Welcome to the Spring edition of Evolve for 2008. In this issue we consider some of the Billing/BSS implications of regulator-driven functional separation for telcos now that this EU-driven policy direction looks more certain; and we report back from a thought-provoking Telecoms CRM and Billing Forum 2008, in Prague.

Few of us are keen on government regulation - especially when it’s aimed at us rather than the other guy and is stamped ‘Brussels’. As our main feature below shows, where functional separation between retail and wholesale operations is applied it will involve extra Billing/BSS investment - whether the change is driven and defined by a specific regulatory brief or is a pre-emptive move by an operator, designed to transform its business and to gain some regulatory relief.

In either case, from an operator's point of view the technical challenges of functional separation might be eased by developments already being driven by changing customer needs, business models, and technologies. One big trend today is towards what’s beginning to be called ‘componentization’ - breaking services down into their component parts and building them back up in a structured way into final products. Big operational advantages, like service reuse, accrue with this approach but crucially it also helps develop the two-sided, wholesale/retail business model designed to be fostered by functional separation itself. This component approach makes service creation and delivery (whether wholesale or retail) a much more structured (and less expensive and time-consuming) process. The two developments might just go together.

What makes customers happy and what makes them churn is the subject of our reader poll in this issue. Be sure to let us know what you think. We also report back on the February poll which asked our readers “How many services do you receive in your telecoms bundle?” The results make interesting reading as we see the spread of multi-play services bundles.

And finally, our visit to Prague for the Telecoms CRM and Billing Forum was a very fruitful experience with operators from Central and Eastern Europe reporting back on how far they've come in recent years. In many areas the region's players have caught and surpassed the performance of operators in Western Europe while at the same time hitting some familiar barriers and limitations, such as the problems of driving revenue growth in saturated markets, delivering excellent customer experience and minimising IT costs. That's the price of success.

Ensuring Customers will Benefit from Functional Separation

It seems that functional separation has become flavour of the month as Telecoms regulators the world over are considering the benefits of splitting national operators into retail and wholesale operations. This type of business separation has already affected incumbent telcos in a range of countries from New Zealand to the Faeroe Islands and moves are currently on the table to break up the Italian, Swedish and Irish national operators.

The UK went through this process in 2006, when BT created Openreach, a new wholesale business unit which is required to give the same level of access to the local network to third-party service providers as it does to BT Retail. The success of this means that the UK is now widely regarded as a benchmark of just how successful functional separation can be.

Within the European Union, this subject is gaining a lot of attention, with commissioner Viviane Reding eager to establish a Brussels-based supervisory authority with the power to split incumbent operators. The main objective is to create more market competition, leading to increased service innovation and greater flexibility and choice for the end user. The principles are clear. But what is less certain, however, is how easy these goals will be to accomplish in practice and to what extent will their achievement be impeded by the greater complexity of the back-office infrastructure.

The answer will of course depend on the precise circumstances surrounding each individual split. The new model may take one of two forms in any given country. In the first scenario, the operator pre-empts forcible action by the regulator, and takes the initiative itself by implementing some of the key elements of functional separation proactively.

In the second scenario, the regulator steps in and imposes the separation according to a specific brief. In this case there is a danger that the operator may be less co-operative and may even be inclined to make it as difficult as possible for other retailers to integrate to its network systems.

Clearly operators who take the initiative themselves are likely to be better disposed to moving beyond the straightforward role of wholesale network provider and making functional separation work for their own benefit. This may include offering a range of complementary value-added services such as ‘billing on behalf of’ retail third parties who may not wish to undertake the cost and set-up difficulties of doing it themselves.

Breaking the Chain

Whichever approach is taken, when they are faced with functional separation, all operators will have to tackle the complex process of dividing their infrastructure in two. This will mean splitting many automated procedures such as provisioning and order handling into separate and distinct processes. Rather than having one fully integrated system capable of covering the entire process from end to end, operators will be introducing a ‘break in the chain’ in order to manage integration with multiple retailers’ systems and equal access for all.

There are, after all, inherent differences between the type of supporting infrastructure required to conduct wholesale and retail activities. While the retailer will typically be dealing with a large number of individual subscribers, the wholesaler will invariably be interacting with a much smaller number of customers, each with a broad range of connections. This can have a significant effect on the underlying rating and billing systems architecture and how CRM is managed, for example.

One of the key challenges wholesale providers face in delivering equal access, is creating a suitable interface for their new retail partners for ordering and service provisioning. Interacting with the underlying network is inherently complex. However, for true equivalence the wholesaler must provide equal access to the full range of its network services to all retail partners. If this new interface has a complicated low-level ‘telco’ specification, then the operator will be making it difficult for any non-telco retailer to interact with the wholesale network.

It will be harder, for example, for a large supermarket offering telecom services to interact with this type of wholesale interface than for a retailer with a telecoms background. And, it may actually be very expensive for a non-telco retailer to do this.

This high cost will typically be a greater burden for smaller retail firms. Large organisations with a business model that projects high subscriber numbers may not be unduly concerned that there is a significant cost to set-up and maintain that interface. Smaller retailers with fewer customers who may be looking to add new services to an already diverse portfolio may well be deterred by the prospect of incurring high costs in supporting that integration.

Bridging the gap between the wholesale and retail functions of a telco operation is a significant challenge in itself. One possible solution is that the wholesale telco actually offers a ‘white label’ service including everything from order handling to ‘bill on behalf of’ so that the retailer no longer has to build its own support systems infrastructure but can still capitalise on its own brand. In this case, the operator must not only provide a multi-retailer BSS environment that interworks with its own wholesale BSS solution but it must also do so cost effectively.

One of the primary goals of functional separation is the delivery of enhanced choice for the end user but an equally pertinent question is ‘does the model offer sufficient choice for the retailer?’ The wholesaler clearly has the opportunity to develop a one-to-many relationship with its retailer base. But does the retailer have the option to go elsewhere if its wholesale partner is not performing well?

Service Innovation

Another objective of functional separation is the delivery of service innovation. If this simply means the repackaging of existing services, then it can be carried out relatively easily by the retailer who can develop their own pricing schemes for bundles of fixed, mobile, broadband and TV offerings. The retailer might, for example, want to bring in pricing per event, cross-service incentives or flat-rate fees, and these can all be achieved when equipped with the appropriate business support systems.

However, when it comes to new service innovation there is an inevitable dependence on the underlying network capabilities. If you want to support a 20MB broadband connection for example, you obviously must have a network in place that is able to provide this service.

The retailer will therefore typically need to rely on the capability of the wholesaler’s network if it wants to achieve new service innovation. If the wholesaler is then reluctant to launch new services, for example if the investment required outweighs the returns expected at a wholesale level, then it is likely that the whole process will stall.

This leaves the door open for agile internet companies such as Google and Facebook to move in, make effective use of IP networks and bypass the telco by launching dynamic new services. So, if the wholesaler is not innovative in creating network capability that the retailer can use, then both run the risk of being compromised by third parties.

Customer is King

Of course, service innovation is of no value if it does not benefit the customer and the main objective must always be to provide the best possible customer experience. In the traditional telecoms model, the customer should never experience an extensive time-lag between ordering a new service and receiving it. Operators today are looking to accelerate further their “lead to cash” time.

However, when the retail and wholesale functions are separated the process can become significantly more complex. Service level agreements will need to be put in place and the time taken to ‘activate’ the customer’s account and services can increase significantly.

Customers may experience up to a 30-day window in which the set-up of service takes place. While the regulator may dictate such a time period, from a systems and order processing perspective, it is highly desirable for orders that transfer across the retail – wholesale divide to be processed as swiftly and accurately as possible. In short, installed solutions need to deliver straightforward customer service and ensure that both wholesale and retail parties generate revenue quickly and efficiently.

Choosing the Right Partner

In the light of these challenges, operators will increasingly want to work with business support systems (BSS) providers that not only have expertise in both wholesale and retail areas, but can also provide a service that spans both types of systems and have experience of working in an environment where this sort of process has taken place.

After all, if the end goal of functional separation is to provide enhanced choice for the user and improvements in customer service, then the provision of equal access to the wholesale network and effective services to subscribers must be simple to manage.

Operators should look to partner with BSS providers who can deliver high-quality, pre-integrated solutions which can be easily linked to the surrounding wholesale and retail infrastructure. By offering this level of functionality, the solutions provider can reassure the operator that no data will be lost between systems, that processes spanning both sides of the functional divide will be supported seamlessly, and that the end customer will benefit from streamlined customer service.

Incumbent operators may be less than enthusiastic about the drive for functional separation and claim that it is not in the best interest of the end customers. However as Claude Frédéric Bastiat, the 19th Century French economist, said: "They will come to learn in the end, at their own expense, that it is better to endure competition for rich customers than to be invested with monopoly over impoverished customers." And with EU commissioner Reding actively pursuing this issue, it is a lesson that they will soon have to learn.

Dominic Smith
Dominic.Smith@cerillion.com

Cerillion Event Report: Telecoms CRM and Billing Forum 2008, Prague, 7-9th April

Cerillion was the Silver Sponsor of the recent Telecoms CRM and Billing Forum 2008, run by Marcus Evans, which took place from 7th to 9th April at the Intercontinental Hotel in Prague, capital of the Czech Republic. The event brought together delegates from as far afield as Kenya, Central Asia and the Middle East, as well as a whole smattering of more local countries, with the goal of addressing the key question: How billing systems and CRM activities must be strategically integrated in order to effectively support next generation products and services.

	Neil Philpott, Director of Pre-Sales

The conference provided an ideal forum to raise awareness of Cerillion in Central Europe, an area where we continue to see opportunity, and also offered a chance to share experiences and to update our insight into developments in the communications market in the region. Cerillion was highly active throughout the event, running the pre-conference workshop, chairing the first day of the main conference and presenting on the final day.

Neil Philpott, Director of Pre Sales, led more than 20 delegates in a half-day pre-conference workshop entitled Assessing key strategies for prepaid / postpaid convergence. The objective was to make delegates think through their company’s priorities and objectives for prepaid / postpaid convergence rather than just regarding it as the next ‘must have’ gadget. The workshop took them through a structured process to help them understand the options and decisions that must be considered in determining an appropriate strategy and implementation path.

The agenda for the 2 day main conference brought together speakers of 10 different nationalities and covered topics from a range of perspectives addressing business and technical concerns. In addition to 14 operator case studies sharing practical experience of prepaid /postpaid convergence, BSS integration, service convergence and the impact of rolling out new services, there were some genuinely radical thoughts on how customers see their telcos and on psychology in the call centre. Lots of examples of good and bad customer experience were quoted. Neil Philpott was in the chair for the first day and his Heathrow Terminal 5 experience in getting to Prague was up there with the worst!

On the second day Neil delivered a presentation on Integrating Ordering Processes with CRM Systems. This identified why the order process is so important and the challenges it presents. It highlighted the key features of the supporting systems and stressed the advantages of a pre-integrated, bundled component solution over the best of breed approach.

It was interesting to hear the Operators presenting their real life experiences of what, even a year ago, were theoretical strategies and plans but now are products in the market and systems in operation. The region has well and truly caught up with, and in many cases surpassed, the supposedly more advanced markets in Western Europe. However, they have also inherited many of the West’s challenges in terms of competing for revenue in saturated markets, delivering exceptional customer experiences, minimising the cost of IT and adapting to suit the rapidly evolving communications environment.

If you would like to find out more about the pre-conference workshop, to see how Cerillion can help you to achieve your CRM & Billing integration goals, or just to get the latest update on the location of Neil’s suitcase, please contact us on: info@cerillion.com

Major Milestone Achieved with 10th Contract for Cerillion 3

London, UK, 2nd April 2008 – Convergent billing specialist, Cerillion Technologies, today announced the 10th implementation of Cerillion 3, its flagship convergent CRM and Billing solution. The latest contract, an upgrade to version 3 by existing customer CamGSM in Cambodia, makes Cerillion 3 the most widely deployed Cerillion version ever.

Streamlined order management and product bundling, support for new channels to market, improved system operations and enhanced discounting flexibility, have combined to make Cerillion 3 the most comprehensive pre-integrated CRM and Billing solution on the market today.

“I am delighted that existing customers including Tele2 in the Baltics and Croatia, and new customers such as engin in Australia, are all benefitting from the investment we have made in Cerillion 3” commented Jez Rudkins, Account Development Director at Cerillion. “Meeting the needs of mobile, fixed, broadband and multi-play clients is proof of the flexibility to support many different business models within the same convergent system.”

Dominic Smith
Dominic.Smith@cerillion.com