Everyone knows the story: get to market fast with attractive, innovative, multimedia products and services to gain market share before the competition steals a lead. That’s the ideal. argues Priscilla Awde examines the reality.

 Tempting it surely is especially for operators faced with increasing revenues from value added services and preventing churn. Yet speed to market may be counterproductive, coming at the cost of product and revenue security which few operators can afford. Telcos must balance the potential threat to revenues against first to market advantage but losses can be high if risk assessment and revenue assurance (RA), are not part of all new service design.

For mobile operators, the situation is complicated by considerably shorter product lifecycles so there is less tolerance for errors: operators must minimise losses and maximise revenues in a shorter time scale.

It is one thing to add revenues from new services but perhaps more productive to actually get paid for existing products and ensure bills are accurate – especially in competitive markets and where ARPU is declining. Generally it is easier and more cost effective to prevent leaks, bill and collect accurately and not overpay suppliers than it is to introduce new revenue streams. Although both cause losses, not collecting what is due from customers is very different from paying out hard cash to third parties based on incorrect information. “If there is a problem, telcos will need to compensate third parties but may not be able to collect revenues from customers thereby suffering a ‘hard loss’,” explains Augusto Argento, director, business unit for HP. (hp.com).

Properly implemented and integrated into legacy systems, revenue assurance solutions identify, locate and make it easier to solve leakage problems before they have a significant impact on the bottom line.

Operators know they lose revenues but without enterprise wide solutions to identify where problems are and quantify what is lost, they can only guess at the extent. Losses due to poorly defined processes or procedures, human error or badly integrated systems are entirely within telco’s control and, after fraud, are the most damaging.

A recent Analysys Mason (analysysmason.com), report commissioned by Subex, showed mobile operators worldwide suffered an average implied revenue loss of around 13%. The causes range from fraud, payment errors with third parties, wholesale billing and interconnect errors. Fraud is the most significant cause of losses, running at four per cent of overall revenue. Poor systems integration accounts for two per cent – statistics for mobile operators are approximately double that of wireline providers. “Although less willing to work with partners than wireline providers, mobile operators need system integrators to support transformation projects and protect against wholesale billing inaccuracies,” explains Adam Boone, VP marketing at Subex. (subexworld.com).

Telcos are especially vulnerable during mergers and acquisitions, new system installations or infrastructure changes. Other problems arise from manual procedures: it is easy to transpose figures accidentally when changing billing systems or tariffs and errors arise when keying the same data into separate systems – problems which can be solved by automation.

Revenue assurance is moving to financial and operational assurance and tracking key performance indicators continues Boone. “Margins are falling which brings increased pressure from stock markets and demand for operators to be efficient, agile, cost effective and increase subscribers.”

The most sophisticated RA systems include analytical and business intelligence tools and are most effective when properly integrated into all business processes, from product design through billing to collection. Successful implementations depend on analysing the entire operations: expert swat teams can examine the system from order to cash. Instead of looking at the minutia, operators need to check the higher levels and the links between systems.

“RA used to play mainly a detective role and there was no systematic approach,” explains Ken King, director telco & media convergence at SAS. (www.http//sas.com) “Now there is a better understanding of RA as a more strategic activity which should be built into operations to ensure all elements perform properly.”

This move is welcome as few operators can tolerate much more than a one per cent loss. Gadi Solotorevsky, chief scientist at Cvidya (cvidya.com) points to the difficulty of increasing net revenue by one per cent suggesting prevention is better than cure. Believing that as the rate of innovation is faster for mobile operators than for fixed, it is even more important for RA to be part of each new service and system change. “Now operators want to involve RA teams and put methodologies and tools in before they make any changes. By putting in proactive RA and controls in first, operators can find problems in advance and prevent or limit their effect. Telcos view RA as a revenue centre now, take it more seriously and see an impact on profits.

“What is new is margin management: operators are looking into this especially for content bought from third parties and where margins are affected by payments to partners,” continues Solotroevsky. “Telcos must ensure they pay and collect the right amounts to assure good margins.

Commonly linked, and increasingly tightly, fraud is however different from revenue assurance. While the results may be the same, the difference is in the intent to pay. Sophisticated, continually moving and changing, fraud accounts for below one per cent of revenues for mature established operators but can be as high as 15% for start-ups in competitive markets believes Jack Wraith, CEO at the Telecoms UK Fraud Forum. (tuff.co.uk).

Globally fraud losses increased 52% from 2003-05 surveys reaching $60 billion. “In the last five years telcos have become more proficient at closing leakage. Fraud management systems use the latest neural technologies and rules which learn from what happens in networks and automatically adjust thresholds relative to threat in real or near real time. Operators are looking at end-to-end risks,” Wraith explains.

Merging multiple and often disparate platforms can cause significant problems and expose weaknesses. “It takes a long time to bring disparate systems into one converged platform and some never do it leading to horrible inefficiencies and system exploitation,” he warns.

Mobile operators suffer from international roaming fraud since they neither know nor control customers moving onto their networks. Fraudsters have profitably exploited the long delays in reporting between operators but new regulations stipulate that telcos must exchange call details within four hours of completion. Losses can be limited by reconciling traffic and billing requests in real time. Although telcos can look at patterns and shut down any unusual usage, they must be able to recognise and not disconnect profitable and legitimate roaming customers.

There has been a change in the way in which revenue assurance is perceived and mobile operators are investing more than in the past believes Mark Johnson, marketing director, communications industry at SAP (sap.com). Next generation services are driving more complexity in the business model and mobile operators must manage the proliferation of products, business models and partners preferably in real time.

Telcos can profitably learn from the media industry Johnson says: “Before they can implement robust RA business processes, operators need a very good underlying understanding of what intellectual property rights they have in what channels and the revenue model associated with delivering what content to which customers. They must be able to exploit digital content which can be re-packaged and re-used several times in different formats. Operators are trying to manage intellectual property rights manually and in a non-scalable way but they need to automate processes and systems.” Vendors are extending their offering to encompass this wider role: RA is not just about leaks but about maximising revenues from the content to which operators the rights and before they expire.

Increasingly RA is associated with the all encompassing order to cash lifecycle – once a product is developed how and to whom should it be marketed, how is it billed and how are revenues collected?

Complexity is the name of the game for mobile operators, not just in the number and variety of products or services but also because the potential for fraud is higher in open, IP based next generation networks. Mobile operators may have hundreds of billing options and customers can select individual bundles on-line. In the relatively simple pre-paid environment there are fewer opportunities for losses but more for post paid customers with significantly more choice.

“Revenue loss from voice will be negligible – the big concern is value added services (VAS), downloadable content and the new set of services offered over IMS platforms. However, there is a price to pay: the more the products, the greater the complexity, the bigger the risk,” says HP’s Argento. “Unable to survive without VAS, operators are selling content and services from third parties to maintain revenue streams in the face of declining voice revenues. Mobile operators are putting in RA controls to monitor all transactions with third parties, help settle disputes and provide evidence that transactions happened. Most content providers cannot afford sophisticated systems to log transactions so must trust mobile operators and their evidence.”

In future there could be big losses from value added services causing operators major headaches standing as they do between customers and third party providers. Then as now, they will need robust, properly integrated RA solutions.