United we stand: common-payment platforms unify prepaid, postpaid services - Spotlight: The New OSS

Telecommunications Americas, Feb, 2003 by Neil Philpott

During the past few years, the mobile industry has seen an exponential growth in prepaid as a preferred method of payment. This has driven mobile penetration rates to saturation levels. However, it has also diminished ARPU (average revenue per user) and increased churn.

Prepay originally was used by service providers to protect revenue from credit-challenged customers with difficulty establishing a positive credit history or those unable to establish a credit rating (e.g., teenagers). This premise is changing. Prepay is now seen as having many advantages as a mechanism for cost control for segments such as the cost-conscious and family-use consumer markets as well as the enterprise market. Examples include mobile service budget limits for college students and cost control for corporate fleet operational communications. As a result, service providers are seeing the benefits of leveraging (and growing) their prepaid customer base in an attempt to attract more customers. However, the prepaid systems deployed in mobile networks today have a number of limitations that restrict their effectiveness.

The nature of traditional prepaid billing platforms means that only limited rating schemes can be offered. For example, capabilities such as tiered real-time pricing schemes (which encourage users to talk longer for less) and recurring charges for value-added services are extremely difficult to achieve. Also, support for corporate account hierarchies has been non-existent. Furthermore, to progress to next-generation messaging, content and information-based services, prepaid processing must support content and packet-based rating, which is typically not available on traditional prepaid systems.

The growth in the prepaid customer base has resulted in a corresponding increase in churn. Customers, who have access only to a non-differentiated mass market service and have no contact with their service provider (and might not even receive a bill from them), feel little loyalty and will readily churn to get the next best deal. The problem with prepaid churn (as with postpaid churn) is trying to understand why customers churn and proactively addressing the problem. Gathering information about the customer base is very difficult due to the anonymous nature of prepaid customers.

Possibly the most decisive factor in ensuring that customers are happy (and loyal) is efficient and complete customer care. Customer information is rarely gathered on the pre-paid subscriber base, billing history records are rarely stored, statements of activity are not produced, and the customer remains essentially anonymous. Disputes are often irreconcilable, which leads to an unhappy customer experience and directly contributes to churn. Proactive customer management strategies to identify at-risk customers are difficult to implement given the scarcity of customer trend information.

A Lesson From Postpaid

Many of the issues inherent with prepaid can be minimized using techniques previously only available in postpaid billing systems. The problem has always been that postpaid systems, many of which were designed years ago as batch-processing systems, have not had the real-time capabilities to bring product pricing flexibility to the prepaid arena. They could not guarantee the low latency and reliability required to manage prepaid transactional processing. Pre-paid services have also been confined to voice-based IN platforms.

Service providers with a large prepaid customer base need to offer value-added content-based services to increase ARPU. In an effort to reduce churn and increase ARPU, billing solutions that can be applied to both postpaid and prepaid services are needed. Two types of solutions are emerging: convergent/integrated solutions and common payment platform solutions.

The Integrated Approach

One approach is to integrate the prepaid biller with the postpaid biller, which allows a wider range of pricing strategies required for a wider range of services. It enables customers to choose their preferred payment method for each service when they sign up for service. It also provides basic electronic wallet capabilities such as the capability for customers to top-up prepaid balances from their postpaid account.

This approach, while attractive at first glance, has several disadvantages. The very nature of an integrated solution is that it continues to rely on a prepaid platform as part of the solution, and therefore will continue to face the majority of the limitations of traditional prepaid systems. As a result, a service must be defined as either postpaid or prepaid, removing the element of customer choice of payment method at the time of purchase. Furthermore, customers are unable to specify transaction-based guiding rules. For example, a customer may wish to have all voice calls guided to a postpaid business account during business hours. After hours, the customer may want the same usage (for the same service) to be guided to a prepaid personal account. In addition, the customer may also want to nominate specific work numbers where the usage is always posted to the business account, regardless of the time of day. With an integrated pre- and postpaid solution, the customer would not have these options.