Revenue Assurance In Latin America

The TMF recently asked me to write an article about revenue assurance in Latin America. To write it, I spoke with a quite a few RA people working in the region. If the you disagree with the content you should blame them, but if you like it you can thank me. The article will be translated into Spanish and mailed to TMF members. For those of you who do not read Spanish, or are not members of the TMF, I have included the English version below. Enjoy! (and do not tell the TMF you read it here first…)

Revenue assurance, the practice of detecting and preventing avoidable financial leaks from business operations, has entered the telecoms mainstream. In a few years it has changed from being a little-known niche into a permanent feature in almost every telco. Is revenue assurance the same all over the world? Yes and no. Technology works much the same everywhere, and people do not differ greatly. So you can find similar causes of leakage on every continent. What differs are markets, governments, products, and attitudes. These create different challenges and priorities in each part of the world. Latin America, where each country is at a different stage of liberalization and many show signs of “leapfrogging” to mobile telephony, poses some special challenges for the revenue assurance executive. At the same time, it has become one of the most dynamic regions in adopting revenue assurance best practice. Dr. Gadi Solotorevsky, leader of the TM Forum’s Revenue Assurance team and Chief Scientist at cVidya, a revenue assurance software and consulting business that supplies several Latin American telcos, commented:

“We find Latin America, even in strong and well-established revenue assurance departments, to be very open to new ideas. Until recently there was limited knowledge of the revenue assurance guidance published by the TM Forum, but now there is a lot of interest in the team’s work. I have spoken with quite a few Latin American operators, some customers of cVidya, some not, and all of them want to learn more.”

The typical Latin American tier one or tier two operator now has a dedicated revenue assurance function. Some of the issues they deal with are more practical or physical than those faced by European or North American revenue assurance practitioners. The difficulties of collecting cash from payphones, managing the impact of power outages and implementing adequate physical security over copper wire are just some of the problems that often fall within the broad remit of revenue assurance in Latin America. However, the risks that need to be managed expand as markets grow. According to the International Telecommunications Union, Latin American mobile subscriptions are now roughly double the number for fixed lines. Such rapid growth in the market poses problems for the wireless service provider, which has to counter fraud, maintain control over prepaid top-ups and ensure everyone accessing their radio network is associated with a bill or prepay account. At the same time, they need to try to ensure systems and processes are scalable and efficient to keep pace with demand. Fixed-line traffic has also grown, driven by strong economies and off-shoring of services. Customer numbers are rising overall. Coupled with the introduction of new products, this has forced telcos to change their systems to cope. When systems are changed, resources need to be allocated to manage the migration of data and avoid the introduction of any errors. Many find at this point that they are confronted with the extra task of cleansing old and corrupt data that had been maintained in their legacy systems. This all contributes to a greatly heightened risk of costly errors going unnoticed.

Fidel Aponte, Regional Revenue Assurance Manager for the Americas & Caribbean in Cable & Wireless, summed up the biggest challenge for revenue assurance: “change is constant”. He explained how revenue assurance in the region is evolving to keep pace with change.

“In the past, revenue assurance was not part of the business culture. By demonstrating the benefits to the business, and by helping meet the goal of rapidly bringing new products to market whilst assuring they are accurately rated and billed, we have changed that perception. We used to be seen as a kind of road block, creating delays. Now we are seen as people who add value.”

Fidel and his peers have gradually shifted the understanding of the role of revenue assurance in Latin America. The increasing pace of change puts the burden on revenue assurance to work well with the rest of the business. This means two things. First, revenue assurance needs to work hard to communicate its purpose and integrate with other activities. Second, revenue assurance needs to encourage a modification of the business culture, where implementing controls to prevent leakage is treated as an objective to be realized as change takes place, not as an obstacle. Whilst Fidel has seen great improvements in how revenue assurance is regarded, he recognized that the hard work is far from over: “we need to continue to evolve in order to keep up to speed.”

Increased competition has made revenue assurance more difficult in many Latin American countries. Competition encourages a more rapid change of prices, the making of special offers and promotions, and sometimes leads to more complicated tariff schemes. If changes in prices are not tightly controlled, from the maintenance of reference data right through to the publication of marketing materials, it can lead to costly or embarrassing miscalculations. As customer expectations rise, it can be hard to ensure that billing integrity and presentation keeps pace. Whilst billing integrity is rarely a factor in prompting customers to first switch providers, it can be a major reason for why customers switch back to their original provider. In some ways, the reputation damage caused by over billing can be worse, and is certainly harder to measure, than the losses suffered from under billing.

Growth in the retail market has had the knock-on impact of increasing the revenue assurance burden on wholesale traffic carriers, whether domestic or international. As markets get liberalized, telcos find themselves needing better systems and processes to manage billing and settlement with an increasing number of other providers. They are simultaneously under regulatory pressure to open up and connect networks in the shortest time possible. Telcos setting up a new operation have the difficulty of trying to ensure that all their new systems work correctly and that they can keep a track on what they owe their partners. Established carriers need to be able to manage more partners using their network. Many of them will have no previous credit history so care is needed in managing the relationship. Failings in a partner’s systems may make reconciliation and agreement of balances more difficult, so it is vital that the carrier has complete confidence in their own numbers. In addition to managing debt and payments with other telcos, more attention must be spent on preventing mistakes. A flaw in the management of number ranges or of inter-carrier prices, if identified and exploited by a rival business, can very quickly result in large losses. That means extra attention must be paid when businesses upgrade their interconnect and wholesale billing systems, often as a direct consequence of market liberalization. Unlike in Europe, where new revenue assurance departments often spent several years focusing on retail and corporate products before broadening their scope, Latin American providers have had to take a more balanced approach. All revenue streams need to be included in the scope of the Revenue Assurance department from the outset.

One topic that cannot be generalized is the influence of laws and regulations in each country. However, it is key that each Latin American telco defines its own revenue assurance strategy with their national obligations in mind. Whilst learning from the experiences of others is a good way to drive improvement, it is a mistake to simplistically follow a generic strategy written by an international consultant with no local knowledge. Priorities and policies need to be aligned to the needs of each specific country. In the worst cases, following a generic model can lead to the purchase or development of inappropriate revenue assurance tools and systems. Dr. Solotorevsky explained:

“Regulation and law varies significantly between Latin American countries. In countries where providers cannot issue back bills, revenue assurance needs to be more proactive and prevent leaks before they occur. In countries where it is hard to terminate a customer’s service, more emphasis must be placed on the integrity and quality of data used in customer acquisition.”

The more things change, the more they stay the same. Liberalization and increasing penetration are driving the Latin American market forward, and adding to the burdens of revenue assurance. Meanwhile, revenue assurance managers are learning from and sharing information with colleagues in other parts of the world. The knowledge they gain is reapplied to create a model for revenue assurance tailored to their particular needs. They are not waiting for mistakes to happen, but are leading the way in explaining the financial consequences of allowing leakages due to operational weaknesses. The Latin American revenue assurance experience is to learn from the past mistakes of others, to better prepare for future challenges.

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.