The Search for Value – A Short History of The Charging Evolution Part 2

Billing for Stuff

Conferences sprang up around Value Added Services. The mobile internet became more than a distant dream and terms such as 3G and UMTS arrived in our dictionaries. How to charge for ‘content’ became a focus of discussion during the early and mid 2000s. Sadly, the straitened times for telcos showed no signs of improvement and no-one was able to launch innovative new content based services.

The mid 2000s saw the first tentative investments in 2.5G and the first Blackberry devices meant that email became available on a phone. Sadly, the discussions on value based charging were too far ahead of the technology and operators went for a flat rate approach. There was skepticism in the industry about charging for packets or bytes. Some joked that even if they could charge for them, their grandmother would not understand that the phone company had lost her packets and instead of accepting more she would probably demand them back.

A Smorgasbord

For a single price you could have anything you wanted. Operators tried to control the initial riot of usage by keeping customers in a walled garden so that they would only use their content – and they failed. Give a customer – say a teenager – a glimpse of greener grass and he is over the wall before you can say ‘what if I gave you some free texts too’.

The advent of ‘data’ and the surge of SMS allowed phone companies to experiment with bundles. Offering customers a ‘mix ’n match’ of services seemed to work for a while and seemed to help with the problem of customer churn, the only back office issue that made it to the desk of the CEO. The advent of data also brought back to the conversation the concept of real time advice of charge. If operators could deliver real time charging to customers it would enable an altogether better service, providing control over usage for operators, control over spending for customers.

Mobile broadband rolled out and mobile data became increasingly popular. Enter Apple’s iPhone and usage went crazy. Networks were overloaded within months. So the phone companies decided that they should charge for usage. They would cap customers’ capacity. They would charge for over-using the network. That would, they thought, fix the problem. But companies such as Google, Apple, Facebook, Skype and a host of other Over the Top (OTT) players were using huge amounts of network capacity, offering compelling products and pushing phone companies into a dangerous corner where margins were razor thin and competition was intense. Phone companies were being forced out of the value chain.

The Impact of BillShock

The rise of data, especially mobile, the phone companies’ dropping voice revenues and the need to charge for volume produced a reaction. BillShock became an epidemic. Roaming has always induced BillShock, but finding data roaming horror stories, or tales of children accidentally racking up tens of thousands of dollars in data charges, became a new game for journalists. Telcos were, briefly, implementing policies that were more network focused than customer focused.

On the face of it, this Policy Management 2.0 looked a lot like Policy Management 1.0. Then something changed. Operators realized that they had the tools to work with customers, while at the same time managing what was happening on the network.

Policy Management + Customer Care = Value

Value Based Charging is, finally, gaining traction. Fewer operators are imposing curbs, bans and hard limits on data consumption. The number of operators charging a fee for overage has dropped from 70 percent to 61 percent in the last few months. Using the tools that are available allows operators to make offers that benefit both them and their customers. Happy hours – an incentive to get customers to use network capacity at ‘off peak’ times – are now offered by 11 percent of operators. The culture is now very different and there is a partnership, a trust, developing between operators and customers. This is producing a win-win situation.

Many have seen that fighting against Skype or Facebook makes no sense. That is where their customers want to go. As a result, over a third of operators are now offering zero rated Facebook plans and over a quarter are putting revenue sharing models in place. As the tools for operators become more sophisticated and, more importantly, their use spreads across the business and away from IT, we see real innovation in Value Based Charging. With video already accounting for 42 percent of mobile traffic, the networks will always now be under pressure and there will be a continual investment needed to cope with the capacity problem. But the customer is king again. Operators are moving to offer them things that they really want. The recent ‘shared data’ plans from Verizon and AT&T are just the beginning. Toll free data is becoming possible and real time help, advice and guidance online is now a distinct possibility

Until Toll Free data arrives, there is a growing sophistication in the help that operators are able to provide their customers. “I see you are almost at your limit, need a boost for an hour?” “An extra gigabyte til Thursday? No problem, just click here.” Direct Operator Billing is now emerging as the most intuitive way for customers to pay and it puts the operators right back in the game. The possibilities for communications networks to become the platform for a smarter world are now real.

Operators are in a unique position with their customers. They can be a trusted partner online. Trusted access, trusted payment options, trusted and timely management of preferences and limits are all valuable. No OTT player has this ability or knowledge – and they know it. Many are turning to operators to help them improve relationships with their customers. And they are prepared to pay. If direct operator billing is the simplest and most intuitive option – Facebook will go for it. If SMS provides the ideal vehicle for precision, location based marketing – Coca Cola will pay for it. If customers of an online travel agency are complaining about data roaming issues, the site will work with the operator and fund it. New models, ideas and collaboration will render toothless the current perceived threat from OTT players. Now everyone can applaud OTT player WhatsApp as it passes the 10 billion messages in a day mark. The fact that messaging is still growing exponentially means everyone wins. In short, operators are now able to leverage their unique relationships, customer knowledge and billing abilities.

Welcome to the Age of Value – and, finally, to Value Based Charging.

 

This history of charging was supported by Allot Communications.

 

 

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Alex Leslie
About Alex Leslie 400 Articles
Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet.

1 Comment

  1. Alex:

    Your highly readable and informative history will be helpful to people new to this important subject–we who have been doing this for scores of years need all the help we can get. Good job.

    Steve Cotton

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