DUBLIN, Ireland-Opinion is divided on the identity of the “killer applications” that will allow operators to make a return on their significant investments in General Packet Radio Service (GPRS) and third-generation (3G) technology. But while operators develop prototype services and grapple with technical difficulties on handsets and network software, they cannot afford to underestimate the challenge of billing customers for the wider range of services on offer.
An effective pricing strategy and billing platform are arguably the most important elements of any 2.5-generation (2.5G) or 3G business model. If an operator does not develop an attractive tariff structure and charge users accurately and on time, it will not make money, regardless of how many users it attracts.
According to Neil Philpott, ADC director of product marketing, Europe, Middle East and Africa (EMEA) software systems, operators will have to implement new systems, because most legacy GSM solutions cannot be upgraded. “Some operators are implementing combined `adjunct’ solutions that feed into the legacy platform to provide a convergent invoice. However, this is a stop-gap measure that makes it difficult to provide a total view of the customer or manage the revenue value chain.
Unfortunately, it is hard to find a commercially proven system that will meet all the needs of 3G operators. “Many of the billing solutions being brought to market for the 3G world are unproven in anything other than small-scale operations. It is true that the ability to charge by duration and/or data volume has been a feature of some systems for a number of years, but this is just one of many charging issues,” Philpott said.
“End users will expect the biller to manage their e-wallets and e-purses in real time. Behind the scenes, the biller will also be required to manage the complex value chain of content providers, portals, advertisers, network operators and roaming partners. This will involve pricing the same service many different times and many different ways, increasing the complexity of the process.”
Robin Burton, marketing manager of Cerillion Technologies, which is working with Manx Telecom on its Universal Mobile Telecommunications System (UMTS) project, believes the sheer number of different services that could be offered will increase that complexity. “All those services come with their own set of business processes, and it is vital that these processes are automated into a workflow system if staff are to have any hope of keeping up with the network,” Burton said.
“Without a decent workflow system, it will be impossible to pinpoint any problems or to bill efficiently. It is also important to make processes as flexible as possible, because this is such a new area. Traditionally, billing companies such as ourselves were asked to design business processes that fit the system-now it is the other way around,” he added.
“Billing is not top of the agenda for operators at the moment,” claimed John Whelan of Dublin-based mobile services development company Alatto. “Because none of the third-generation applications developed thus far are commercially available, operators do not feel a sense of urgency.”
The fundamental problem is that most operators are accustomed to charging by duration, which works fine for voice calls, but does not reflect the diversity of mobile data applications and their value to end users.
In terms of pricing for GPRS services, for example, both Vodafone and BT Cellnet are using volume-based pricing. Users get a set number of megabits per month for a flat fee with an extra charge for data volume exceeding the prescribed limit.
But Philpott does not think this approach will work for 3G services. “Billing by volume of data is not the way forward. Most users of 3G services will perceive its value in other terms, for example a video download, fund transfer or news item. We will be in the `billing for content’ arena,” Philpott said.
“3G billing is different from existing systems in that consumers are not familiar with packet-based charges as opposed to existing time-based models,” added John Whelan. “Consumers need to be educated to understand the difference, because it is difficult to explain why a color image could easily cost 100 times more to download than a text e-mail. Research has shown that consumers would prefer fixed tariffs with very high download limits rather than charges per packet of data.”
Richard Hubble, managing director of Xacct Technologies, which is working with Manx Telecom to collect and correlate billing data, agreed that users will have to understand the value of different types of data. “One price does not suit all content, and customers will need to understand that because operators will need them to be using the 3G network as much as possible,” said Hubble.
Strategy Analytics senior industry analyst Sara Harris expects operators to bypass early billing issues by offering 3G services free to encourage users to try them out. “In the short term, operators will allow free access to their services to generate interest and demand,” she said.
But in the longer term, operators will have to bill fairly and accurately or risk going out of business.
