnect billing and partner management. Indeed, such a cloud-based, managed service model is already the standard for other back-office systems, such as roaming traffic management.
Thus it is not surprising that many operators in emerging markets are choosing cloud-based interconnect billing solutions. By opting for a cloud-based approach to interconnect billing, operators benefit from rapid implementation, no CAPEX and a low cost of ownership. This type of approach also negates the need for software licensing or hardware procurement, while providing a solution that can quickly scale to meet demand and rapidly demonstrate a return on investment.Meanwhile, the managed service provider focuses on all the billing functions, including event processing, rating, error correction, duplicate checking, reporting and financial settlement.This eliminates the need to retain a pool of highly skilled employees to operate these systems and frees the operator’s in-house team to focus on securing the best commercial relationships with its interconnect, roaming and content partners.
Managed service options now offer both flexibility and user control. Technology has played a critical role to ensure that online user portals, near real-time reporting and web-based dashboards can be applied, providing exactly the same or better levels of control from a managed service proposition, compared to an in-house solution. Operators can now adopt interconnect billing, roaming and partner settlement processes as managed services, while still retaining full commercial control.
In the long-term, wholesale management is moving in the direction of a combined interconnect, roaming and content settlement hub model, with options for dynamic traffic trading and routing decisions that combine steering of roaming with optimal routing strategies. As the industry evolves towards an LTE future, the additional requirements associated with roaming, interconnection and content settlement services will form an integral part of the new commercial landscape.Indeed, 4G deployments are quickly gaining momentum in emerging markets like Africa, where 11 million customers are predicted by 2015.[iii]Such a hub-based model enables more, rather than less, operator agility. It clearly supports the lean operator concept, helping to identify the core essence of an operator’s business, and using external resources to support complementary wholesale partner management processes.
As roaming and interconnect billing converge, the real opportunity for operators lies in a consideration of the managed service model. Why manage multiple wholesale partner systems, when the processes they support can be managed for you? Why maintain multiple, costly in-house systems when you can enjoy the economies of scale and expertise of a specialist managed service provider?
[i] Source: Informa Media & Telecoms, Africa Telecoms Outlook 2013: Seizing new revenue opportunities
[iii] Source, 2012 African Mobile Factbook: http://www.africantelecomsnews.com/Factbook_form.shtml
