 | Issue: | North America II 2015 |
| Article no.: | 10 | |
| Topic: | Flexibility is the key to your bottom line in the usage economy | |
| Author: | Flavio Gomes | |
| Title: | CEO | |
| Organisation: | LogiSense | |
| PDF size: | 219KB |
About author
Flavio Gomes is CEO at LogiSense Corporation. For the past 15 years he has been focused on strategic direction and navigating the company to deliver real-time usage rating and billing solutions to the telecommunications, machine-to-machine, unified communications and enterprise service provider marketplace. Gomes is a serial entrepreneur with nearly 20 years of business building experience who understands the critical role accurate, real-time usage rating plays in the modern service provider’s ability to monetize offerings, maximize revenue and control costs in the Usage Economy: The dynamic convergence of subscription- and usage-based billing models, allowing service providers to monetize in real-time any triggered event in the connected world to gain significant competitive advantages.
Prior to LogiSense, Gomes founded MGL Systems, an Ontario, Canada-based Internet Solutions Provider which was acquired by a regional telecommunications company in 1999.
Article abstract
Having flexibility allows providers to roll out new services in ways never seen before and at a much higher rate. For example, a provider could consider rolling out a bundle of 1,000 minutes per month across any medium, including landline, mobile and VoIP, etc. Or, tiered packages that include different levels of music, video and data downloads across any device. It becomes less about what current services the provider offers and more about what combinations of services the provider can imagine, bundle and tier in ways that are highly attractive and personalized to the end user
Full Article
Today’s Communications Service Provider marketplace is complex and Machine-to-machine (M2M) communications has changed the face of the industry. Twenty years ago, different service providers each offered one service—a local exchange carrier provided local telephony service, a nationwide provider offered long distance services, cable companies offered television services and wireless service providers came on the scene with mobile telephony services. Today, each has tread on the other’s territory and offers a mix of voice, data and in some cases mobile services.
Over the top (OTT) players have also jumped into the fray, offering a broad base of video, audio and even text messaging services without owning the network over which the packets travel. Cloud providers like Amazon Web Services (AWS) are offering thousands of different services to businesses and individual users. Mobile providers are stirring things up by adding advanced data services such as LTE into their service mix.
M2M communications now connect machines, devices and appliances wirelessly to the Internet, turning them into intelligent assets that share vast amounts of data. These tiny bytes of data, in turn, help companies better run their businesses, communicate with their customers and track everything from vending machine inventory to logistics performance to cargo containers to heavy machinery.
As the industry continues to evolve, modern CSPs are facing a number of challenges when it comes to the OSS/BSS systems needed to support their operations. Legacy systems that were generally designed for a handful of services and a few different ways to bundles packages can’t keep up with the landslide of new services being rolled out. Traditional ecommerce / ERP platforms can’t adjust to the volume of rules and exceptions that communications services require to deliver the right services to the right customer at the right location at the right price.
The reality for today’s providers:
• Rigid billing systems limit creativity with service offerings, tiered offerings and bundles
• It’s taking too long to roll out new services that can help them remain competitive
• Customer fallout is heading in the wrong direction
• Services like M2M and cloud don’t fit into the same OSS/BSS mold as legacy services
A transition is underway
Many of these new services that providers need to offer are no longer just based on an “all you can eat” subscription billing model made popular over the last decade, yet that’s exactly what many OSS /BSS and traditional ERP systems were constructed to support.
This doesn’t mean the Subscription Economy is dead. In fact, many providers are finding great success offering subscription-based services. What we are seeing, however, is that the breadth of new services coming online actually is making way for the revival of the Usage Economy.
This isn’t your grandfather’s “pay for what you use” model. AWS, for example, is selling operating systems by the hour. Verizon recently announced it is selling Oracle in the cloud by the hour—not the month or year. In today’s Usage Economy, providers require a much higher degree of granularity and flexibility in their BSS platform to offer any combination of services at any price point to any customer.
Subscription vs. Usage based billing models:
• In a subscription-based billing model, users are charged a flat rate for a particular service or bundle, generally in periods of some length such as one month, one year or two years (a great example is the traditional two-year commitment to a mobile phone contract). Within that bundle you get what you pay for and if you exceed limits (data, minutes, messaging, etc.), you pay a premium, generally at a higher incremental rate than you would under the plan’s limits.
After the time frame specified in the agreement expires, the user can continue, choose a new plan, or cancel service altogether. Under this model, the provider receives a consistent and balanced cash flow and is thought to have high customer retention.
• In a usage-based billing model, a user pays for the service(s) they consume in increments determined by the service provider. For example, data used on a mobile phone is measured in MB, texting is measured in number sent/received and calls are measured based on location/rate. Pricing tiers can be created, such as one GB of broadband data for US$69.99 per month, 1.5 GB for US$89.99, and so on, with any additional services or overage charges the provider wants to offer bundled in as well. Usage contracts between users and providers are generally still in play, but are becoming more flexible. A successful usage based billing model is designed to provide a high value solution that protects margins and grows revenue in a world where average revenues per user (ARPUs) are low.
Usage rating takes centre stage
In both models, but especially in usage-based billing, real-time rating is critical. Rating determines the cost of a service, whether it’s a call, a data transfer, a video download, or some other type of event/occurrence. The rating process involves converting call- or data-related information into a “dollar value.” Rating can include hundreds of characteristics defined by the provider, including these common ones:
• Time, such as time of day or day of week
• Usage amount, such as length of a call, amount of data, number of songs downloaded, etc.
• Origination/Termination of a call
• Third-party charges, such as taxes, user fees, etc.
• Overage charges
New and complex types of packaging, bundling and billing scenarios are emerging daily. The billing solution that manages them needs to be flexible and scalable enough to match the CSPs offerings – both current and those planned for the future. Real-time usage-based rating allows CSPs (that own their networks) to see a clear ROI from the services that utilize that network, and allows competitive and OTT providers to bundle and price competitively to drive maximum revenue. Operators that don’t have their own networks can ensure their rates are profitable by rating twice; once for their cost and once for their sell price.
Having this flexibility allows providers to roll out new services in ways never seen before and at a much higher rate. For example, a provider could consider rolling out a bundle of 1,000 minutes per month across any medium, including landline, mobile and VoIP, etc. Or, tiered packages that include different levels of music, video and data downloads across any device. It becomes less about what current services the provider offers and more about what combinations of services the provider can imagine, bundle and tier in ways that are highly attractive and personalized to the end user.
Let’s take a look at some of the capabilities today’s CSP may require:
• Creating highly complex rate plans, including tiers, multiple keys, service bundles and discounts
• Supporting frequent and rapid change of rate plans, which is critical in competitive pricing scenarios.
• Scheduling of call detail records (CDRs), event detail records (EDRs) or usage detail records (UDRs) pulling from various network sources or selecting a pre-defined time to drop off CDR/EDR/UDRs to the mediation engine
• Categorizing calls based on class (local, regional, national, international) or other as needed
• Defining regional and national minute buckets at the service level and individually adjusted for each phone line as warranted
• Rating for prepaid, spending control or pre-delivery charging deployment
• Entering manually or batch importing of call detection configuration
• Rating in real time with an integrated API
You can see just how complex the modern CSP’s world has become. Flexibility is paramount to success in today’s marketplace.
Can usage and subscription models co-exist?
Most of us remember when the Subscription Economy ushered in the age of “all you can eat” for one price. However, it never took into account the dramatic evolution of the industry as two factors emerged:
• New players such as OTT content providers are driving competitive pressures to new heights
• The dramatic and rapid emergence of new services such as advanced data, cloud and M2M services are breaking the mold on the way services have traditionally been sold
The Usage Economy takes these two factors into consideration and maximizes their potential for providers who need the flexibility and scalability to offer complicated tiered and bundling scenarios to their users.
Let’s be clear, the Subscription Economy isn’t going to disappear. There’s considerable room for both subscription- and usage-based billing to coexist. Today’s marketplace is actually allowing many CSPs to benefit from the best of both worlds. For example, platform-agnostic cloud solutions make it easy for CSPs to layer usage-based billing capabilities atop an existing platform that is designed more for services launched for the Subscription Economy.
In the end, it’s all about flexibility and personalization. Service providers—regardless of medium—face intense competitive pressure to roll out new services quickly, price them competitively, and offer new types of bundles and pricing tiers that make sense for today’s consumer. Implementing usage rating capabilities should be a core strategic initiative for any modern CSP aspiring to be competitive in today’s Usage Economy.
