Assuring Wholesale In Latin America

It seems the TMF liked my last article about revenue assurance in Latin America so much that they asked me to write another. This one is specifically about how Latin American operators are rising to the challenge of assuring wholesale costs and revenues. Here it is first, before the TMF has a chance to publish it. I am so good to you – always giving you the good stuff before everyone else ;)

Start with a tiny error, like undercharging a call by one cent. Repeat the error millions and millions of times. That one cent multiplies into an awful lot of money. If revenue assurance is the discipline that detects and prevents processing bugs that cost telcos money, then wholesale products represent the ultimate revenue assurance challenge. Small variances add up to big losses, not least because partner telcos may take deliberate advantage. So how closely are wholesale costs and revenues monitored in Latin America?

Dr. Gadi Solotorevsky, leader of the TM Forum’s Revenue Assurance team, believes that Latin American operators have risen to the challenge:

“Most Latin American RA managers tell me that they no longer see inter-carrier settlement as a high risk area. Although some years ago it was very problematic, nowadays they check it, but they do not find any significant problems. This is quite surprising, especially when compared to Western Europe. Many European RA managers view inter-carrier settlement as a high-risk area in which significant leakages are found time after time.”

At the same time, the combination of liberalization and strong growth is putting new pressure on wholesale carriers in Latin America. As markets get liberalized, telcos find themselves needing better systems and processes to manage billing and settlement with an increasing number of counterparts. They are also under regulatory pressure to open up and connect networks in the shortest time possible. New operations have to ensure that their new systems work correctly and can keep a track on what they owe. Established carriers need to be able to manage more partners using their network. The absence of a credit history between telcos means more care is needed in managing relationships. Failings in a partner’s systems may make reconciliation and agreement of balances more difficult, so it is vital that each carrier has complete confidence in their own numbers. That means extra attention must be paid when businesses upgrade their interconnect and wholesale billing systems, often as a direct consequence of market liberalization. There are also other challenges emerging for revenue assurance, as controls need to be extended to cover traffic for newer products like MMS and VoIP, and inventive revenue-share arrangements complicate the calculation of who owes what to whom.

When settling interconnect, one of the oldest problems has been to get agreement on the amounts owed. Unlike domestic customers, other telcos have the means to determine their own calculation of the amounts they owe. Disputes between carriers are rarely reported publicly, but insiders know they occur surprisingly often, even though it usually takes a difference of 5% or more before invoices are questioned. Start-ups are hence particularly at risk, as they are most likely to rely on the billing integrity of the more established networks they connect to. There is also a message here for other kinds of wholesale customer – including content providers and any business involved in revenue share arrangements – that they too need to invest in the technology and processes to protect their business interests. Relying on the occasional audit of their partner’s business may seem like a cost-effective alternative, but anyone with experience of how hard it is to determine the root cause of disputes, or to perform audits of unfamiliar telcos, will know this to be a risky approach. Employing auditors to ask questions is no substitute for recalculating bills using independent data.

The risk of wholesale leaks is amplified because other telcos may take advantage. A mistake with a pricing plan or number range may be exploited by another telco to greatly reduce their costs. Some telcos may even generate artificial traffic for the sole purpose of making money. In this case, the aim is to send calls around a loop to exploit pricing quirks; the generator of the traffic can make more money from the call being terminated on their network than they get charged for transiting it through the intermediary network. As the Latin American market grows, so does the potential for unscrupulous businesses to exploit telcos. For this reason, any wholesale provider needs to be constantly vigilant that all prices are designed to earn positive margins and that there are no unusual spikes in the traffic they carry.

In Europe, new revenue assurance departments often spent several years focusing on retail and corporate products before broadening their scope to cover wholesale. In contrast, revenue assurance departments in Latin American providers have taken a more balanced approach from the beginning. Many have always included wholesale revenues and costs within their scope, giving them a head start. They need to keep moving forward in order to keep pace with change, as the complexity of wholesale settlement is increasing. The good news is that revenue assurance practitioners in Latin American operators are aware of the risks. However, they need to keep their executives motivated and focused on the management of those risks. In revenue assurance, the worst damage is done by leaks that go undetected. The Latin American market is transforming itself, and telcos must stay on guard. When small errors add up to big losses, they cannot afford not to.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.