.gif)
REVENUE MANAGEMENT - Follow the money
The increasing complexity of service provision is creating new revenue leakage risks
says Adam Boone
New services, innovative service bundling, and emerging content-distribution business models open the door to a host of potential new risks for the typical telecommunications service provider. Increasingly complex new content partnerships and revenue sharing arrangements create potential for new forms of revenue leakage. Smarter end-user devices, content-based services and converged network environments create new potential for fraud.
In short, the new world of next-generation services means new risks, and these emerging problems are foremost in the mind of service providers around the world as they seek to roll out new service offerings and adopt more competitive business practices.
In mid 2007, telecoms industry research specialists Analysys undertook the fifth annual global survey of service providers' attitudes to revenue management, touching on topics like fraud, revenue assurance, and other sources of revenue leakage. The survey, which was underwritten by Subex Limited, identified a continued increase in revenue leakage across the globe and provided insight into the main causes. The study examined regional differences in revenue leakage and the approaches to combat it, showing some intriguing differences in how European operators address the problem when compared with operators elsewhere.
Globally, Analysys reported, the overall average level of revenue leakage from all causes stood at 13.6 per cent of total revenues. The Middle East/Africa region experienced more than 20 per cent of revenue loss, with Asia close behind at just below 20 per cent and Central and Latin America at more than 15 per cent. Western Europe ranked lowest of all regions at about 7 per cent, following Central and Eastern Europe at 8 per cent and North America at just about the 13 per cent average.
When breaking losses down by operator type, mobile operators continue to lose the most at nearly 14 per cent, with mid-sized operators with between 100,000 and 1 million subscribers racking up the most loss at more than 18 per cent. For comparison, the largest operators are losing only 6 per cent of revenue per year.
Significant growth in fraud losses and revenue assurance problems related to the launching of new products and pricing has driven the overall increase in losses. In addition to fraud, the three primary sources of revenue leakage cited by respondents are poor processes and procedures, poor systems integration, and problems associated with applying new products and pricing schemes.
The level of revenue loss that operators find ‘acceptable' has risen this year to 1.8 per cent, from 1.1 per cent in 2006. This is the largest single increase since the survey was started five years ago. Major incumbents were least tolerant (1.2 per cent) and fixed line alternate operators most tolerant (2 per cent). Operators in Central and Latin America reported the highest level of ‘acceptable' loss at 2 per cent, with operators in the Middle East and Africa accepting lower levels of loss (1.4 per cent) than the average.
At the planning stage for new products, most operators take into account most causes of loss as part of their preparation for new service launch. However, 32 per cent of operators do not use any third party help to address revenue leakage issues. Yet the findings show that the operators who use third-party solution providers for revenue assurance lose 30 per cent less compared to those who use no external help.
The survey found that managers responsible for revenue assurance and fraud management feel a great deal of uncertainty as they look to the future and consider next-generation networks and converged services.
The findings showed that dramatically more revenue assurance and fraud managers are concerned about the impact of next-generation networks and services on revenue management than in previous years. In fact, around half of the survey respondents reported that addressing revenue management issues for these new technologies will be a chief concern in the next three years. Much of the anxiety may stem from the unknown. New products like IPTV are still reaching mass-market subscriber penetration and unanticipated revenue leakage issues may emerge as these products reach peak subscriber growth and market uptake.
The new converged, IP network represents new opportunities for fraud, especially as these services incorporate content that must be delivered and billed for across a converged infrastructure. Further, end user devices are increasingly intelligent, opening the door for new hacking techniques and mobile malware. These are significantly different from the risks associated with a traditional fixed-line telephone network and therefore present a higher degree of vulnerability for operators. This risk is heightened as operators are under growing pressure to deliver these new services rapidly in order to stay ahead of the competition. Compounding these challenges, the competitive environment facing most operators means they must achieve faster time-to-market for new offerings and shorter product lifecycles. As a result, billing processes must be able to adapt to this accelerated pace of change, or what has been described as the need for greater service agility and operational dexterity.
Another area to take into consideration is the implication of delivering new content-based services that involve third parties. In the Analysys research, 30 per cent of respondents cited interconnect/partner payment errors as one of the main causes of revenue leakage across the business. If an operator intends to offer content-based services, it may no longer be responsible solely for a service's connectivity, but also the delivered content, either provided on its own platform or by a third party. As a result, this creates additional complexity at the accounting stage due to payment handling, tariff management and revenue sharing. With more third-party operators involved in the delivery of the service to the end-user - from the operator, the content owner, to the content host - there is potentially greater opportunity for interconnect or invoicing system errors, which need to be assessed.
An emerging key strategy for addressing many facets of this transformation, and to maximize the benefit of revenue management efforts, is to establish a Revenue Operations Centre (ROC), a consolidated collection of systems that monitors the health of the revenue chain and the impact on costs. Like a NOC enables the tracking of service quality and network health, so the ROC is a centralised monitoring and control infrastructure that integrates an operator's individual revenue assurance, fraud management, cost management and risk management solutions to better monitor revenues and costs. This end-to-end approach takes into consideration all the processes involved in delivering the service to the subscriber, and helping the service provider to understand the impact of operational processes and outcomes on profit.
A ROC allows operators to monitor the financial performance (eg total revenue, arpu, subscriber growth), revenue performance (eg revenue/cost by category, revenue/fraud loss) and operational performance (eg revenue/fraud/ bad debt loss by root cause) across their networks. It also enables an operator to track costs associated with delivering services, and arrive at an understanding of the profitability of different service types, different subscribers, different market segments, and other relevant business metrics.
For operators offering next-generation wireless and wire-line services, implementing an end-to-end approach to monitoring and protecting revenues and managing down costs will become an even greater requirement, as services become more complex. An approach like a ROC enables operators to compare and consolidate information from across network, operations and business systems to monitor revenue chain integrity, detect cost overruns and, hence, achieve sustainable profitability.
Adam Boone is VP Strategic Marketing, Subex Limited
Share this article with others
Post to del.icio.us
Printed from http://www.eurocomms.com/features/112201/REVENUE_MANAGEMENT_-_Follow_the_money.html
Comment on this article
Skip to comments
We encourage users to analyse, comment on and even challenge European Communications's articles, including the one above - 'REVENUE MANAGEMENT - Follow the money'
User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site.
Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. We will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site.