The RA Analogy Between Utilities and Telcos

In an article for Public Utilities Fortnightly, Victor Milligan of Martin Dawes Analytics argues by analogy that utilities need revenue assurance in the way telcos needed it at the end of the 90’s. You can read the article here. I fully agree with Milligan’s comments about customers of RA services demanding a Proof of Concept and Proof of Value to minimize the risk and demonstrate the benefits of RA. However, he also provokes my favourite bugbear – lots of talk about % leakages and recovery, but where do these stats really come from, and how reliable are they?

Eric Priezkalns
Eric Priezkalns
Eric is a recognized expert on communications risk and assurance. He was Director of Risk Management for Qatar Telecom and has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and others.   Eric was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He was a founding member of Qatar's National Committee for Internet Safety and the first leader of the TM Forum's Enterprise Risk Management team. Eric currently sits on the committee of the Risk & Assurance Group, and is an editorial advisor to Black Swan. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.   Commsrisk is edited by Eric. Look here for more about Eric's history as editor.
  • David Leshem

    Along the elementary saying “when you hold a hammer everything looks like a nail”, then for sure Martin Dawes paper holds true.

    IMHO the attempt of drawing an analogy between RA for telecoms RA and RA for Utilities is like comparing cats and dogs, especially from a birds view. My point is these two industries are misleadingly similar.

    While this venue is not an RA for Utilities tutorial, the differences between the two industries are fundamental.

    – Cost function: In telecoms there is no real incremental cost for a given call placed. In Energy, when ever we turn the light someone has to burn some oil barrel on the other end of the wire. This discussion goes into complex costing based on the types of energy sources used; Green energy (what type? Each type has its own cost function) Gray energy (what type? How the futures were procured etc)

    – Pricing function: In telecoms the prices are usually predefined. Energy, industry prime challenges is peak load moderation. One of approaches is to offer dynamic pricing at the user and even the appliances level. Naturally it requires smart meters. So pricing methodology is rather different.

    – CLTV: Telcos can retain customers and influence their churn by offering them a nice handset. To switch a provider is usually requires a physical SIM card replacement. Utilities do not have SIM cards and the carriers logo is not in front our eyes when ever we place a call. Accordingly “static friction” and the easiness of the customer to switch providers is inherited.

    – Business model: Telcos can usually be classified either as MVNO or MNO (apologies for not mentioning the fixed operators). Quite a few energy providers are hybrid. The implications are vast.

    – Market structure: For an example in Germany or UK there are 5 leading providers and say another 10 medium size players. While in the Energy market each of these countries has over 75 large and medium players.

    What are the implications of the above, how RA has to be defined in light of the above is a key question, prior to putting the cart before the horse.