Going beyond the monthly bill: the highly competitive customer service industry is trying to help operators reduce churn and manage new products, such as cable modem and telephone service

Cable World, Nov 26, 2001 by K.C. Neel

For cable operators, billing is no longer just about collecting checks from subscribers every month.

For instance, customer service representatives at Time Warner Cable, whose Desert Cities system serves some 130,000 customers in and around Palm Springs, Calif. are now armed with a special weapon: a software upgrade designed to reduce defections to satellite service by identifying customers likely to switch and then prompting remedies to prevent that from happening.

Called ProfitNow!, the software is made by CSG Systems, the Englewood, Colo.-based customer service company that has helped shake up the once-staid world of cable billing and information technology (IT). The company aims to provide an operator's customer service reps with the tools they need to answer just about every question that might arise, according to Liz Bauer, CSG's VP-investor relations.

The innovation is borne of necessity. Concerned that growth in basic subscribers has slowed to a crawl and that satellite poses a major threat, operators hope new technology can help them hang on to customers. Meanwhile, they're offering multiple product lines, such as cable modem and telephone service, that require more sophisticated billing operations than in the past.

Flexibility with billing and back-office applications has been crucial as operators launch new services such as high-speed data and telephony. Moreover,

operators want to know that they can modify their business strategies without compromising their back-office, billing and customer-care functions, says Scott Hatfield, Cox Communications' chief information officer.

"There was a day not too long ago when IT meant the same thing as billing," Hatfield says. "That has changed. Now, billing is just one component of a whole IT platform. And we can't expect the billing services to do everything we need.

Bob McKenzie, SVP-strategic marketing at DST Innovis, one of CSG's primary competitors, agrees: "Operators want us to help them increase their revenues, increase their efficiency in order to become more profitable, and, most importantly right now, help them improve their overall customer service. By doing that, an operator will drive revenues by reducing churn. If customers are pleased with their service, they'll be less likely to go the [direct broadcast satellite] competition."

The customer service experts know all about competition. DST's predecessor, Cable-Data Inc., once dominated the sector, handling nearly three-quarters of cable billing in the early 1990s. (CableData merged with Kansas City-based DST Systems in 1998).

But now DST, CSG and a third rival--Cincinnati-based customer service giant Convergys--have essentially divided the cable-billing market. DST Innovis remains a significant vendor, with contracts that represented some 35% of cable customers at the end of 2000, according to the Yankee Group. But CSG scored a breakthrough in 1997 with an exclusive deal to provide billing and information services to TeleCommunications Inc., which was later purchased by AT&T Broadband. CSG and Convergys now have deals giving each a 30% market share at the end of last year, according to the consulting firm.

Last year AT&T Broadband agreed to migrate all of its old MediaOne systems to CSG's billing and information systems from the Convergys systems MediaOne had been using at the time of its acquisition by AT&T. That meant Convergys lost some 5.1 million customers. But Convergys ended up getting AT&T's phone-billing business, which has been growing substantially in the past year.

There's little doubt that taking care of broadband customers can be lucrative. For fiscal year 1999, for example, CSG logged $60 million in net income on revenue of $322 million. Last year, net income zoomed to $91 million--an increase of 52%--on revenue of $399 million. Convergys--which represents companies such as Sprint and Compaq in addition to its cable clients--had 2000 revenues of nearly $2.2 billion.

All three of the major billing companies entered the cable TV arena in slightly different ways, according to Yankee Group analyst Paul Hughes.

Convergys seized the opportunity to develop bundled billing and information products. The company expanded its vertical product lines by acquiring 17 technology companies in 18 years. Convergys, which had mainly telecommunications clients for many years, has expanded its client list to include cable operators, both domestically and in Europe. Hughes expects Convergys to continue to develop products it can sell to multiproduct providers like Cox Communications--which offers customers voice, video and data services--and to continue to expand its client list to include more wireless-telephone and data customers in the U.S.

CSG has concentrated heavily on the cable arena, Hughes says. When CSG was spun off from First Data in 1994, the company's CEO Neal Hansen made a conscious decision to create products for video providers. The company has developed technology to service and support new technologies such as telephony and data, but rather than vertically market those products to other industries, the company tends to upsell those services to cable and DBS customers, he says.