You know how some people look like zombies after too much plastic surgery? That’s kind of like billing.
Coming out of the recent ETIS gathering in Athens, my esteemed colleague Mr. Leslie proposed that with the rise of real-time will come the death of post-paid billing as we’ve known it. Could be. But I wondered if maybe real-time technology actually could breathe new life into billing. So, I jumped on the phone with MATRIXX Software CEO Dave Labuda to try and figure it out.
First, Labuda points out that real-time billing is still typically housed in a silo that is separate from the primary batch billing processes. “Real time is really relegated to the voice pre-pay platforms,” he says. The reason for this, he says, is that “historically, real-time was so much more expensive than batch.” As a result, most billing runs through a batch process and real-time just deals with pre-paid services. But, “it is time to move the whole ecosystem – all service, all subscribers – to real time,” Labuda says. There are at least six reasons that operators need to consider moving all billing into a real-time environment.
1) Meet increased customer expectations. Customers now expect “instant gratification, real time knowledge, real time views” of their services, what they’ve purchased, and what they can buy, say Labuda. The best way to play into these expectations is provide customers with real-time capabilities in order to “let people spend money if they want to,” he says.
2) Recognize that everything is an IP service. Labuda says, services are “all blending together. If you look at LTE, voice is another data service, the same is true for messaging.” The catalog of available services in the all-IP environment covers everything from voice to retail goods to digital content. These are all billed different ways. Many are served up on-demand and thus require real-time accounting and payment just to be authorized for delivery. In that sense, the most efficient way to drive billing is through a real-time environment that isn’t separate from the core billing process. If that separation persists, it becomes nearly impossible to give consumers the visibility and control over their usage and spending that they expect to have and which they receive from many credit cards and online services like Amazon.
3) Capture as much of the value chain as possible. We’ve been hearing for years now – starting with the Telco 2.0 concept – that telcos are in the most advantageous position to capture the biggest chunk of the connected value chain. They have trusted customer relationships. They have monetization infrastructure. They own the networks that connect everything. They put devices in nearly every user’s hand. Labuda argues that a major reason third party developers haven’t flocked to do business with and through telcos though is that “operators haven’t offered a sophisticated enough platform for 3rd parties to see the money.” In other words they’ve lacked the real-time billing and direct-to-bill charging capabilities that can make them the most attractive partners for third party developers and sellers.
4) Seize opportunities to out-Apple Apple. There’s a market opportunity staring operators in the face. Clearly there is fatigue among content producers and app developers when it comes to closed ecosystems like Apple’s iTunes and App stores. Third parties want options that allow them to conduct transactions directly with consumers. Apple charges upwards of 30 percent per transaction to conduct business. They simply have maintained the early mover advantage and can keep transaction costs artificially high for third parties who have few or no other options. Telcos can bring new efficiencies and capabilities to market for third parties that give them more and more open ways to engage and transact with consumers, but only if they can roll out real-time billing, charging, pricing, and payment interfaces.
Labuda says that “Apple’s model is pretty simple; there’s no ability to really address anything but the consumer and everything costs $1 or $2. If you look at an app developer, it’s really about the residuals – sell it not just for $1, but for $1 plus 10 cents per month.” Third party service providers are more likely to be attracted to models that give them more ways to engage consumers and generate repeat revenue. Further he says, operators can offer “more upside for the developers” because “they can live on thinner margins and are amortizing across more of the value chain.”
5) Make it easier to make a profit. In a real-time environment, operators can offer more and charge less, which drives us to a case of basic macroeconomics. “Markets drive to efficiency,” says Labuda. So, he says, operators need to create ways to work not-quite-as-hard to earn a buck as they do today. “If you think about how much work a mobile operator does to earn $100 in margin, it’s a massive amount of work to get that money,” Labuda says.
He argues that businesses are willing to pay for value and for quality, and even moreso if they can do it on demand. He offers the example of how law firms almost exclusively use FedEx to send documents because despite it being massively more expensive than the post office, they trust FedEx to delivery safely, securely, and on time every time. Telcos have an opportunity to provide the same kind of trusted services on the spot if they can manage to serve it up and charge for it in real-time.
6) Bring the value prop into the modern age. To this point, a major problem for Telcos has been pricing and a failure to determine value and sell it to customers. Because of the lack of real-time capabilities, “communications is in the stone age when it comes to pricing,” Labuda says. A company like Wal-Mart, for example, “probably changes 10,000 prices a day,” he says, and is able to “know what sells to different groups and hone it” because its “cost to change prices has been extremely low.” Contrast this with Telcos, however, who usually have a “six month process to change a price, so you do work up front to come up with an answer that only has a 10 percent chance to be right,” Labuda says. This isn’t efficient and it plays into telcos’ “complete failure to sell value to the consumer,” he adds.
Rather than selling by the megabyte, which Labuda says is like selling everything in the grocery store by the pound, telcos should shift to models where they charge for the value of what’s in the megabyte. It’s much easier to do if they can see what’s selling in real-time and make appropriate price adjustments in order to achieve real market efficiency. More importantly, it puts consumers in a position to pay for value rather than trying to price compare by deciphering the cost of intangibles. In a market of over-the-top applications that leverage core communications services, selling value is necessary.
So, how does any of this revive billing? It can happen if, as a result of real-time billing and charging, the communications bill becomes the ultimate record of transactions conducted in one’s digital and online life. It might look a bit different from what we know today, but in a sense, it makes the bill more valuable because of what it can tell us about what we’ve spent and what benefits, if any, we’re due to receive for it all. Owning that statement, and conducting the transactions that flow into it, would mean that Telcos own a big piece of the value chain and have more insight into what consumers like, what they do, and how they like to pay, than anybody else. But to facilitate those transactions, billing probably needs to go to real-time.