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THE RACE TO BUNDLE VOICE, DATA AND VIDEO
Susana Schwartz
It’s no secret that the more services bundled under one trusted brand,
the less likely customers are to leave a provider. In fact, Yankee Group
finds that tying two services together causes churn to fall by one-quarter;
tying three causes it to fall another eighth; and adding a fourth leads
to churn rates falling an additional sixteenth. JD Power and Associates
maintains that as much as 40 percent of consumers would prefer all their
communication services—including local, long distance, Internet, TV
and even wireless—to be delivered by a single provider on a single
bill.
The question remains of whether they’d prefer that single bill
to come from their phone company or their cable provider.
There’s no question that cable providers are poised to realize
substantial revenue gains, as they can upsell VoIP to existing subscribers
already using pay-per-view and Internet capabilities. Cable companies
have already witnessed a 41 percent increase in spending, with an average
of $42 spent each month.
Riding the Learning Curve If telecom providers move
quickly, they have a chance to beat out cable operators. “Cable
companies will grapple initially with complex taxing issues and the challenges
of building E-911, directory assistance and other third-party databases,
not to mention interfaces to different industry standards,” says
Jan Timothy Woodcock, a principal in Deloitte & Touche’s Media & Entertainment
Practice.
Billing for telephony services created around VoIP also will be a huge
obstacle for cable, as many of their systems were built 20 or so years
ago. “For cable, billing is an onerous task, as traditionally, their
billing systems ran virtually their entire business, including inventory
tracking, customer management, account management, storage engineering
data and field force management,” says Anthony Starkey, vice president
of business development for Mentis Broadband.
There also will be obstacles around customer care, because cable companies
always dealt with “houses” rather than “people” in
the delivery of their services, according to Neil Philpott, director of
product marketing for Amdocs. “They have to understand the family
unit in the billing system to manage access control in triple play, and
that’s why [telecom providers] could have the higher ground.”
Some RBOCs claim that as much as 70 percent of existing customers have
voiced interest in service bundles that include video and TV services
as a component. Despite those contentions, there are few providers with
rich offerings for robust settlement of content and video services. In
fact, most triple play is moving toward all-you-can-eat pricing. That
is attributable to the fact that RBOCs are just testing the waters by
simply reselling cable or satellite services that garner a nominal monthly
charge for minor pay-per-view transactions. In fact, price has become
the focal point for RBOCs and IXCs racing to get people up on their networks,
with plans to upsell them down the road.
However, consumers will respond to price for only a limited time, because
they will want to migrate to QoS-based enhanced services. Carriers will
have to acknowledge when someone downloads MP3 files it can cause a VoIP
connection to drop out or a video to be shaky. Carriers will have to have
well-defined service levels that exist independent of one another.
“ You still have to put a physical DSL connection, but also define and
configure three or more logical connections on top of the physical layer,” says
Mark Nicholson, CTO and head of product development at Syndesis.
Some are trying to mitigate the impact of video on multichannel offerings
by laying fiber wherever economics and regulations allow.
“Multi-service ILECs have an opportunity to gain the upper hand
if they lock in traditional telephony customers disenchanted by VoIP’s
911 and power outage issues,” says Larry Davis, founder and CEO
for CommSoft.
Despite optical networks’ huge bandwidth capabilities, the cost
of steel, equipment and OSSes are making fiber to the home (FTTH) and
fiber to the curb and premise (FTTX) an expensive proposition for the
time being.
Those who have begun to take the leap are doing so in phased approaches—usually
in greenfield or brownfield environments, where they can work in tandem
with legacy environments, phasing in fiber for next-generation services.
“The 3G work going into credit authorization, third-party clearing
and settlement might be a simple version of where triple play strategy
will go…to the extent that the content piece and third-party aspects
of it are associated,” says Reid Drucker, a partner at Accenture,
who says it might be possible that those further along in their 3G strategies
might be better prepared for complex triple play services.
In the interim, some carriers are using copper facilities with ADSL2
Plus (a family of next-generation standards for addressing bandwidth and
capacity issues) and passive optical networks (PON) until FTTH evolves.
Because triple play services should operate regardless of network technology,
support of DSL, ADSL2, VDSL, PON and EPON (Ethernet PON) are growing as
a foundation for fiber overbuilds, which would enable telecom carriers’ video
capabilities to mirror or trump that of cable, while offering unconstrained
bandwidth for data and voice as well.
Most concede that the real potential of triple play will not be reached
until carriers figure out the business issues of how to manage accounts,
discounts, packages, and cross selling and upselling opportunities, as
well as the substantial technical issues around OSS and billing.
OSS Challenges
Off the record, many industry pundits concede that triple play bundles could
potentially cripple existing activation, order management, provisioning and
billing systems. Some go so far as to say this will be the thing that finally
kills off legacy OSSes, as sophisticated access networks will require complex
configuration, provisioning, activation and discovery.
“When you see an RBOC partner with a satellite company, you know
rolling out a single bill will be quite a challenge, as legacy systems
are inflexible and cannot independently support the diversity of services
that come with true triple play,” says Anne Robinson, senior product
manager with Portal Software. She recommends carriers seek out vendors
with experience around dynamic price bundling, tiered pricing and volume-based
discounts. “And expect it to take a long time,” says Robinson,
acknowledging that five years or more might be needed to move from legacy
to point solutions that are up to robust triple play requirements.
Despite the initial pain, those carriers with 10 or more billing systems
will benefit from moving to converged, technology-agnostic systems. Maintenance
costs are so high that it is more sustainable a cost to go through the
initial pain of finding points of integration among network elements and
end-to-end elements, such as CRM, billing and financials, Robinson says.
One of the challenges to convergence will be the fact that first-generation
DSL networks for single service offerings aimed for best-effort quality.
Because the challenges were minimal, since most operators went with flat-rate
billing, most of the configuration was done at layer 2. “With second-generation
networks, most of the configuration will have to happen at layer 3, as
well as layer 2, because of the added responsibility of configuring IP
to accommodate QoS, traffic shaping and traffic aggregation,” notes
Syndesis’ Nicholson, explaining that second-generation access networks
in triple play require significant changes in provisioning, activation
and order management. “Carriers will need the freedom to choose
any vendor or network supplier, any topology, as well as any technology
to deliver voice, data and video bundles.”
That will be challenging, since there will be multiple network equipment
vendors and multiple technologies, whether IP, ATM, DSL, frame relay,
Ethernet and VLANs—all having to work together on the same network.
Provisioning across all of them will be arduous due to an increase in
network equipment.
Because provisioning and qualification of local loops and DSLAMs, DSL
modems and cable TV converter boxes could potentially become problematic,
carriers are expected to rely more heavily on service management platforms
in order to create policies that govern how triple play services are carried
across access networks and how DSLAMs are configured.
“All the technologies have to be pulled together, as well as different
topologies, so that you can get to the source of a service—whether
the video server, the softswitch for VoIP or the Internet service provider
access point—from the CPE through the access network,” says
Nicholson.
In order to format any number of services over any number of media, carriers
have to be able to change representations, analogous to what people do
on a hard disk. “That means carriers should create flexible infrastructure
on two levels—one, reconfiguring services quickly, and, two, saving
different types of files so that they can create multiple services of
one medium,” says Cramer’s Brian Buggy, senior vice president,
OSS architecture.
Service Activation
Keeping all pieces of the infrastructure intact will build a solid foundation
for service activation, which is expected to shift from being a static subscriber
function to one of switching services dynamically.
In order to support creative prepaid and usage-based billing for triple
play, carriers will need to look at each service and application within
the pipe. “In the past, provisioning and activation had to be aligned
according to specific service types, whether telephony or data, but that
would create chaos as carriers get into multiple accounts for each customer,” says
Alan Sheehan, CTO of Interactive Enterprise, whose service activation
platform is deployed with broadband operators rolling out interactive
pay-per-view services over GSM networks (text messaging to access channels)
and on-demand services through multiple devices.
When presenting bundles of triple play products, carriers need to better
understand the interrelationships among the different facets of the network,
customers and technologies involved.
There is a clear segmentation of customer, service and network in maturing
OSS standards, such as OSS/J and TMN. “There has to be a pyramid—at
the top of which is the subscriber, and then the services to which he
or she subscribes, and then the access technologies used to deliver those
services to the customer,” says Sheehan, who sees carriers shifting
from a call-center world to one where subscribers self-provision on-demand
switch services.
As subscribers and services mature in triple play offerings, the process
will move up the value chain, beyond providing fast pipe access and into
services and then into applications. “Then, you have to do more
than provide a fat data pipe; you have to support voice, data and video
applications within that pipe, which means you have to recognize what
is data, HTTP, peer-to-peer gaming.” That, Sheehan says, requires
more that a view of bits pushed up the pipe, and more of an application
view.
As traditional TV and video services were switched on and off through
billing, it broke down, because billing becomes more and more bloated
as it increasingly has to handle subscriber management responsibilities,
says Sheehan. To address that issue, Interactive Enterprise has formed
a relationship with CSG Systems, which is OEMing IE’s service activation
platform. “Carriers want to swap in billing systems without much
impact to their operational environment,” adds Sheehan, who says
there will be an emerging trend toward putting activation platforms in
front of billing. “Billing systems will have to enable access to
services through PCs, TVs, and cell phone interfaces, which means the
user interface components will have to move into service activation platforms.”
Bringing Together Billing and Order Management
In triple play, there will be different quality levels for different services—all
traveling over the same physical infrastructure. “Carriers need multiple
logical connections over the physical transport to accommodate each service—one
for voice, video and one for data,” says Syndesis’ Nicholson. That,
he notes, should mean different cost levels for each connection. That way,
when an MP3 download causes a VoIP connection to drop or video to be shaky,
the carrier can compare each connection to a level of service independent of
each other. “You have to go beyond just establishing the physical DSL
connection, and onto defining and configuring three or more logical connections
on top of that physical layer,” Nicholson adds.
Because video, voice and data services have to be separated from network
topologies, as well as vendor requirements for delivering services, interfaces
for order management and billing must be simplified.
First-generation order management systems were created for processes
built around the earlier DSL access technologies, so they will break down
with broadband access. Because networks must now take on different characteristics,
as well as different vendors, carriers are advised to put in a level of
abstraction to handle the nuances around vendor, technology and topology. “That
will resonate way up into the order management and billing stack, ultimately
making it less complicated, and making billing less complex,” says
Nicholson. “Carriers can use the same softswitch vendor and ride
over DSL, PON or cable—the goal is to abstract out the service from
the network infrastructure required to deliver that service.”
Keeping the technology and vendor differences down at the lower OSS layer
will mean carriers can streamline higher levels.
Deloitte & Touche’s Woodcock agrees. However, he admits that
hashing out sequences and dependencies around cable services are going
to be a significant effort. “If there are a false set of assumptions,
then it becomes more difficult to achieve basic telephony and billing
capabilities.”
That false set of assumptions is derived from “quick fixes,” where
cable operators modify existing billing and OSSes to accommodate voice
for existing cable systems. “A cheap fix will break over time, as
carriers get lulled into a false sense of comfort in pilot phases. Once
they hit 2 million subscribers with QoS questions, they will have major
problems in the call center,” says Woodcock.
Some companies are opting for plans to build on adjunct platforms to
handle special parts of triple play—with a plan to eventually draw
it all together. “For now, carriers are trying to provide the minimum
of what they need to launch triple play as inexpensively as possible,” says
Drucker.
“While many billing platforms can rate and bill for complex combinations
of services, carriers going into broadband entertainment should seek out
systems that offer integrated customer management, order handling and
billing.”
CASE STUDIES
SBC’s Triple Play Strategy
“ As much as 74 percent of our customers voiced interest in bundles with
satellite components,” says Mike Paquette, vice president of billing for
SBC. Consequently, SBC’s strategy has been to get video services on its
bill as quickly as possible (i.e., partnering with EchoStar). “Long term,
we will integrate television and video services into our bundled voice and data
offerings, which will mean the creation of set-top boxes that integrate satellite
TV, DSL Internet access, and home LAN and wireless LAN capabilities,” he
says.
Because success with integrated voice, data and video bundles will rely
heavily on the way in which such packages are presented, Paquette concedes
that creating robust triple play service bundles while simultaneously
simplifying bills is a tenuous balance to strike.
One step to simplifying bills has been the integration of price points. Where
local and long distance (LD) charges were separate components, SBC integrates
bundles of local and unlimited LD. “We continue to build upon our ‘single
price point’ concept for our ‘all-distance’ services, and
we plan on doing the same with data and video as well,” says Paquette.
The next step will be to add video and data components. “We established
a set of integration points for interfaces so that ordering desktops can
support and holistically present super bundles,” says Paquette, noting
he wants to get the ordering capabilities on CSRs’ desktops so that
with a single call, voice, data or video products can be provisioned, ordered
and billed.
“The goal is to someday give the customer the ability to choose
his or her own service bundles from a menu of 20 or more services,” says
Paquette.
SBC has also launched a “shared bill” initiative with its
partnership with EchoStar, which calls for continued integration of products
and services through its video channel and ultimate packaging and discounting
on one bill.
Phase one meant first setting up its satellite partner as a billing and
collections agreement, whereby its products and services continued to
be provisioned and rated by EchoStar on behalf of SBC.
To get the video service into a shared bill, SBC had to get video capabilities
onto its ordering desktop. That meant resolving the order entry issue
on the access infrastructure. “We created an order management adapter
to plug in with PSTN numbering schemes,” explains Paquette.
By bundling the shared-bill concept with the discount engine, SBC has
a chance to have cross-product discounts, where SBC discounts certain
product sets, which are components of packages.
SBC also has launched a strategy for a “competitive response infrastructure,” the
goal of which is to better support affiliates and partnerships by improving
order management and introducing packaging catalogs, as well as affiliate
account management capabilities. Under that initiative, two activities
are underway to improve bill period synchronization with business partners
involved with triple play and to mature flexible payment options strategy. “We
want to eliminate scenarios where affiliates and partners struggle to
hit the bill period time frame in order to get ‘to’ and ‘from’ dates
synchronized with LECs for shared bills.” To accomplish that, SBC
is analyzing how data are processed in an attempt to synchronize cycle
dates
SureWest Eyes Video on Demand
SureWest Broadband is an ILEC that also operates as a CLEC offering broadband
as part of its triple play offerings in Sacramento, Calif. The company acquired
WinFirst, a company that integrated its billing and OSS systems to create
self-provisioning for triple play services. SureWest continues to overbuild
in its territory with a fiber-only network. It offers a video product that
is fully digital, with up to 260 channels, as well as 10 Mbps of full duplex
Internet access, and voice packages.
The company is focused on bundles and discounts that are based on the
number of services and packages customers purchase. Although it has VoD
promotions, its focus is still on bundled service offerings, with discounts
based on the total amount spent by customers.
“When we turn up the homes, we have a good success rate; 50 percent
of our customers purchase triple play and 80 percent buy two or more services,” says
Fred A. Arcuri, senior vice president and chief operating offer for SureWest,
which has added wireless to its triple play bundle, although it’s
not yet on the unified bill.
The company is overbuilding outside its ILEC territory, “displacing
three or more existing providers,” says Arcuri. “That is phenomenal
penetration,” he says, noting that SureWest closes 70 percent of
its sales once it gets in the door. The company sells door-to-door with
a laptop presentation that does a side-by-side comparison of what the
customer has and what it would have with SureWest.
“Thus far, our success with triple play has depended on the differentiation
we get from the data product we offer,” says Arcuri. “Word
of mouth has given us a great service reputation as regional player.”
SureWest continues to roll out fiber to the home, but in the meantime
counts on DSL to extend the life of copper.
Competing with SBC’s voice and data services in some areas, SureWest
is looking at satellite partnerships to more aggressively compete with
SBC and Comcast—which is rolling out IP voice.
SureWest is concentrating on more of the cross-promotion for usage-based
features, as well as monthly features and subscriptions.
“For now, we are looking at how VoD will bring in new types of
revenue splits between us, the studios and content owners,” says
Arcuri, noting that the billing strategy around content with video services
is still up in the air. “With VoD, the content providers may or
may not say we need to compensate them for movies, and perhaps charges
will be based on the number of eyes that see it rather than how many times
they view it,” says Arcuri.
According to Arcuri, part of the problem with moving ahead is that telecom
carriers don’t have access to first-run movies. “VoD products
suffer a bit, because major video retail outlets have first dibs,” he
says. Since content is aggregated and priced through the National Cable
Television Consortium, months go by before the carriers can get videos.
“For now, their commitments with retail video stores are more important
than those with their VoD partners, but if we could get first-run movies,
they could—no doubt—make more money with us,” says Arcuri.
Giving Customers the Choice
“ We are the local trademark,” says Doug O’Brien, vice president
of IT for Sigecom, an Evansville, Ind.-based carrier offering television programming,
Internet access and telephone service to its customers. The company last year
converted a mix of five billing and OSSes to Telution’s COMX. “It
took about three months of hashing out requirements, and then we swapped out
those systems and an in-house workforce management and service availability system
so that we could have a consolidated view of customers’ accounts and so
that CSRs would be cross-trained on all products.”
Sigecom enables customers to choose different cable speeds and modem
speeds according to their usage; they can ratchet up speeds for certain
downloads, as customers are charged according to what they use.
Additionally, customers are not locked into service bundles; they can
choose different tiers of video, as well as traditional telephony packages.
By forcing itself to keep throughput available for users and offering
flexibility in its options, Sigecom has a penetration rate of more than
37 percent with its triple play services. With more than 88,000 homes,
the company relies heavily on word of mouth, even when SBC and Insight
Communications moved into the area. “Many people switched initially,
but came back because of our customer service,” says O’Brien.
That customer service relies on an automated workflow in its order management
system.
When a customer calls in to upgrade, the order management group explains
discounts and products and then generates work orders. At that point,
the system autoprovisions all the video and cable modem services on Sigecom’s
network, automatically assigning MAC addresses from inventory and showing
the boxes that are plugged in to activate the service. Once a service
is activated, customer and service information is forwarded to populate
the billing system.
“Packaged bundling and discounting was one customization we wrote,
as well as pro-ration rules,” says O’Brien, noting that cable
services are billed in arrears, which requires pro-rating of calculations.
Simultaneously, Sigecom redesigned business flows to apply to the new
applications.
We inputted functional responsibilities and replaced manual processes
in nine months. O’Brien contends the initial investment was worth
it, “as the system put $1.2 million toward the bottom line after
this conversion.”
The company’s next initiative will be to implement Web-based payment
and presentation by June in preparation for going live with a digital
video recorder product.
Who’s Scared of an 800-lb Gorilla?
Can a small rural carrier with 20 CSRs supporting about 40,000 access lines,
10,000 Internet customers and 8,000 cable TV customers compete with or beat
out Time Warner or Vonage—both of which are overbuilding in its territory
north of San Antonio, Texas. “Life as we knew it has come to an end;
competition is here and now, and only those who adapt will survive,” says
Keith Mitchell, IT manager for Guadalupe Valley Telephone Cooperative. “I
feel good about our ability to adapt to compete with the big cable companies,
as we have the hometown reputation for quality service.”
“We used to have separate platforms for telephony, Internet and
cable, but now we want a single database so we can see all the services
purchased for aggressive cross-selling capabilities.”
In greenfield areas, such as subdivisions and multidwelling buildings,
the company is rolling out fiber to the home. Engineers are also in the
field upgrading its coaxial cable plant to 870Mhz bandwidth. “For
those customers who already have cable TV and telephone services with
us, we will offer upgrades to DSL or cable modems for broadband,” says
Mitchell, noting the fiber rollout will take a couple of years. “Then
we will be able to roll out enhanced services.”
Mitchell also is engaged in regular meetings with marketing heads to
determine product discounting strategies so that bills are designed to
be flexible enough to create and track cross-product promotions.
As of July 1, the company will bundle cable TV, telephone and DSL on
one bill.
“When we roll out enhanced services, we will have scenarios where
we can discount pay-per-view packages for high-speed Internet customers,
or afford customers the chance to create packages around sports or business
and so on,” says Mitchell.
To prepare for cross-selling TV services to its DSL customers, Guadalupe
and its service order management vendor, CommSoft, have been working together
to add new fields to its service order system and its own homegrown software
used for maintaining line assignment databases and engineering. “We
need to handle cable TV converter box serial numbers, as well as different
types of data engendered by cable modem Internet services,” says
Mitchell, who is converging billing databases in preparation.
About CommSoft
CommSoft's software solutions give communication service providers the ability
to conduct their customer care and billing operations from one fully integrated,
convergent system. Our ability to centralize data reduces costs, increases
efficiency and enables better service. CommSoft customers benefit from the
ability to offer a single bill for all their services including wireless,
wireline, cable, and ISP. We have over 20 years experience providing customer
care, billing, rating, financial, cabs, capital credits and provisioning
solutions. For more information, go to www.commsoft.net.
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