Chasing Change: Innovation in BSS

In January this year the Global Mobile Suppliers Association (GSA) pronounced LTE a “mainstream” technology, citing 145 networks in commercial operation in 66 countries. By the end of this year GSA expects the figure to have risen to 234 networks in 83 countries. The rate of deployment has been impressive—there were just 17 live networks at the close of 2010, and 47 at the end of 2011.

The global LTE subscriber base grew ten-fold in the year to September 2012 but still represented a tiny fraction of the world’s total, at 44 million. Informa has estimated the end-2012 figure at 63.2 million, more than half of which are accounted for by US operators and the great majority of the remainder by South Korean and Japanese players.

It seems reasonable to conclude that LTE is simpler to deploy than it is to sell. Indeed the monetisation of mobile broadband networks is probably the greatest commercial challenge that today’s operators face. Those that fail will not survive.

For many years after its commercial debut mobile telephony was a premium product, billed at a premium price. Even as the wider consumer market opened up prices stayed high, kept aloft by a combination of scarcity, cost of provision and no small amount of chutzpah. Today, while traces of the premium mindset remain—visible in the charges operators levy for some international roaming services—the prestige has been steamrollered out of mobile by the sheer weight of its ubiquity.

Nowhere is this truth more bluntly apparent than in the challenge of pricing and monetising mobile broadband services. In many markets 3G networks were deployed in the belief that, because the technology was superior to 2G, customers would pay more to get it. That belief proved baseless for 3G more than a decade ago and it makes no morse sense for LTE today, says Jaco Fourie, senior expert in BSS at Ericsson.

“If the price of a service is well above a consumer’s income or disposable spending levels then they are simply not going to buy it,” Fourie says. “You might get a bump from the early adopters when you first launch but when the market is fully penetrated you’ll grow at GDP, end of story.”

In the face of this challenge, he says, his customers have two questions: How should they evolve their pricing for mobile broadband, and what do they need to change in their billing systems to make that evolution possible? “We are literally inundated with requests for workshops on how to monetise mobile broadband,” he says. “There is a constant discussion around how to structure broadband offerings, how to create different packages and which ones work in different places around the world.”

Operators have to start by being realistic about what the customer can afford, he says, and they have to be prepared to move beyond the familiar comforts of a bucket of minutes, a flat rate tariff and overage charges.

“We are seeing quite a lot of speed differentiation now, as not everybody requires 4G levels of speed,” he says. “But eveyone wants connectivity, even people in lower disposable income brackets. Operators need to segment to address these people, using specific service packages that allow them access only to the services that they need at a price that fits their pocket.” Operators can also use third party content to differentiate new technology like LTE, he says, bundling services such as Spotify or Netflix.

At all times, though, operators must give their consumers real-time access to exactly how much money they are spending, particularly when they own devices that consume data in the background, possibly without the user even being aware that it is happening. Many operators still have the mindset that all data is user initiated, he says. This can be compounded if those operators still view service consumption in terms of the time it takes for an action to be performed over the network. “This is a culture shock for operators,” he says. “On an LTE network, with the speeds that many operators around the world are now offering, you could consume two gigabytes of data in a really short amount of time. The marketing departments of many mobile operators are recognising the needs caused by this massive change in behaviour and the urgent need to inform the user about what they’re doing.”

Even when operators fully grasp the concepts of billing for mobile broadband services they will still face challenges putting them into practice. Mobile network billing environments are notoriously complicated, having been expanded piecemeal, often on a service-by-service basis. The immense complexity often renders them inefficient, Fourie says, adding that he had “one hundred times more” discussions with operators about evolving their billing architectures in 2012 than he did in 2011.

The more technologies and services operators launch, the more appealing the idea of a single billing system that can support them all becomes. Unhappily for operators there is never a good time to undertake a transformational project that threatens to disrupt service and (in the case of large international players) internal relations. The upshot is that the complexity simply increases, as Fourie explains: “More and more customers are asking for a quotation for an end to end, fully integrated B/OSS environment that they can user for new services, and that wasn’t happening two years ago,” he says. “But does this mean that they are going to transform towards that environment or is this just the same old approach of putting in a new system to deal with a new issue? I can’t answer that but I do believe the mindset has shifted.”

As it must. Fourie suggests that the acquisition and installation of B/OSS systems in the past were, “with all due respect to operators, somewhat careless”—because the industry was enjoying double or even triple digit growth and moving at great pace. Today the growth has receded dramatically, meaning operators simply can’t purchase with the kind of abandon they once did. But the pace of development, as we’ve seen, has actually accelerated, placing greater pressure on them to upgrade and evolve. It will almost always be extremely difficult, operationally, psychologically and financially, for operators to simply discard the legacy billing solutions that they have amassed over the years. Despite this reality, isn’t it always the ideal—from a functionality perspective— to look to a full transformation?

This is a loaded question for a vendor of billing systems, and Fourie shows due deference to operators’ need to retain and maximise their legacy installations.

“One would always look at what you can do to augment the existing environment to make it capable of dealing with the immediate business needs—that will always be the cheapest approach,” he says. “But there are certain things that you just will not be able to do efficiently with legacy environments.”

What he describes as the “nirvana” of full service segmentation, which allows operators to offer users access to specific data applications such as social networking, requires a level of integration from different elements of the overall architecture that is all but impossible to derive from legacy systems, he says.

Increased service sophistication and the bundling of third party offerings represent a wider problem. “Traditional B/OSS systems were designed for a retail business model in which operators sold phones and telephony to individuals and enterprises. Now operators are selling ICT to enterprises, which is a completely different thing, and selling consumers connectivity to a range of services. With these services you suddenly have a whole hoard of content and service proivders as partners that you actively onboard and allow to sell through to your customers. Traditional systems were just not designed for that.”

The notion of segmenting down to the individual is difficult enough to make reality in a single market. For international operators with a presence in multiple countries that are looking to leverage their scale by consolidating their various billing installations it can be even more difficult.

For these operators centralisation or standardisation are attractive options but there are serious hurdles. Data protection legislation often requires that customer data be stored in the customer’s home market, for one thing, which blocks any move to centralise. But internal politics could be even more problematic, with individual opcos feeling that standardised or centralised systems might rob them of the ability to tailor servies to their specific market.

Fourie says that his unit of Ericsson has been working on standardisation projects for customers for over a decade. And the learning suggests that individual opcos’ fears about their ability to operate with independence and flexibility may be unfounded. “Every individual opco thinks that their market is special. But when you look at all these markets there are actually only a few very small things that are truly unique,” Fourie says. “These are things that can be configured to be allowable or disallowable market by market.”

Data protection legislation is less easily circumvented. Ericsson has installed systems for customers where operation is centralised but systems are distributed, Fourie says, which does offer some savings. This is particularly attractive in developing markets where operators have high staff turnover, he says.

The firm is also currently implementing a centralised billing system for an operator group in three European countries, with a fourth to be added this year. Fourie doesn’t reveal which countries, but he stresses that the ease with which such systems can be deployed depends on how good relations are between the countries in question.

All of which leads, inevitably to a discussion of outsourcing and the cloud. “B/OSS has to run on cloud infrastructure because operators will stand up datacentres and consolidate their hardware to minimise cost,” Fourie says. “Over time the focus might move to outsourcing and XaaS but the initial drive to cut IT spending has to be in the cloud.”

Operators need to approach the notion of outsourcing their billing function with caution, he says. Anything that can be effectively standardised and made configurable can be outsourced, he argues, but operators need to understand that their commercial “identity” resides within their B/OSS systems. The packages they offer and the way in which they interact with their customer base should not be relinquised.

“There is a school of thought that we will move to outsourcing BSS,” he says, “but I don’t think it will happen yet, it won’t happen for every element and certainly not in the part where the operator creates and maintains its identity.”

Ericsson, of course, has a substantial managed services business on the network side. There have been suggestions from some quarters that big network vendors with a billing play, Ericsson and Huawei being the most obvious, are able to leverage network sales to undercut specialist BSS providers on price. Fourie rejects this outright. “That was common in the 90s when everyone did it, including Ericsson. Whenever there was a new greenfield operator the VAS, the SMS, the voicemail and the prepaid billing system were bundled in. That just doesn’t happen any more, because operators don’t buy network and B/OSS together. And if we did that we would be a bankrupt support solutions unit.”

Nonetheless, he says, there are benefits to breadth of offering. “Our solutions run from the network all the way to CRM and that’s not something all providers can offer. We see a lot of pull from operators because of this end to end connectivity.”