|Issue:||Latin America 2014|
|Topic:||How to monetize the data revolution|
Embedded Policy Management – the DNA of Next Generation Billing
|Title:||CEO & Chairman|
Since January 2013, Wolfgang Kroh is CEO and Chairman of the Management Board of Orga Systems. He holds a Master’s Degree in Mathematics and Computer Sciences at the Technical University of Hanover, Germany.
From the beginning of his career in 1978, he has been focusing successfully on sales and marketing of high tech products and services. Rehired in 2006 as Chief Executive Officer of Frankfurt-based LHS AG, he rebuilt the company, ensured steady growth and profitability to finally manage and execute an IPO. After Ericsson acquired LHS in 2007, Wolfgang managed the company as a separate entity and completed the integration into the group. Before starting at Orga Systems, he was working as Senior Advisor in the BSS area of Ericsson.
The ‘data’ revolution has brought with it access to a range of new services and products. With the access to almost anything came the problem of knowing how much data was being consumed. Customers used too much and bill shock became a common term. Regulators moved to limit this, and mandated that customers must be told when their limits were reached. This is where policy management came into play. In the beginning policy definitions and mechanisms were far more static than they need to be today. Traffic management policies that determine which traffic should be given priority have been employed in the network without any knowledge about customer segments or individual subscribers. Customers were throttled or their usage was curbed.
Communication service providers are seriously challenged today: High market penetration rates have led to a decline in overall subscriber growth, and markets are more and more saturated. Sparked by the rise of the mobile internet and the smart phone as a portable and versatile device, new OTT players threaten to substitute traditional communication services. Business models are changing rapidly and Communications providers are rethinking their roles in the digital world and adapt their processes, structures and cultures to compete. They must switch from supporting business models where providing information after the event was acceptable to providing information during, or even before the event takes place.
The events that need to be supported are very different from the telephone calls or texts of the past. The ‘data’ revolution has brought with it access to a range of new services and products. With the access to almost anything came the problem of knowing how much data was being consumed. Customers used too much and bill shock became a common term. Regulators moved to limit this, and mandated that customers must be told when their limits were reached. This is where policy management came into play. In the beginning policy definitions and mechanisms were far more static than they need to be today. Traffic management policies that determine which traffic should be given priority have been employed in the network without any knowledge about customer segments or individual subscribers. Customers were throttled or their usage was curbed.
After a while the ‘business’ saw the opportunity, policy rules management became more business relevant and strategic, and the ability to explicitly manage rules became important. Instead of throttling, now customers are told they are approaching their limit and offered some extra ‘data’ for a small fee.
Challenges for CSPs – Consistency is key
CIOs and CTOs are under continuous pressure to reduce costs and increase efficiency. Siloed approaches to new business opportunities, new services and segments is what worked very well for the telecommunication industry in a slow moving world with gradual innovation on voice and text messaging services. Adding boxes, connecting platforms and establishing integration layers took this approach to the next level where data services are offered in a very static and network driven style. Today, it is no longer acceptable for CSPs to launch new services, new bundles or promotions with a delay of several months. Enhanced 3G and 4G / LTE networks create the need for new business models that allow for a flexible and dynamic monetization within a multiplayer ecosystem.
In most of the traditional network and BSS architectures, policy control resides within the network department while service monetization, revenue management and billing are IT based applications. In this kind of distributed architecture policy and charging is spanning multiple departments within a CSP and it is hard to collect all necessary data in real time to apply new rules, offer add-on packages or to keep customers informed on their current status.
In recent years, 3GPP has specified interfaces like Sy to connect these worlds. Real world deployments are often based on project driven integrations that get more and more complex when business demands grow. Performance limitations on this kind of “synchronized” approach lead to duplication of data and business logic and parallel processing of events for charging and billing as well as for policy decisions. Consistency and with this the customer experience become a critical factor. From an operation and OPEX perspective, each platform has to be configured, maintained and kept up to date. License and maintenance cost grow with each additional box, increasing TCO and weakening achievable results.
Turning Customer Intelligence into Business Value
But wouldn’t it be more efficient to have a single view to customers, their products, data and applied rules? This would help to manage decisions on targeted promotions, upgrade bundles or alternative tariff options in a faster and easier way.
From a high level perspective, real-time rating and charging decide WHAT kind of services customers might use and what the related cost are. Policy decides HOW services are delivered to the customer. Looking at tiered price plans, for example, the bundle of ‘WHAT’ and ‘HOW’ is what customers are paying for. Unifying this decision in one instance is a natural next step. Combining all pricing and Quality of Service (QoS) relevant parameters in one system creates a powerful management of complex charging rules and policies within one step. A single and consistent view to all customer attributes is the foundation of policy aware charging and turns customer intelligence into business value.
Today’s world is about customer engagement anywhere on any device to ensure a positive experience and Marketing departments are desperate for new ways to analyze, optimize and personalize the customer’s digital experience. Embedding policy management technologies offers a paradigm shift that provides CSPs with capabilities to create a new data service experience. Context aware mobile applications and real-time customer interaction drive personalization of data offerings, thus enabling marketers to deliver a completely different level of customer experience. In-session communication of special offers generates repeat purchases, increases social sharing and enriches the customer profiles at the same time.
On the IT and network side, utilizing centralized customer intelligence opens up new areas of optimization in handling data services. Examples show that intelligent session control based on real-time customer data from online charging simplifies session management. It helps to reduce diameter signaling, number of concurrent sessions and with this investment in network infrastructure.
Network efficiency and intelligent charging
Operators are continuously moving to a data-centric business. LTE is now commercial on 300 networks in 107 countries, adding 109 new commercial networks year-over-year since June 2013, with 350 commercial LTE networks anticipated by the end of 2014, as reported by 4G Americas in June 2014. Though the US and Canada still lead the world in LTE connections, Latin America is growing rapidly. According to Ovum, the region will achieve nearly 3.7 million LTE connections this year and reach more than 25 million by the end of 2017. With LTE in place, VoIP and VoLTE will replace traditional circuit switched services in the long run. Besides delivering the data stream to devices, this generates issues with fast growing signaling traffic. In addition, the move to real time creates more signaling compared to the traditional postpaid / offline processing. This stresses the network infrastructure as well as policy and charging systems.
Network-wise, there are several strategies to manage this massive growth at different areas of a CSPs network and IT infrastructure such as network optimization and traffic control. But an intelligent policy and charging control environment can take off additional load from the systems, too. An optimized session management will help to avoid investments in hardware for charging systems and network elements.
Further the close integration of policy control, charging and billing with a central catalog and order management drastically reduces IT efforts when commercial offerings are created, derived, re-arranged or changed. New offerings can be automatically published to the charging and billing, which performs the instant service monetization. Service providers can set a new agenda for designing, launching, selling and delivering products across all services and customer segments.
Enabling new business models
Many of the new services and products will be made possible through partnerships. Over the Top (OTT) players, once seen as competitors to the communications providers have become allies. As such, many of the services will be offered in tandem with these players, providing a ‘win-win’ for both parties. The communications providers gain customers without having to invest in extra network coverage and the OTT provider gains new customers as well.
Another area providing huge opportunities for communications providers are the ‘Machine to Machine’ (M2M) or Internet of Things (IoT) markets. Connected devices will find their way into almost every market on earth. Analysys Mason forecasts that the number of M2M connections in Brazil will grow to 35 million in 2018, at a CAGR of 32% from 2012 to 2018. The rest of Latin America is forecast to grow at a 25% CAGR over the same period. But creating revenues from these services will be a challenge. Today, M2M connectivity is dominated by a low margin business that requires a highly efficient management of resources assigned to these services. Behavior of machines is very different when compared to traditional service usage with human subscribers. Just imagine how billions of new devices with less predictable traffic patterns will join the network, including cars, machine-to-machine modules or video surveillance that requires 24-7 bandwidth. The future M2M connectivity will need application and device based policy management to control, adapt and limit network utilization if needed and to keep these services profitable.
Whatever the services that communications providers choose to support over the coming years, instant responsiveness will be critical to success. Technology systems have to be reshaped in order to enable more innovation, to achieve superior customer experience, and to increase loyalty. Transforming legacy infrastructures into a real-time driven agile BSS needs to pave the way to new revenue streams and extended business models like M2M, cloud services, automotive, and utilities. To be able to take advantage of new opportunities providers will need to implement both real-time charging and embedded policy management as the DNA of next generation billing.