I was speaking with fellow colleagues on the topic of IP services and the implication it has for the Revenue Assurance Department. There was a debate around margins, capex and ROI.
For fixed line, we sell fixed bandwidth at a fixed rate and fixed infrastructure is implemented. Should a subscriber want access to fixed infrastructure that is not in place, the operator would implement that infrastructure at a cost to the specific subscriber. Thus, network expansion is paid for, cost is recovered and ROI is reasonably ensured.
Mobile or wireless services we sell at near fixed bandwidth (give or take congestion), at a fixed price but we do not sell access to specific or fixed infrastructure. Network expansion is a cost shared amongst all users of that infrastructure, when it is used. It is thus factored into the per usage price. Capital expansion is often done in context of QoS or Service Assurance.
To recap some of my master’s study, I differentiated between Revenue Assurance (RA) and Revenue Management (RM) as two different objectives of the RA Department. The RA objective was concerned with complete and accurate billing of revenue already earned and focused on the Operations side (right hand side) of the eTOM model. It is concerned with leakage reduction and leakage containment. RM objectives on the other hand is concerned with demand-management decisions. It requires the organization’s interface with the market with the objective of increasing revenues, and in this sense becomes a complement of supply-chain management, which addresses supply and demand decisions. It is associated with the Planning (or left side of the eTOM model). The term RM is used synonymously with yield management, pricing and revenue management, revenue process optimization, and demand management.
When demand is established it is an RA objective. When demand is not established it is an RM objective.
TMForum definition for RA is “Data quality and process improvement methods that improve profits, revenues and cash inflows without influencing demand.”
The increase in IP services due to smart phone technology requires revenue management decisions to influence demand. Demand is controlled by manipulating price strategies like AT&T did when it changed its fixed price, unlimited data usage billing model to a per usage billing model.
Revenue assurance of IP services is initiated as an RM objective due to the demand pattern not being established. Unlimited usage on a fixed price model does not work. Smart phone and tablet technology has commoditized data services and this has changed the billing model of operators. Before smartphones, RM was the concern of the Marketing and Product Development functions at the operator. They provided new price plans based on usage charges or at least inclusive bundles. Manipulation of price plans affected margins. Marketing and Product Development may not be geared today to deal with the technical and operations demands of capacity planning and management in context of the financial bottom-line. Cost and QoS management is not in their domain either. The question is, if the Marketing and Product Development guys can’t manage this complex process, why should the RA department be in a position to do so? And if they must, what are the implications of this new objective assigned to them? Is this objective assigned to the RA Department?
There are advocates who believe the RA Department to be responsible for RM decisions. Would the RA Department be required to step into the debate of network infrastructure ROI? Does that mean that the RA Department by default adopts a monitoring responsible for ROIs in the company in general? If the Department was only required to monitor and report on these statistics since it has access to the data, what is the responsibility of Network Planning or Management Accounting in the management of ROI?
When a per usage billing model is adopted for IP, it would require usage monitoring and complete billing verification. These two are RA objectives and focus on billing accuracy of revenue already earned in the same way we would do sms or voice traffic assurance. There are challenges with customer queries disputing the data usage where the operator cannot tell the subscriber which sites were visited, etc. And then there is the inevitable “semi” fixed price billing where data billing is done in segments of say 2MB regardless of whether a total of 2MBs were used for a status update on the iPhone…to the painful annoyance of many subscribers.
I think IP revenue assurance in a per usage model is fundamentally similar to normal event tracking done for voice, etc. and most RA Departments set up to monitor and track large volumes of billing events, would by default be able to pick up IP revenue assurance. Fraud management and network exploitation may be different cattle of fish, as we have not started to comprehend what users can do with smart phones. But in context of billing management, the challenge for the RA Department is moving beyond the initial network infrastructure ROI monitoring and Product Development discussion. There may be a different role required in the Marketing and Product Development space. Or a closer collaboration between Product Development, Network Planning and Management Accounting.
Are there views out here that the RA Department should be responsible for setting and monitoring IP margins?