The Search for Value – A Short History of The Charging Evolution

The Beginning

There was a time, Before Mobile, when things seemed stark and simple. Your telephone, if you had one, lived in the hall, or at the foot of the stairs. It did not ring very often. There were waiting lists for telephones and there were Complaints Departments. It was a time of monopolies, a time when, in many countries, the Government owned the telephone company. Customers were called subscribers and they paid their bills. It seems stark in today’s context, but owning a telephone, like a TV, was a status symbol and something of great value.

Pricing was designed to control subscribers, to stop them from overloading the network in busy times. As a result, in the UK for example, it was more expensive to use the telephone in the morning. It cost money to make local calls and much more to make long distance calls. International calls were prohibitively expensive, but in an emergency or on an important occasion invaluable.

Competition, Liberation and some problems for IT

In the 1980s there were rumblings of competition. The sale of Telephone Companies or the de-regulation of the phone market raised huge sums of money and opened the door to competition – and opportunity.

Competition arrived at different speeds, depending on where you were. In the UK, it arrived with a polite, Jeeves like cough. Mercury Communications wondered if “Sir” might like to consider saving some money on long distance calls? “Sir” said thank you, but he was quite happy with the Established Phone Company. In the U.S, competition arrived overnight, with a range of exciting and enticing offers of cheap long distance calls. In Sweden, the introduction of competition was so successful that the incumbent lost half its customers in a week.

Competition brought price wars, opportunity and benefits for all. Operators and customers – liberated by not being called subscribers anymore – realised that it actually cost about the same to deliver a phone call 1,000 miles as it did five. Prices plummeted. With the price wars came a stark truth for incumbents. The systems that were running their pricing were largely mainframes. They were no match for the new breed of Unix based billing systems of the mid 1990s. In these, prices could be changed within weeks. In the mainframe world a price change might take up to six months and such a change could cost as much as one of the new fangled systems. The result was that competitors and start ups had the advantage of innovating on price. Flexible pricing plans emerged and with them a new era of marketing lead pricing.

The price of the new billing systems was in the hundreds of thousands at the entry level, but this did not stop companies buying them every time they wanted to launch a new product or service. The fear that a new product would bring chaos to existing systems was not worth the risk of building it into an old system.

The Mobile Revolution

While competition was shaking up the fixed line world, the mobile phenomenon was just taking off. Early brick phones gave way to car phones, and these gave way to ‘hand’ sets. In an office in a grey building just outside Nice, a small group of engineers were designing a standard for a new generation of mobiles. It was called Groupe Speciale Mobile or GSM for short. It was the early 1990s. After an initial, slightly nervous, launch period the new standard began to take off in Europe. The brainchild of this small group, GSM was to be the standard that took on CDMA, prevalent in the US and Japan, and ultimately catapulted digital mobile into global ubiquity.

The Convergence Conundrum

The rise of mobile brought with it the concept of convergence, as operators began to converge fixed and mobile networks and back office systems. Convergence began to mean many things – including divergence. Companies experimented with offering one billing and pricing experience for a host of different services, from telecoms to water, gas and electricity. Utility companies played with the idea of offering telecoms services and telecoms companies, briefly, toyed with the idea of offering utility services.

Having launched hundreds of products and invested in hundreds of systems and having lost sight of the customer, the 2000s ushered in a period of consolidation. This was driven as much by the need to regain a single view of a customer as by the pressures of the worst recession in the industry’s history. The cover of Time Magazine declared that the Telecoms industry had ‘flushed’ $6 trillion on the basis that ‘if we build it they will come’.

A year before the recession, the telecoms industry had begun to talk about an interesting development – the possibility of offering content, data – stuff, to their customers. Still rich and solid institutions, telcos began to eye other industries, particularly finance and media. They began to wonder if they could deliver content and charge for it too. At the same time, another phenomenon was adding to the huge growth in mobile – prepaid. Initially launched as a way of making mobile available to all, it introduced a concept that the industry had been debating for a decade – real time. It would, however, be some time before real time, post paid and content would converge to create the environment that would usher in value based charging.

Click here for Part Two.

This history of charging was supported by Allot Communications.

A History of Billing

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About Alex Leslie 400 Articles
Alex was Founder and CEO of the Global Billing Association (GBA), a trade body focused on the communications sector. He is a sought after speaker and chairman at leading industry conferences, and is widely published in communications magazines around the world. Until it closed, he was Contributing Editor, OSS/BSS for Connected Planet.

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