Eugene Bergen-Henegouwen, executive vice president and managing director, EMEA, of former GTE unit Syniverse, likes to shock people. Especially when those people work for wireless network operators.

One of his favourite ways to shock them is to tell them about the €11 million fraud one operator suffered – and didn’t even realise it was happening until it was over. That loss, he reminds them, went straight to the company’s bottom line and a whole string of executives’ end of year bonus calculations.

The problem, he says, is that too many operators simply don’t want to know. And even if they have the courage to face up to the ugly truth that they are being ripped off, they don’t like talking about it. “If companies publicized their fraud losses their customers would begin to ask what else is wrong,” he explains.

Fraud is in fact only one of the ways carriers lose money. One of many. Poor systems and processes lie at the root of much of the trouble.

Most common are rating errors or put another way not capturing usage data correctly.

Provisioning issues are also a considerable source of problems – a customer is hooked up but somehow the billing system never gets to realize it. Another is subscription errors – do the set of services delivered match the set paid for. And errors with one off charges, such as fees for connection or disconnection, are yet another money drain.

Then there are also errors in the way network operators account to each other. It is not uncommon for operators to pay for non-existent or under-used back-haul services such as leased lines. And errors in payments for roaming, when subscribers on one network use services of another, are the stuff industry legends are made of. In one case a carrier handed money over to a carrier with which it did not even have a roaming agreement. Year after year.

The sources of errors vary greatly between organizations and regions. In general revenue losses are worse in Asia and Africa than in Europe or North America, says Geoff Ibbett, director of product management revenue maximisation at Bangalore , India , based operator support systems provider, Subex Azure (www.subexazure.com).

There is also a difference between new and established network operators, says Ibbett. More recent entrants are more likely to suffer from usage errors while older players are more likely to suffer from subscription errors simply because new entrants concentrate on getting subscribers on to their networks rather than billing for their services and older network operators have vast databases with long and complex customer histories.

And just as the sources of errors vary widely, so do the estimates of exactly how much the operators are losing. The spans seems to be somewhere between 5% and 16% of gross revenues. But they are just estimates, reminds Ibbett. “In fact nobody knows how much is being lost,” he says.

In a study commissioned by his company but carried out last year by Cambridge , UK , based consultancy Analysys (www.analysys.com), 100 operators polled produced estimated losses of 13% of gross revenue including bad debt. “But if you go to an operator and say that they are losing 13% of revenues they will laugh at you because they don’t really know,” says Ibbett. “They don’t measure it and if it isn’t being measured you can’t say how much is being lost.’

This is a tough issue for carriers, says Drew Rockwell, CEO of Boston based Lavastorm (www.lavastorm.com), a company that specializes in revenue assurance – the craft of plugging the leaks through which the companies’ money flows to waste.

“It’s all about accuracy,” he says, “Customers alerted to the fact that might be being undercharged may ask whether they are being overcharged.” And quite rightly, because they ARE being overcharged, he adds. But on balance the losses tend to be higher than the over billing, “because the people who are over billed tend to notice and complain while those who are under billed don’t.”

Lavastorm has seen cases where error rates run as high as 30%. A field may not be passed between databases or rounding errors can accumulate. A data error does not necessarily mean revenue loss (or illegitimate revenue gain, for that matter), but the greater the number of errors the more likely money will be going astray.

Good companies will continuously work on the problem till they get to 5% or lower, says Rockwell. But even if a company solves the technical issues, that’s only part of the story.

“Having the technical prowess is one thing,” says Dan Baker, research director at the OSS/BSS KnowledgeBase (www.technology-research.com/oss_bss.htm), a consultancy which has made the study of revue assurance a speciality. “Having the financial prowess is another.”

All too often carriers provision services but do not get enough money for them. Pricing of complex telecommunications services is easy to get wrong, says Baker.

Sometimes they simply do not charge enough. At other times they do not realize what facilities are being tied up by services. Sometimes it is the intercarrier billing – whether for roaming, backhaul or whatever – that lets them down. And sometimes it is all of the above, he says.

In an industry where average revenues per subscriber are already under pressure, that is something to be concerned about – very concerned – even if carriers may prefer not to show it, says Baker.

Getting the technology right “might clear up 45% of the problem but that’s all,” says Ted Fadick, director of services and sales support delivery, billing and operating support systems company Convergys Corporation (www.convergys.com). “What you need is to get the people doing the right things and then go on to the technology,” he says.

Progress is being made, says Fadick. “We were running around looking for leaks. We’re now concentrating more on changing processes to prevent leaks occurring,” he says. “Automate the detection process and use the human investment to concentrate on prevention,” he adds.

Even an organization that is doing everything it can to stop the leaks will lose revenues. That’s the nature of the beast. Around 1%, says Dr. Jane Booth, international revenue assurance control consultant at global carrier Cable & Wireless (www.cw.com). She estimates her companies’ current losses worldwide at around 2.5% of revenues.

Bad enough, she admits, but that’s a lot better than the 5% they were probably losing before they cracked down on the problem two years ago, she insists. In Cable & Wireless’ case large credit adjustments alone accounted for 40% to 50% of the leak. The natural tendency of people in customer facing roles is to want to be helpful, she says. “Sometimes people give away more than they should,” she adds.

Despite progress there are still carriers out there who believe that they are untouched by revenue losses, or at least not to any extent worth worrying about. But thankfully they are getting fewer and fewer, says Eric Priezkalns, a freelance revenue assurance consultant and director of Hatfield UK based Revenue Protect Limited  (www.revenueprotect.com).

“The simple fact is that if you don’t look for something you are unlikely to find it,” he says. “And even when you have found the problem you still have to keep on looking,” he adds.

No matter how hard they look and how much they find there will always be losses, says Priezkalns. “It’s one of those areas that is virtually impossible to combat completely. If only because of the good will a good company will show its customers.”

The growing complexity of the environment operators find themselves in will ensure that the problem never goes away completely, says Lavastorm’s Rockwell. Every time a new service is introduced or a new commercial relationship is formed, a new set of loss opportunities arises, he says.

Subex Azure’s Ibbett believes the problem has gone down since it was first recognized but that it is now back on the rise. When companies started to crack down on revenue leaks they had some success, he notes. “I think we are currently down on two years ago but up on last year,” he says.

“Things can only get worse,” he says with a smile.

 

[PANEL on Roaming Fraud]

Stop thief!

Roaming revenues are becoming an ever increasingly important part of operators’ incomes as people travel more and get used to the idea of taking a phone with them – and using it. Roaming, however, is a particularly fraud prone and therefore leaky part of the operator revenue vessel.

The biggest source of fraud by far is SIM card copying, says Eugene Bergen-Henegouwen, executive vice president EMEA, of Tampa , Florida , based Syniverse www.syniverse.com). “And it’s at its worst where rich countries border poor countries,” he adds. Weak spots include the joins between Western and Easter Europe and North and Central America .

The good thing is that crooks quickly make themselves known. “They start making a lot of phone calls straight away,” he says. The bad thing is that it can take days for roaming usage data to be fed back to the home network for appropriate action to be taken. And in that time a lot of damage can be created.

The GSM Association (www.gsmworld.com), the organisation that looks after the interests of GSM mobile phone network operators, is pushing for all GSM operators to adopt a new more efficient way of exchanging roaming records. The GSMA's Near Real-Time Roaming Data Exchange (NRTRDE) initiative is looking to reduce the time taken to exchange roaming call records from 36 hours after the call was made to four hours or less.

“Roaming fraud has increased in line with roaming usage,” says David Maxwell, NRTRDE Project Manager. “We are looking to reduce it before it increases more.” Under the new system if the visited operator does not notify the visiting operator within four hours, he will be responsible for the losses, he adds.